BREXIT impact on UK life insurers

Poli­cy­hold­ers of a Brit­ish in­surer, such as Cler­ical Med­ical (now: Scot­tish Wid­ows Ltd.), Stand­ard Life, Scot­tish Mu­tual or Friends Provid­ent keep ask­ing the law firm SCHIRP & PART­NER.:

Does Brexit affect contracts concluded in Germany?

This ques­tion can be answered with a clear yes. The Brit­ish will leave the European Union on March 29, 2019, at least ac­cord­ing to cur­rent in­form­a­tion. The con­sequences, how­ever, de­pend on how Brexit will ac­tu­ally be com­pleted. At present, no one really knows. It is also un­cer­tain, which im­pact the Brexit will really have. In the worst case, also in case of an un­reg­u­lated Brexit, the con­sequences could be far-​reaching, namely up to a re­fusal of the in­surer to provide the ser­vice from the con­tract. Then, the customer’s legal ac­tion is con­sid­er­ably more dif­fi­cult, as he has to com­plain and en­force un­der Brit­ish law. To pre­vent such dif­fi­culties, the af­fected Brit­ish com­pan­ies came up with the idea to trans­fer the con­tracts of Ger­man cus­tom­ers – as well as other holds – to a sub­si­di­ary. Stand­ard Life plans to trans­fer a sub­si­di­ary based in Dub­lin, Scot­tish Wid­ows Ltd. (Cler­ical Med­ical) has an­nounced the trans­fer to a sub­si­di­ary in Lux­em­bourg, named Scot­tish Wid­ows Europe S.A.. The trans­fer is in­ten­ded to en­sure that Ger­man law also ap­plies after Brexit. But it’s not that easy to ac­com­plish the trans­fer. Be­cause this still needs court ap­proval. Cler­ical Med­ical has a court hear­ing sched­uled for 14 March 2019. 

Even in the event that the trans­fer is suc­cess­fully com­pleted, not all risks for the Ger­man poli­cy­holder are off the table. The con­tracts lose their pre­vi­ous in­solv­ency pro­tec­tion through the trans­fer. So far, in the case of bank­ruptcy, the Brit­ish De­posit Guar­an­tee Fund FSCS (Fin­an­cial Ser­vices Com­pens­a­tion Scheme) got in­volved. This is no longer the case after the trans­fer. An­other prob­lem could be that UK in­surers in­vest heav­ily in shares, but es­pe­cially in UK shares. Of course, if there is a crash, it also af­fects the cap­ital stock of Brit­ish life in­sur­ance policies.

What shall affected customers do now?

Law­yer Al­ex­an­der Temiz, who con­duc­ted many suc­cess­fully pro­ceed­ings against Cler­ical Med­ical in the triple-​digit mil­lion range: Don’t rush it, by de­clar­ing the ter­min­a­tion of the con­tracts too early. The ter­min­a­tion leads to the fact that the cus­tomer re­ceives only the sur­render value, which is usu­ally far be­hind the paid premi­ums. The is­sue of Brexit and the un­cer­tain con­sequences should, how­ever, be taken as an op­por­tun­ity to have Brit­ish in­sur­ance con­tracts checked once.

Es­pe­cially the Brit­ish in­surers have gained ac­cess to the Ger­man in­sur­ance mar­ket by ad­vert­ising re­turns of between 6 and 10% per an­num, which are much higher than Ger­man in­surers. But there haven’t been any signs of such re­turns. In fact, these con­tracts just have re­turns of between 0,5 and 1,5% per an­num. The un­rav­el­ing of these con­tracts by ex­plain­ing the op­pos­i­tion could be a real chance for re­im­burse­ment of the premium paid plus an in­terest rate that is of­ten 30% more than the ex­pec­ted payout.

For more in­form­a­tion: SCHIRP & PART­NER Recht­san­wälte, Law­yer Al­ex­an­der Temiz, Leipzi­ger Platz 9, 10117 Ber­lin, Tel.: 030 3276170, Fax.: 030 32761717, Mail: temiz@​schirp.​com