Out-Law News | 08 Nov 2019 | 2:39 pm | 2 min. read
EIOPA surveyed national competent authorities (NCAs) on their compliance or intention to comply with its Brexit recommendations. According to the information it received, all NCAs either comply or intend to comply, with the exception of France, which does not intend to comply with EIOPA's recommendation on change in the habitual residence or establishment of the policyholder.
The survey responses reveal varying levels of Brexit preparedness amongst EU member states. For example, 10 NCAs have stated that they currently comply with all of EIOPA's recommendations, including Spain, Italy and the Netherlands. However, six NCAs have stated that while they intend to comply with all of the recommendations, they currently do not comply with any.
Although EIOPA's recommendations are at a high level only, these results could provide a greater degree of certainty to firms that are basing their approach to cross-border business on the EIOPA recommendations.
Insurance law expert Tobin Ashby of Pinsent Masons, the law firm behind Out-Law, said: "EIOPA's analysis demonstrates the variety of approaches currently being taken by different states to implementing its recommendations".
"Differences in each state's laws and regulatory regime mean that it will never be possible to reach an entirely consistent position across all national competent authorities," he said.
"However, firms planning to maintain cross-border business post-Brexit will be encouraged by the level of responses indicating compliance or the intention to comply. Although EIOPA's recommendations are at a high level only, these results could provide a greater degree of certainty to firms that are basing their approach to cross-border business on the EIOPA recommendations," he said.
The UK will become a 'third country' for the purposes of EU financial services regulation should it leave the EU without a deal, and UK insurers and distributors will lose the right to conduct business freely in the EU. In EIOPA's view, insurance contracts concluded in the EU by UK insurers will remain valid in principle should the UK become a third country. However, the insurers would no longer be authorised to carry out insurance activities with regard to these cross-border contracts.
EIOPA's recommendations are designed to minimise the detriment to insurance policyholders in this scenario, with a focus on orderly run-off and portfolio transfer. They also set out how NCAs should deal with authorising third country branches, the lapse of authorisation, communications with policyholders and beneficiaries, and cooperation with other NCAs. EIOPA also intends to establish "cooperation platforms", to allow EU NCAs to exchange information relating to unauthorised cross-border insurance provision.
Among the survey responses, Ireland's stands out as it states that it currently complies with only one of EIOPA's recommendations. The Central Bank of Ireland (CBI) said in its response that, currently, it only complies with the first recommendation, the general objective. This relates to the treatment of cross-border business of UK insurance undertakings and minimising the detriment to policyholders and beneficiaries. However, it intends to comply with all the recommendations.
Irish insurance law expert Naoise Harnett of Pinsent Masons said that the CBI's response on recommendation one "refers to the legislation which has been enacted by the Ireland to provide for a three-year run-off period for existing insurance business by UK authorised undertakings which do not have authorisation to carry on insurance business in Ireland upon the UK's withdrawal from the EU".
"The legislation requires that no new or other insurance business is carried on by undertakings availing of the run-off regime in Ireland other than the administration of the existing portfolio in order to terminate that activity in Ireland," he said.
"The restrictions in this legislation will need to be balanced in an Irish context against the confirmation by the CBI that it will comply with recommendation six, which deals with policyholders with a habitual residence - or, in the case of a legal person, place of establishment - in the UK which conclude insurance contracts with a UK insurance undertaking and afterwards change their habitual residence – or place of establishment – to Ireland after the UK's withdrawal from the EU," he said.
France stated in its response that it did not intend to comply with recommendation six.
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