What should insurers do to ensure continuity and market access after a no-deal Brexit?
Continuity for insurers after a no-Brexit deal
Many EU member states have still not introduced temporary measures, don’t be caught out in the event of a no-deal Brexit.
Insurers must press ahead with no-deal preparations as the risks rise that the UK will crash out of the EU on 31 October. After all, ‘no deal’ remains the default legal position in the absence of a ratified deal.
So what temporary measures can insurers take to mitigate the impact of a no deal, particularly in view of the potential loss of market access and contractual continuity?
In December 2017 the UK announced some unilateral measures, including the temporary permission regime (“TPR”) and financial services contracts regime. These permit EU27 insurers with existing UK passports, to continue to operate for a temporary period in the UK following notification to the UK regulators. It also allowed insurers based in EU27 states to continue to service existing cross-border insurance contracts for up to 15 years.
In February 2019, the European Insurance and Occupational Pensions Authority (EIOPA) published nine non-binding recommendations designed to minimise negative impacts on policyholders and to ensure continuity of service after Brexit. Insurance regulators inside individual member states have until 15 August 2019 to signal whether they intend to comply with the proposed recommendations or explain their reasons for non-compliance.
A number of national governments and regulators have already announced a number of preparatory measures, however they differ widely in scope, duration and nature.
The following is a summary of the various publicly-announced positions of EU member states on temporary measures to mitigate the effects of a no deal:
|Belgium||Confirmed ongoing validity and the provision of services under existing contracts issued by UK insurers and reinsurers in the event of a hard Brexit.|
|Czech Republc||The Czech Brexit Act will enable UK insurance and reinsurance undertakings the ability to perform activities necessary to settle claims. The act expires on 31 December 2020.|
|Denmark||Existing policies with British insurance companies can continue until they expire, although no later than the end of 2020. Insurance undertakings can thus continue to service existing policies, but may not extend them or take out new policies.|
|France||UK insurers will be allowed to pay claims on policies written pre-Brexit but they will be unable to renew those policies or write new risks unless they have an authorised EEA entity. It hasn’t yet specified a run-off period.|
|Germany||Introduced a bill adopting transitional provisions to enable UK insurers to service existing contracts. Passporting rights for UK (re)insurers will be extended for up to 21 months after Brexit. The underwriting of new business is specifically excluded. Run-off period: three years after Brexit.|
|Ireland||UK Insurers automatically given permission to service existing policies for a period of three years after Brexit. UK insurers wishing to continue to write new business will need to apply to the Central Bank of Ireland for the appropriate licence/authorisation.|
|Italy||Made provisions for a transitional period of 18 months during which UK insurers would be able to continue to service existing policies.|
|Luxemboug||Introduced temporary measures enabling UK (re)insurance companies to continue to service existing contracts for 21 months after Brexit.|
|Poland||Companies will be able to continue to service non-life contracts for 12 months and reinsurance contracts for 24 months. UK firms will not be able to write new business or extend ongoing contracts.|
|Spain||Under transitional arrangements the existing contracts of UK insurance companies will continue to be valid and enforceable for a period of nine months. UK insurers will be considered third-country entities and must therefore apply for authorisation if they wish to enter into new contracts.|
Despite EIOPA recommendations, this list shows that the majority of EU member states have still not introduced temporary measures to mitigate the impact of a no-deal Brexit. Insurers should continue to press ahead with contingency plans in order to ensure continuity of service after withdrawal.
KPMG’s network across Europe is providing Brexit advice to its insurance clients in preparation for Brexit including:
- The authorisation and establishment of subsidiaries belonging to UK insurance groups in the EU;
- The authorisation and establishment of third-country branches of EU27 insurers in the UK;
- Advising on the UK Part VII transfer process to enable insurers to deal with their back books after Brexit;
- Advising insurers on their business plans, Target Operating Model (TOM) design, governance frameworks and risk appetites.
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