21/02/2018

Post-BREXIT: EIOPA concerns for policyholders of cross-border insurance contracts

brexit

The European Insurance and Occupational Pensions Authority (EIOPA) has issued an official opinion paper about continuity of service in insurance from 30 March 2019 following Brexit day. The opinion is non-binding, but calls on UK insurers and insurance supervisory authorities to ensure continuity of service to policyholders and beneficiaries of cross-border insurance contracts after the UK withdrawal from the EU.

As a result of Brexit, UK insurance undertakings will lose their right to conduct business in the remaining 27 EU Member States by way of freedom of establishment and freedom to provide services. This means that from the 30 March 2019, UK insurers will no longer be authorised to “carry out insurance activities with regard to these crossborder insurance contracts” in the EU27, which includes fulfilling insurance contracts and paying insurance claims benefits to policyholders and beneficiaries.

In practice, around 30 UK insurers, including the large commercial insurers, have already either created new subsidiaries in EU27 jurisdictions or can move contracts to existing EU27 businesses. Both these measures are in line with the options suggested by EIOPA. This means that significant disruption for FERMA members after Brexit is unlikely, but some smaller London market companies writing specialist lines of business may have more difficulty concluding their arrangements.  

The UK insurance market has been calling for transitional arrangements post-Brexit ahead of some mutual recognition and a market access deal. After a provisional agreement on three cornerstone issues (i.e. the divorce bill to be paid by the UK, the future of the Northern Ireland border and the rights of UK citizens in the EU and EU citizens in the UK), Brexit talks are now focusing on the post-Brexit relations and transitional measures.

On 7 February 2018, the European Commission published a draft legal text on transitional arrangements to be included in the Withdrawal Agreement, but on 9 February, EU Chief Negotiator Michel Barnier expressed public doubts about the transition period agreement indicating that this was “not a given” based on the UK disagreements over the application of EU rules during the transition period. Discussions remain difficult and the unknown prevails.