Delay to IDD start date
The EU Commission published draft legislation today (in the form of a proposed Directive and a proposed Delegated Regulation) to delay the IDD start date to 1 October 2018. It has agreed to requests for a delay made by the European Parliament and a number of Member States despite expressing the view that industry has already been given considerable time to adapt to the new rules. Individual states are still required to transpose the IDD into domestic regimes by 23 February 2018. The European Parliament and the Council will need to agree the new date in an accelerated legislative procedure.
Brexit – UK approach to incoming financial services firms
The Treasury, PRA and FCA have today set out proposals for dealing with EEA-headquartered financial services firms wishing to conduct regulated activities in the UK post-Brexit. The concern, of course, is how those firms, including (re)insurers and (re)insurance intermediaries, can operate in the UK once they have lost passporting rights (assuming that they do so).
The Treasury has confirmed its commitment to ensuring that EEA firms can continue to operate in the UK post-Brexit. If necessary, this will include bringing forward legislation to enable firms to obtain a “temporary permission” to continue their activities in the UK for a limited period after withdrawal. The Treasury will also legislate (again, if necessary) to ensure that contractual obligations, for example under insurance contracts written before Brexit, can be met.
The FCA has confirmed that firms that are solely regulated in the UK by the FCA (including (re)insurance intermediaries but not (re)insurers) will be able to obtain such a “temporary permission” without the need to apply for authorisation.
The PRA’s consultation paper (CP30/17) “International insurers: the PRA’s approach to branch authorisation and supervision” aims to explain the PRA’s policy towards authorising and supervising third country insurers carrying on (or considering carrying on) insurance business in the UK and that do not benefit from passporting rights. A new Supervisory Statement is intended to supplement Supervisory Statement 44/15 “Solvency II: third-country insurance and pure reinsurance branches” and explains, in particular, the circumstances in which the PRA anticipates that a subsidiary would be more appropriate than a branch for the conduct of the proposed business in the UK, based on the level of policyholder liabilities covered by the FSCS.
The PRA states that its proposals in CP30/17 have been designed in the context of the current UK and EU regulatory framework. It also notes that firms currently branching into the UK under the insurance passport will, subject to the outcome of negotiations between the UK and the EU, need to apply for authorisation to continue to carry on those activities in the UK post-Brexit. In a separate “Dear CEO letter“, Sam Woods (CEO of the PRA) reflects on the current state of negotiations and on HM Treasury’s proposal for a temporary permissions regime, which the PRA only expects to use as a fall-back. In the light of this, the PRA will be ready to receive branch authorisation applications from January 2018. Mr Woods also encourages any incoming firms who have not already made contact with the PRA to do so quickly as the authorisation process can take up to 12 months from the point of application.
We will comment more fully on the PRA’s proposals in due course.