LONDON (Reuters) – British lawmakers on Monday urged the government to address the status of cross-border pensions and insurance contracts after Brexit, saying time to make changes ensuring people continued to be paid was running out.
While Britain is not due to leave the European Union until March 2019, insurers have said that, due to the lengthy legal process involved, they need to know by November whether they must move contracts with EU customers out of Britain.
“The possibility that UK providers may not be legally able to pay out pensions or insurance contracts to citizens in the EU – including UK expats – is a stark example of the consequences of a ‘cliff edge’ Brexit,” said Nicky Morgan, who chairs parliament’s Treasury Committee.
Morgan said that without further action, insurers would lose the legal authorization to service hundreds of thousands of contracts that extend beyond the date when Britain is due to leave the bloc.
“Citizens …living in the rest of the EEA (European Economic Area) in receipt of personal pensions may face difficulties in getting paid,” she said in a letter to finance minister Philip Hammond.
UK residents – including many EU citizens – receiving pensions from EEA-based providers would find themselves in the same situation, she said.
Morgan said the government should outline what was being considered to preserve stability and certainty in respect of insurance contracts that straddle Brexit.
Insurers want regulators to be allowed to start working on a mechanism that would allow existing contracts to continue operating after Brexit, a process known as “grandfathering”.
Without this, an insurer would have to move contracts for EU customers to a new EU subsidiary after 2019 for them to remain in the same jurisdiction as the customer, or sell that portion of the business.