The intention of the Solvency II directive is to introduce harmonised risk-based rules for insurers operating within the EU. One of the major changes which is expected concerns the way in which distribution of insurance will be regulated across the EU. Firms trade cross-border by way of the “passporting” regime, which allows firms authorised to provide certain financial services in one EEA Member State to deliver similar services in other EEA Member States. It is expected that the Solvency II regime will make it easier for firms to do this.

The proposal is that under the new regime, host state regulators will be able to claim jurisdiction over enforcement matters in certain circumstances. Insurance distributors which operate in more than one Member State may therefore have to engage with both their home and host state regulators.

It is likely that the directive will be implemented in different ways throughout the EU Member States, and there will therefore be differences in the way that firms operate through the EEA. As a result, firms will need to be clear not only on the laws and regulations which apply to them in their home state, but also on the laws and regulations of the host state which will apply to them when they operate in the host state under a passport.