Brexit

On 23 June 2016, the UK voted to leave the European Union. The UK had been due to leave the EU on 29 March 2019, but the revised departure date is now 31 January 2020.

Once the UK becomes a “third country” under EU legislation, the IDD will no longer apply to UK intermediaries (only the UK requirements will continue to apply) and UK intermediaries will be no longer treated as EU intermediaries.UK intermediaries will lose the IDD passporting rights they currently have and similarly, EU intermediaries will lose the IDD passporting rights in relation to the UK.

In most EU Member States, EU governments have adopted legislative acts on the UK’s withdrawal from the EU providing for contingency measures should there be a ‘hard Brexit’ (i.e., UK withdrawal with limited alignment), ensuring that policyholders that hold existing life and non-life insurance policies with UK insurance undertakings, operating in their respective countries in FOE or FOS under the Solvency II single licence, will not be affected by these undertakings losing their passport rights. Most of these national acts of the EU Member States provide for a temporary run-off regime which, subject to a number of conditions, will enable UK insurers to continue to fulfil their obligations, contracted to their EU customers prior to Brexit, for a transitional period after the date of the UK’s withdrawal from the EU. However, in many countries, UK insurance intermediaries are not included in the relevant local legislations, as during this transitional period they could help their EU 27 clients, for example to resolve claims problems on multiple insurers’ London policies.

BIPAR believes that it is important to have UK intermediaries included in these national acts. Without their UK intermediaries being there to help during this transitional period, EU 27 clients may, for example, have problems to get claims paid on multiple insurers’ London policies. BIPAR, therefore, suggested to its member associations to contact their respective regulator to ensure that UK intermediaries are included /referred to in their respective Brexit national act or get the confirmation that their Brexit act on the insurance sector covers insurance intermediaries.

In the UK, European insurance intermediaries currently operating in the UK can continue to carry out insurance business, including writing new contracts as well as servicing existing contracts, for a temporary period after even a ‘no-deal’ Brexit (i.e., UK withdrawal without agreement). In order to do so, they must submit applications for UK authorisation and complete any necessary restructuring.

EIOPA Recommendation and other measures

Further to its December 2017 Opinion urging insurance undertakings to take necessary steps in good time to ensure the continuity of cross-border insurance contracts between the UK and the EEA30 after the withdrawal of the UK, in February 2019 EIOPA issued 9 recommendations for the insurance sector in light of the UK withdrawing from the EU without a withdrawal agreement.

The Recommendations provide guidance on the treatment of UK insurance undertakings and distributors with regard to cross-border services in the EU after the withdrawal of the UK from the EU without a withdrawal agreement. EIOPA explains that the objective of its Recommendations is to minimise the detriment to policyholders with cross-border insurance contracts. The Recommendations addressed to National Competent Authorities are to foster supervisory convergence and to ensure consistent supervisory practices.

The 9 EIOPA Recommendations range from the authorisation of third country-branches, the lapse of authorisation, the cooperation between the national competent authorities, the communication to policyholders and beneficiaries to distribution activities.

With regard to distribution activities, Recommendation 9 states the following:

“Competent authorities should ensure that UK intermediaries and entities which intend to continue or commence distribution activities to EU27 policyholders and for EU27 risks after the UK’s withdrawal are established and registered in the EU27 in line with the relevant provisions of the IDD. Competent authorities should ensure that intermediaries, which are legal persons and are established and registered in the Union, demonstrate an appropriate level of corporate substance, proportionate to the nature, scale and complexity of their business. These intermediaries should not display the characteristics of an empty shell. Moreover, the professional and organisational requirements of the IDD must be met on a continuous basis. This is without prejudice to the right of the Member States to introduce special provisions in their national law for third country intermediaries, provided that equal treatment of intermediaries on the respective market is guaranteed. 30. When assessing whether a specific UK intermediary or entity is providing distribution activities in the EU, competent authorities should take into account that only the consistent and uniform application of the IDD can guarantee the same level of protection for consumers and ensure a level playing field in the Union. Competent authorities should ensure that all intermediaries carrying out distribution activities which target EU27 policyholders and EU27 risks fall under the scope of the IDD. 31. For this purpose, competent authorities should assess any distribution model against the definition of distribution activity as provided for in the IDD”.

On 31 October 2019 EIOPA published responses from NCAs on its website whether they will comply with each of EIOPA’s recommendations or explain the reasons for not complying with those recommendations.

According to the information received, all NCAs comply or intend to comply with almost all recommendations.



- Published on June 2020 -

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