The chief exec of UK regulator the Financial Conduct Authority (FCA) Andrew Bailey has again called on government to ensure passporting rights when the country leaves the European Union.
Speaking at the BIBA conference in Manchester this morning (16 May), Bailey said it is imperative the UK avoids a “cliff-edge” Brexit, with the regulator “strongly welcoming” a transition or implementation period when the UK exits the EU in March 2019.
Without this period, Bailey said Brexit could lead to “a sudden and disorderly falling away of the passporting system”.
Bailey stressed the importance of passporting as it provides the legal basis for existing insurance contracts in EU countries and the UK.
“The risks of not getting this right are considerable, because without passporting the authorisations of those firms that rely on it fall away in the market into which they passport, unless some other action is taken,” Bailey said.
“The risks of not getting this right are considerable,” he added, saying: “This is not a small issue.”
Speaking about the EU financial services sector more broadly, Bailey said insurance brokers made up just under 60 percent of those using passporting rights.
As a result, he said both those trading out of the UK into the EU, as well as those trading into the UK - had the most to lose from the potential loss of passporting rights.
He also said that passporting is a mutually beneficial system to both the EU and the UK and should not be viewed as an act of goodwill being granted to the departing country.
“The passporting system goes both ways, from the UK to the EU, and from the EU to the UK, so both sides have a strong interest in orderly transition,” Bailey said.
“This is not about one side asking for a favour or picking a cherry.”
The chief exec pointed to FCA research that found that around 10 million UK policyholders and £27bn ($36.4bn) of insurance liabilities could be impacted if Britain was to be left without passporting rights.
In the rest of the European Economic Area, Bailey said this could affect 38 million policyholders with £55bn of insurance liabilities.