Following last week’s agreement between the UK and the EU to extend Article 50 until 31 October 2019, the FCA has confirmed that it will also extend the deadline for incoming EEA firms to enter the UK Temporary Permissions Regime (“TPR“) to 30 May 2019. The FCA’s announcement only applies to firms for which the FCA is the “relevant regulator”, which includes insurance intermediaries.
If the Withdrawal Agreement can be ratified by 30 May 2019, the TPR will not come into force. This is because an implementation period would allow incoming EEA firms to continue their activities in (or into) the UK until the end of December 2020.
If no agreement is reached by the UK and the EU before the end of May, it is not clear whether the FCA will extend the window for notification to align with the Article 50 deadline of 31 October 2019. The FCA has stated that it will continue to keep the TPR notification window under review, but it is unlikely that further detail will be provided until there is greater political clarity on if, when and how the UK will leave the EU.
In light of this uncertainty, any incoming EEA intermediaries who intend to rely on the TPR should proceed on the assumption that they will need to submit their notifications by the end of 30 May 2019.
The position for insurers is different. The PRA has confirmed that “[the] deadline for a firm to notify the PRA that it wishes to enter the TPR has passed” and that it “does not intend to further extend the notification period”.
The period for notifications set out in the PRA’s Direction: ‘Temporary permission and variation: notification before exit day’ 7 November 2018 as amended by the PRA Direction – ‘Temporary permission and variation: notification before exit day (amendment) 28 March 2019) ended on 11 April 2019. The validity of notifications made by insurers before the deadline is not affected.
The post below was first published on our Litigation blog.
Amidst the ongoing uncertainties in relation to both the nature and timing of Brexit, we have published a new decision tree on enforcement of English judgments in the EU27 post-Brexit. It is intended to act as a quick reference guide to help determine which rules will apply to enforcement of a judgment post-Brexit – whether the current rules in the recast Brussels Regulation, or the 2005 Hague Convention on Choice of Court Agreements, or the local rules in each EU27 country. Please click on the image below to access the document.
With a month to go until the UK is due to leave the EU, FCA guidance published yesterday is too late for most UK insurers and intermediaries to change their plans. Understandably, the FCA has waited for views to be expressed by EIOPA before commenting itself on the position for insurers and brokers. It took until last week, though, for that EIOPA guidance to be published (see our previous comments). The FCA’s guidance adds little, if anything, to what was said by EIOPA. For brokers, in particular, the FCA acknowledges that this is “a complex area” and advises firms to contact local EEA regulators and seek legal advice.
Two FCA statements are directed at insurers and insurance intermediaries:
Some key points are set out below. A warning about the advice issued by FCA is, however, that much of the following is a matter of individual EEA state discretion. It cannot be assumed, therefore, that the approach advocated by the FCA (and by EIOPA) will be adopted in all jurisdictions. As is often the case for Brexit-related questions, the answer depends on taking local advice in the relevant EEA state.
The FCA has followed up today with the publication of near-final rules and guidance that will apply if the UK leaves the EU without a deal (see FCA PS19/5). The PRA has also published an update to firms on its plans for Brexit, including near final materials (see PRA PS5/19). Feedback from both regulators includes further details on use of the temporary transition power, through which they aim to ensure that firms and other regulated entities do not generally need to prepare now to meet new UK regulatory obligations. In most cases, firms will be given a period of 15 months to adapt to these changes.
Recommendations issued on Tuesday by EIOPA emphasise the importance of safeguarding policyholders in the event of a “no deal” Brexit. Encouragement given to EEA states to help UK insurers meet their obligations to EEA policyholders is particularly welcome.
In some areas, EIOPA has provided explicit guidance on the approach it expects individual states to take. For example, it is clear (and unsurprising) that UK insurers should not be allowed to write new contracts in the EEA without authorisation. In other areas, EIOPA has taken a “softer” approach. Examples include that regulators:
- should apply “a legal framework or mechanism to facilitate the orderly run-off” of business which becomes unauthorised as a consequence of Brexit; and
- should not prejudice policyholders who have “an option or right in an existing insurance contract to realise their pension benefits“.
Overall, EIOPA’s announcement attempts to strike an appropriate balance, reflecting the considerable lobbying efforts by UK and EU27 trade bodies. Its acknowledgement of individual state discretion in a number of key areas does, however, still leave uncertainty for UK firms planning for 29 March 2019. There is also nothing in EIOPA’s recommendations that could not have been said many months (or even years) ago. It is a pity that politics have prevented earlier publication of these recommendations, leaving industry to spend many millions on unnecessary legal advice and other contingency planning.
EIOPA has given national regulators 2 months to say if they comply with each recommendation, or explain non-compliance.
The FCA portal for incoming EEA firms to notify the PRA and the FCA of their intention to enter the UK Temporary Permissions Regime (“TPR”) is now open.
The TPR will apply if the UK leaves the EU on 29 March 2019 without an implementation (transitional) period. It ensures that EEA firms currently operating under an incoming passport (either from a UK branch or on a cross-border services basis into the UK) can continue to carry out regulated activities in the UK until they receive new direct authorisation by the UK regulators.
This short “at a glance” guide contains an overview of how the TPR will apply to EEA (re)insurers and suggests some next steps. Notifications must be submitted before 29 March 2019.
The Political Declaration setting out the Framework for the Future Relationship between the EU and the UK was published earlier today.
On financial services (including insurance), the final declaration essentially contains the same three points as in last week’s outline political declaration (as discussed in our blog post of 15th November), although there is some limited further clarification.
Yesterday’s announcements on the terms agreed for the UK’s withdrawal from the EU say relatively little about the future framework for cross-border trade in goods or services. More detail is expected on this next week.
The final deal remains subject to approval by the European Council, the EU Parliament and, crucially, the UK Parliament. Nonetheless, yesterday’s agreement must have increased the chances of a transitional (or implementation) period for the UK’s withdrawal from the EU. During that period, both (re)insurers and (re)insurance intermediaries would continue to benefit from the passporting rights that they currently hold, but ultimately stand to lose.
Press reports over the past couple of days suggest that a deal struck by the UK government would “give UK financial services companies continued access to European markets after Brexit” and that “UK financial companies will be able to operate as they now do in Europe“.
There has not been any confirmation that a deal on services has in fact been reached. Rather, there have been denials. Any deal on services is also dependent on all other aspects of a withdrawal agreement and the new UK-EU relationship being agreed.
The press reports suggest that the EU may have agreed to accept that the UK regulatory regime is “equivalent” to EU standards (which will undoubtedly be true at the time of exit), and that the UK will be given greater certainty than other third countries that this acceptance will not be arbitrarily withdrawn. Michel Barnier has since suggested (in a tweet on 1 November) that this greater certainty for the UK as to withdrawal of equivalence may not be forthcoming.
Whether or not a deal has in fact been reached on services, it is important to recognise that securing “equivalence” does not mean that UK insurers and intermediaries can continue to carry on cross-border business as if they held passporting rights.
We have assisted Airmic to produce a guide for policyholders on Continuity Clauses, which some in the insurance market are using to prepare for the impact of Brexit.
The clauses aim to provide a level of contract continuity in the event that the UK leaves the EU without suitable transitional arrangements being put in place or without an agreement allowing UK insurers to perform cross-border business into the EEA.
The guide explains those Brexit issues of particular relevance to policyholders and explains what Continuity Clauses aim to do. Policyholders are encouraged to discuss the implications of Brexit for their insurance programme with their broker and this guide should assist policyholders in those discussions. Click here to access the guide.
Herbert Smith Freehills is Airmic’s Preferred Service Provider on insurance law issues and has assisted Airmic in producing a number of its technical guides over the past few years.
EIOPA has published an opinion and FAQs emphasising the need for insurers and insurance intermediaries to explain to policyholders how Brexit will affect their insurance cover.
At first sight, EIOPA’s comments appear to reinforce concerns that political compromise cannot be expected on policies written (or performed) on a cross-border basis before the UK’s withdrawal from the EU (so-called “legacy contracts”). The particular issue for UK insurers is whether they will have the authorisation they need, post-Brexit, to continue to meet their obligations to EEA policyholders under these contracts. Closer examination of the words used by EIOPA may, however, mean that fewer policies are caught by this issue than has been assumed to date.
Our discussion of EIOPA’s latest opinion can be found here.