With Brexit approaching in March 2019, uncertainty remains over whether Britain and Brussels will reach an agreement to ensure that UK insurers can continue to pay out on policies after Britain leaves the European Union. The uncertainty tied to Brexit serves as a broader warning to policyholders about the potential pitfalls that can occur when large-scale political or economic change occurs, and how that change can impact an insurer’s indemnity obligations under a pre-existing contract. In the case of Brexit, it remains unclear whether UK and EU regulators will permit the transfer of existing contracts across borders, or whether they will permit a contract formed and regulated under the rubric of one economic area to suddenly be governed by another. Although procedures do exist for the transfer of policies from one insurer to another, the cost of such a transfer is substantial – roughly £1 million ($1.3 million). Pre-Brexit, the UK saw about 20 such transfers per year. Reports suggest that number could increase ten-fold, with the expense to eventually be passed down to policyholders. With increased secession movements around the world in recent years (e.g., Crimea, Catalonia, Scotland, etc.), the insurance ramification of such changes ought to be considered by companies and insurers doing business or insuring business interests in such regions.
