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: email@example.com