Germany: Brexit: BaFin publishes a General Administrative Act (Allgemeinverfügung) regarding the conduct of insurance business of UK insurance undertakings and institutions for occupational retirement provisions in Germany after the end of the transitional period.
On 31 December 2020 – at the end of the transitional period during which the UK was still part of the Customs Union and the Single Market despite its exit from the European Union on 31 January 2020 – , BaFin has issued and published a General Administrative Act ("Allgemeinverfügung zur Durchführung und Abwicklung der grenzübrschreitenden Tätigkeit von Versicherern und EbAV aus UK und GI") stating that insurance undertakings and institutions for occupational retirement provision (IORPs) with their registered office in the United Kingdom of Great Britain and Northern Ireland or in the British overseas territory of Gibraltar will lose their European passporting rights on 1 January 2021. As a consequence, they will no longer be permitted to carry out cross-border activities in Germany.
The General Administrative Act addresses the impact of Brexit on the existing contractual obligations of these insurance undertakings and IORPs. As the EU and the UK have not concluded a comprehensive trade agreement for the area of insurance supervision, Solvency II insurance undertakings will no longer be authorised to operate EU-wide, as provided for in Article 15(1) of Directive 2009/138/EC. This also applies to IORPs whose cross-border activities are governed by Articles 11 and 12 of Directive (EU) 2016/2341.
In short, BaFin has made the following orders:
Companies that have conducted insurance business in Germany until the end of 31 December 2020 do not require a licence from BaFin for the continuation and settlement of existing business.
The primary insurance contracts concluded until that date, however, must be terminated immediately, if and as soon as legally permissible. Insurance contracts and terminated primary insurance contracts must be wound up in full on the basis of the contract terms. Insurance contracts already terminated by 31 December 2020 are to be wound up in full on the basis of the contract terms.
The execution of the existing business until the end of the full run-off is only possible if and as long as the termination of the primary insurance contracts is inadmissible under civil law.
In addition, further provisions apply to IORPs.
Moreover, BaFin has ordered that the execution of the existing business despite the possibility of termination is permissible until the completion of the transfer of the insurance contracts to a company authorised to conduct insurance business in Germany or in the EU/EEA or to a third-country branch authorised in Germany if the transfer process has been initiated by the end of 31 December 2020.
Last, for the entire duration of the execution or settlement of the insurance contracts by a primary insurance undertaking, the informal submission of certain documents/data is ordered. Until 27 February 2021 at the latest BaFin needs information on the Contingency Plan and the names and contact details of those persons who are responsible for complaints handling within the insurance undertaking. Other information such as the expected period until final termination or settlement of all insurance contracts, the numbers of insurance contracts still to be settled and the policyholders concerned, the amount of gross technical provisions, the amount of gross premium income as at the last balance sheet date and the number of outstanding claims is to be submitted to BaFin once a year within three months after the end of the financial year of the undertaking.
The General Administrative Act has come into force on 1 January 2021. It is currently available in German language only. BaFin has announced to publish an English version in the course of January 2021.