XL Catlin’s London-based insurance operation has introduced a Brexit contract continuity clause. The clause addresses the risk that contracts written by XL’s London-based entities prior to Brexit may become impermissible if passporting rights are lost as a consequence of the UK leaving the European Union.
XL Catlin is proceeding with its Brexit plans to move its EU headquarters to Dublin, which were publicized in September 2017, said the company in a statement, noting that the recently announced $15.3 billion acquisition of XL Group by AXA SA does not affect these plans.
The clause is intended to be included in insurance policies written by Catlin Insurance Co. (UK) Ltd., (CICLUK) – a UK regulated insurance company – and XL Catlin’s Syndicate 2003 at Lloyd’s. These two entities will remain in the UK after XL Insurance Co. SE (XLICSE) – the main insurance company platform for XL Group within Europe and Asia – moves to Dublin, Ireland, subject to regulatory approvals.
XL Catlin said it is important to note that moving XLICSE is simplified by the entity’s status as a “Societas Europaea,” which means it can continue as the same legal entity and move to Ireland with relative ease (and without a court sanctioned portfolio transfer) to the benefit of XL Catlin’s business, its clients and to brokers. The move also means that XLICSE’s policies do not need to rely on the clause.
The company explained that the clause mirrors standard London market continuity clauses, with some key differences:
- The clause makes XLICSE an additional party to the policy from inceptionas a contingent insurer with the aim of providing continuity of cover for clients
- If post Brexit a policy’s performance becomes impermissible in whole or in part and cannot be amended to enable CICLUK or the Syndicate 2003 to perform it permissibly, XLICSE (assuming that XLICSE has moved to Dublin within the time period expected) will automatically and seamlessly be contractually obliged to perform it or any part of it, assuming it can do so permissibly.
- If XLICSE cannot perform the policy, only then is it automatically cancelled with a pro-rata return of premium (subject to no claims having been notified).
“Our innovative clause offers significant advantage by minimising the risk that policies will be cancelled, by making XLICSE a contingent party to the policy,” commented Paul Greensmith, UK country leader and director of London Market Wholesale.
“Effectively, XLICSE will act as a back-up. A political solution may yet be forthcoming that ensures polices can be performed post Brexit, but in the absence of one we believe this clause gives our clients and brokers the certainty they expect and deserve from their insurance partner,” he added.
Source: XL Catlin
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