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.
This briefing considers the position of EEA firms who wish to access the UK insurance market post-exit. It also looks at the impact of Brexit on non-EEA headquartered groups that currently passport into the EEA via a UK subsidiary.
This briefing supplements our previous note “Access to the single market” – an explanation for the (re)insurance sector, which considered Solvency II rules on third country access to the EEA and the role of “equivalence” under Solvency II.