EU and UK authorities gear up for Brexit

Publication date: 06/2018

Eiopa urges EU insurers to take contingency measures, while UK supervisors reveal Brexit plans.

Eiopa urges EU insurers to take contingency measures, while UK supervisors reveal Brexit plans

The European Insurance and Occupational Pensions Authority (Eiopa) urged European insurers to form specific plans for the UK’s withdrawal from the European Union in March 2019.

The supervisor deems top priority the protection of consumers and beneficiaries with cross-border contracts, stating that the National Competent Authorities (NCAs) are playing a pivotal role to ensure that a smooth transition will take place.

Eiopa is concerned with insurance contracts which will conclude before the withdrawal date. These contracts are going to be valid after that date, so insurers should be able to continue the service and fulfil their obligations to the customers.

There are currently many options within legal frameworks that firms can choose from to ensure service continuity. For example, the transfer of contracts to a subsidiary within the EU or the UK, depending on where the insurer is based, the establishment of a third country branch, or the change of domicile of a UK insurer in the legal form of a European company.

Eiopa also reminds insurers that they have to give as much information as possible to the consumers on how UK’s withdrawal will affect the contracts. They should also as explain their contingency plans and what would the impact be on contractual rights and on the provision of services, before their clients can decide on whether to conclude or renew their contract.

The information could be about a change of the contractual counterparty in cases where the portfolio of insurance contracts is transferred to another entity or the potential loss of protection provided by any existing national compensation scheme due to a portfolio transfer to an entity located in another jurisdiction.

To this, NCAs will have to step up their supervisory actions to ensure that local insurers have or will create their contingency plans and that they are giving enough information to their clients. Eiopa proposes a continuous dialogue between national supervisors to establish a comprehensive review of the insurers’ actions.

Read Eiopa’s opinion here: Link 1. In the meantime, German insurers have called for a ‘test procedure’ to ascertain ‘equivalence’ status of the UK to start immediately after In its latest briefing note to insurers on the March 2019 divorce, the German trade association, GDV said that starting the equivalence testing “as early as possible’ post-Brexit offered the best hope for “cross-border business [to] continue as smoothly and effectively as possible”.

Earlier this month, industry lobby group the City UK had asked regulators of both sides ( to come up with plans to protect cross-border contracts after Brexit.

“It is important for regulators to issue commitments about the future treatment of these contracts to act as a regulatory backstop in the event that the transitional period fails to materialise,” the City UK had said.

The UK prepares for a “no-deal” scenario

Regulators in the United Kingdom have announced their Brexit strategies, following the Treasury’s contingency plans, especially if the negotiations end with no deal between the two parties.

The Treasury, among others, will distribute additional powers to the financial services regulators to address any deficiencies as a result of Brexit. In a no-deal scenario, the Government will allocate EU functions to the appropriate financial services regulator.

The Financial Conduct Authority (FCA) and the Bank of England (BoE), the Prudential Regulation Authority (PRA) and the Payment Systems Regulator (PSR) will introduce transitional measures, to ensure that there is a functioning legislative and regulatory framework if the UK lose complete access to the single market.

The authorities will be working on a thorough review of EU and UK laws to spot and amend any differences or gaps between the two legislative frameworks while ensuring that the European regulations will be fully incorporated into the British legal system.

The Treasury will introduce a Temporary Permissions Regime (TPR) whereby EEA firms will continue to operate in the UK for a limited time after UK’s departure from the EU, despite the loss of their passporting rights. Also, there will be additional regimes for entities operating cross-border and outside of the passporting framework.

Read the full announcement: Link 2, Link 3.

Following the Treasury’s announcement, the Bank of England issued a press release: Link 4, on how it intends to assume responsibilities after Brexit. The regulator will consult on changes in the Binding Technical Standards (BTS) taken from the EU this autumn, together with the FCA.

The proposed changes will be submitted for review and comments by firms and, depending on the negotiations’ outcome, they may come into force on 29 March 2019, in which case they will grant transitional relief to comply with the changes.

The FCA confirmed its intention to help firms adapt to the new legislative framework post-Brexit: Link 5, giving time to both UK and EU companies to comply with the new rules. The FCA underlines, however, that it will not make broader policy changes, but minor technical amendments to ensure that the framework remains functional.