IUA Puts Out a Brexit Continuity Clause

The International Underwriting Association of London (IUA) has published the Brexit Contract Continuation Clause to assist companies in managing insurance contracts as the United Kingdom leaves the European Union. The clause is meant to clarify how firms will continue to pay claims despite any business disruption caused by a situation in which adequate transitional arrangements are not agreed.

Insurers currently relying on the EU financial services passport to conduct cross-border business between the United Kingdom and continental Europe may not be licensed to continue providing cover, or pay claims, on existing contracts after March 2019. The new clause, therefore, allows a risk to be placed with both a UK-domiciled insurer and a "contingent" EU-based insurer. In the event of any Brexit difficulties, this contingent insurer will step in and fulfill any policy obligations that the original insurer is no longer able to cover.

Chris Jones, the IUA's director of market and legal services, said, "The Brexit process continues to be quite uncertain in the nature of its final outcome and the future trading relationship trading relationship between the UK and remaining EU states. 

"A number of other market clauses have already attempted to address the issue of contract continuity, but it has proved difficult drafting a solution that covers all political eventualities. Another problem has been catering for the many different corporate structures, both currently present in the London Market and planned by firms as part of their Brexit contingency responses."

While the clause is primarily intended for insurance business, it could also, in principle, be used for reinsurance risks. The clause will be freely available from the IUA clauses website (www.iuaclauses.co.uk).