In case the UK withdraws from the European Union without ratification of the withdrawal agreement, on 30 March 2019 the UK becomes a third country and UK insurance undertakings and distributors lose their right to conduct business across the EU’s 27 Member States by way of freedom of establishment and freedom to provide services. In principle, insurance contracts concluded before that date by UK insurance undertakings in the EU27 are valid after that date. However, the insurance undertakings would no longer be authorised to carry out insurance activities with regard to these cross-border insurance contracts.
Many UK insurance undertakings, in particular with large cross-border business in the EU27, have already taken action and are implementing contingency measures. However, there is a residual amount of insurance business in the EU27 for which UK insurance undertakings have not taken appropriate measures – as of November 2018, 124 UK insurance undertakings, representing about 0.16 per cent of the total insurance business in the EU27.
The EIOPA’s recommendations provide guidance on the supervisory treatment of residual insurance
business with the objective of minimising the detriment to policyholders with such cross-border
insurance contracts. NCAs should ensure an orderly run-off of the insurance business, including
the appropriate supervision. UK insurance undertakings without authorisation should not
conclude new insurance contracts.
Furthermore, the recommendations provide guidance on the application of relevant legal provisions with regard to cross-border insurance of UK insurance undertakings. The nine recommendations range from the authorisation of third country branches, lapse of authorisation, co-operation between national competent authorities, communication to policyholders and beneficiaries to distribution activities.
Gabriel Bernardino, Chairman of EIOPA, said: “Besides the fact that UK insurance undertakings have taken appropriate measures for most of the cross-border insurance into the EU27, there is a residual amount of business that would become unauthorised when the United Kingdom leaves the EU. To ensure the protection of policyholders and beneficiaries concerned, national supervisors have to ensure consistent supervisory actions and to cooperate closely and effectively.”
The recommendations can be obtained via EIOPA’s website here - https://eiopa.europa.eu/Publications/Standards/EIOPA-BoS-19-040_Recommendation_Brexit_final.pdf .
Huw Evans, Director General, Association of British Insurers, said: “Although it comes late in the day, this is sensible guidance which helps reduce legal uncertainty over paying some insurance contracts post-Brexit. It is particularly important that UK citizens who bought pensions in the UK but now live in the EU have the extra reassurance this provides. Allowing contracts signed before Brexit to run off and extra time for insurers to transfer portfolios into the EU27 are also pragmatic decisions which we welcome. However, while this guidance reduces uncertainty, it does not eradicate it as all EU27 individual regulators must implement it in the same way. A no-deal Brexit remains a major challenge for the UK and the EU insurance industry’s customers and must be avoided at all costs.”