The London-based insurance operations of XL Catlin have introduced an innovative contract continuity clause in preparation for Brexit.
The clause addresses the risk that contracts written by XL’s London-based entities prior to Brexit might become impermissible, assuming passporting rights are lost as a consequence of the UK leaving the EU.
XL Catlin is proceeding with its Brexit plans that were made public in September 2017. It intends to move its principal EU insurance company, XL Insurance Company SE (XLICSE), from the UK to Ireland later this year, despite AXA’s €12.4 billion acquisition of XL Group.
The Brexit clause will be included in insurance policies written by Catlin Insurance Company Ltd UK (CICLUK) and XL Catlin’s Syndicate 2003 at Lloyd’s.
These two entities will remain in the UK after XLICSE, the main insurance company platform for XL Group within Europe and Asia, moves to Ireland.
Moving XLICSE is simplified by the entity’s status as an EU-registered societas Europaea, according to a statement, “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.”
XL Catlin’s Brexit clause mirrors standard London market continuity clauses, with some key differences.
These include making XLICSE an additional party to the policy from inception as a contingent insurer with the aim of providing continuity of cover for clients.
The clause would also kick-in post-Brexit in the event that 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).”
Commenting on the new Brexit clause, Paul Greensmith, UK country leader and director of London market wholesale ar XL Catlin, said: “Our innovative clause offers significant advantage by minimising the risk that policies will be cancelled, by making XLICSE a contingent party to the policy. Effectively, XLICSE will act as a back-up.”
“A political solution may yet be forthcoming that ensures policies 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.”