The EU’s insurance regulator has issued an opinion paper warning insurers and financial services regulators to make “sufficient and timely” preparations to ensure continuity of service after Brexit for cross-border insurance risks. The paper, published by the European Insurance and Occupational Pensions Authority (EIOPA) on 21 December 2017, stresses that the insurance industry and regulators should not assume that any particular trade deal between the UK and EU will be negotiated. They should therefore take responsibility for fulfilling their insurance obligations as part of the sound and prudent management of their business, whatever the post-Brexit landscape might look like.
Most insurers will already be aware of their options for restructuring after Brexit, but these are set out in EIOPA’s paper and include:
- The transfer of insurance contracts of UK undertakings with policyholders in the EU27 to an insurance subsidiary established in an EU27 Member State;
- The transfer of insurance contracts of EU27 undertakings with UK policyholders to an insurance subsidiary established in the UK;
- The establishment of a third country branch in the UK or in the EU27 Member State of the policyholder; and
- With regard to UK undertakings in the legal form of a European company, the change of domicile of the company to an EU27 Member State.
According to EIOPIA chairman Gabriel Bernardino: “It is essential that insurance undertakings consider all eventualities, including the possibility of no political agreement at the date of withdrawal”…”I call on all insurance undertakings and national supervisors to plan effectively and take the necessary steps in good time to ensure that policyholders and beneficiaries are not exposed to unnecessary uncertainty regarding the status of their contracts.”
EIOPA’s paper serves as a reminder that the post-Brexit landscape for insurers remains uncertain and that insurers should not make any assumptions about the kind of trade deal that will be reached. In particular, it is unclear whether a free trade deal will be agreed between the UK and EU in respect of financial services specifically. UK financial services regulators anticipate that there will be a transition period after the UK’s formal exit from the EU, during which firms could continue to benefit from ‘passporting’ rights. However, the EU’s chief negotiator Michel Barnier has stated that any trade deal after Brexit would not include financial services and that the UK will lose passporting rights as a result of its decision to leave the EU. Barnier has spoken of “the red lines that the British have chosen themselves. In leaving the single market, they lose the financial services passport”.
EIOPA’s paper is here.