Insurers whose operations will be impacted by Britain’s impending departure from the European Union are not waiting for the outcome of the complex negotiations to decide on their next move.

According to Sian Hill, a partner and Brexit insurance lead with KPMG in the UK, most have either already announced their plans — or are close to a decision — on how they intend to avoid finding themselves shut out of key markets in March 2019, when Brexit takes effect.

On a visit to Bermuda this week, Ms Hill has been updating clients on Brexit matters and has met with Association of Bermuda Insurers and Reinsurers representatives.

For insurers the key Brexit issue is “passporting”, which allows a financial institution in any EU country to service customers throughout the 28-country bloc without barriers.

“The UK Prime Minister has made it very clear that as far as the UK Government is concerned, the UK will not be staying in the single market, which broadly means that insurance companies will lose the right to ‘passport’ across the EU,” Ms Hill said.

“It would be good to have a transitional period because that would give businesses longer to prepare — but it’s not certain yet whether there will be one, how long it would be and what form it would take.

“So businesses are planning on the basis of a hard exit at the end of March 2019 and they have to be prepared for that. The most important thing for insurance groups is to be able to continue to service their customers throughout the process.”

Several companies have already announced plans for new EU hubs to ensure they can access EU business post Brexit. Bermuda-headquartered Hiscox, for example is setting up a base in Luxembourg.

Insurance groups were analysing locations, mostly in western and northern Europe, as they looked at factors like regulators, proximity to major clients and employment law.

“There have been a few announcements and there will be more to come,” Ms Hill said. “We’ve been talking to clients who have made a final decision and haven’t announced it yet, or who are close to making a final decision.”

Asked whether the industry was ready for the Brexit upheavals, Ms Hill added: “Insurers are working very hard and nobody is underestimating the amount of work that needs to be done.”

One of the biggest challenges insurance groups face is the bureaucracy involved in transferring existing EU policies out of the UK to a new EU insurer, Ms Hill said, adding that the UK rules on such transfers was “quite cumbersome and expensive”.

Other major practical issues included the changing of operating models, away from having one company writing all European business, and the consequent changes in staff location, governance and the organising of outsourced back-office support services.

She said Bermudian-based groups with existing European operations would be directly affected, but they had an added option, thanks to the island’s third-country equivalency with the EU’s Solvency II insurance regulations.

“It might be possible for some Bermudian groups to write European business directly from Bermuda in the future, because the licences already exist, even if they don’t do that currently,” Ms Hill said.

“It’s hard to say how that’s going to pan out, but Bermuda is a recognised Solvency II-equivalent jurisdiction, which means that the Bermuda Monetary Authority is regarded as a good group supervisor.

“It’s not yet clear whether the UK would be recognised as an equivalent jurisdiction. It’s something that would have to be granted by the EU, as opposed to being automatic.”

With the UK being a major insurance market in itself, companies with an EU platform outside Britain were also having to make plans, Ms Hill said.

A Bermudian firm writing EU business out of Ireland, for example, may also have a UK branch, but Ms Hill said an extra step may be needed in future.

“The current expectation is that they would need to get that UK branch separately authorised in the UK,” she said. “So you wouldn’t necessarily need to change your legal structure, but you would need to have a locally regulated branch.”