A draft of bill of law decree (the "Draft") containing urgent measures in view of a possible "hard Brexit" was circulated on 19 March and and it is likely to be discussed by the Italian Government in these days.
The Draft, which contains a transitional discipline applicable in case no agreement is reached by and between the European Union and the United Kingdom, applies, among others, to insurance services and insurance distribution activities carried out in Italy by UK operators. The Daft also includes provisions regarding banking and financial services, including funds and pension funds, which are however just shortly touched in this article.
Based on the Draft, upon the exit from the UK from the EU - which is still unclear when it will occur -, the UK insurance companies doing business in Italy under the right of establishment or the freedom to provide services regime will be cancelled from the register held by IVASS containing the names of the companies authorized to do business in Italy.
However, in order to guarantee the continuity of the business already in force, UK insurance companies shall be allowed in the transitional period - starting from UK's exit from the EU to the end of the eighteen's month following such exit - to continue manage the policies in force, without the possibility however to write new business or to renew, also tacitly, the policies in force. IVASS (the Italian Insurance Regulatory Authority) shall render public such transitional business activity, probably on its website, although the Draft does not specify anything in this respect.
UK insurance companies are requested to submit to IVASS - in 90 days by the date of entry into force of the law decree - a plan illustrating the measures that they intend to implement in order to guarantee the continuity of business, including management of claims and the relevant payments. IVASS is authorized to request integrations and updates to the plan at any time.
In fifteen days by the time the UK exit from the EU is accomplished, UK insurance companies must inform the policyholders and those entitled to the payment of a benefit/indemnification, of the way by which they intend to continue to transact business, also by means of a publication of a notice on their website.
Starting from the date of exit, policyholders are allowed to withdraw from policies whose duration is more than one year without incurring in any expense, by, among others, giving a communication in writing to the insurance company. Any clause of tacit renewal contained in the policy ceases to be effective and the withdrawal by the policyholder shall be effective from the expiry date of the first year following the date of exit of the UK from the EU.
UK insurance companies will remain subject to the supervisory powers of IVASS with respect to the transitional business is carried out in Italy for the transitional period.
As regards UK insurance and reinsurance intermediaries doing business in Italy under the right of establishment or the freedom to provide services regime at the time of exit, these shall cease their business at that date and shall be simultaneously cancelled from the register of intermediaries held by IVASS.
However, in order to avoid any prejudice in respect of the policyholders, the assureds, and those entitled to the payment of benefits/indemnifications, insurance intermediaries are allowed to put in place what is strictly necessary to close the contractual relationships in force promptly and, in any case, in no later than 6 months from the date Brexit has occurred. In the said period of six months, insurance and reinsurance intermediaries cannot start new business nor renew distribution agreements in force.
Also in the case of UK insurance and reinsurance intermediaries, these must inform policyholders, assureds and those entitled to the payment of benefits/indemnifications, of the way they intend to continue doing business in the transitional period and remain subject to the supervisory powers of IVASS.
Italian insurance companies authorized to do business in the UK under right of establishment or freedom to provide services regime at the time Brexit occurs can continue doing their business in compliance with the provisions issued by UK.
Nothing is said with respect to Italian intermediaries operating in the UK under the right of establishment or the freedom to provide services regime, but it is quite likely that the same regime provided for Italian insurance companies doing business in the UK (and described above) will likewise apply.
Until the end of the transitional period, Italian tax provisions related to, among others, insurance business will continue to apply, whereas VAT provisions will apply, to the extent possible.