The European Insurance and Occupational Pensions Authority (EIOPA) has called on European regulators to minimise the detriment to insurance policyholders and beneficiaries in the case of a no-deal Brexit.
On 19 February, EIOPA issued recommendations for the insurance sector for the potential scenario in which the UK withdraws from the EU without a withdrawal agreement.
The recommendations, which are addressed to National Competent Authorities (NCAs), provide guidance on the treatment of UK insurance undertakings and distributors with regard to cross-border services in the EU after a no-deal Brexit on the 29 March.
In the case of no-deal, the UK would become a third country and lose their right to conduct business across the EU27 member states.
In principle, insurance contracts concluded before Brexit by UK insurance undertakings in the EU27 are valid after that date, but the insurance undertakings would not anymore be authorised to carry out insurance activities with regard to these cross-border insurance contracts.
EIOPA’s recommendations offer guidance to NCAs with the objective of minimising the detriment to policyholders with such cross-border insurance contracts.
They suggest that NCAs should ensure an orderly run-off of the insurance business, including the appropriate supervision, and that UK insurance undertakings without authorisation should not conclude new insurance contracts.
EIOPA also suggested that NCAs should allow portfolio transfer from UK insurance undertakings to EU27 insurance undertakings, provided that it was initiated before the withdrawal date.
Additionally, EIOPA recommended NCAs foster supervisory convergence and to ensure consistent supervisory practices.
Gabriel Bernardino, chairman of EIOPA, commented: “To ensure the protection of policyholders and beneficiaries concerned national supervisors have to ensure consistent supervisory actions and to cooperate closely and effectively.”
Nigel Feetham, partner at Hassans International Law Firm, added: “This is a much welcome statement by EIOPA on ‘contract continuity’ and the validity of portfolio transfers post-Brexit, in particular.”
“Whilst they are just ‘recommendations’ to EEA Regulators, I think it is unlikely that the competent authorities will not act upon them.”
Feetham suggested EIOPA’s recommendations provided very useful clarifications on Brexit contingency plans involving Gibraltar, which he has been a great advocate for.
He explained: “Importantly for Gibraltar companies, EIOPA makes clear that the recommendations are also applicable to insurance undertakings and intermediaries established in Gibraltar.”
“A lot of work has gone into Brexit contingency planning over the last year and this statement by EIOPA provides very helpful clarification.”