Ireland proposes 15-year run-off for UK insurers

Out-Law News | 23 Sep 2020 | 3:42 pm | 2 min. read

UK-authorised insurers and distributors will be given 15 years to wind up their pre-Brexit Irish business provided that certain conditions are met under proposals put forward by the Irish government.

Ireland had previously proposed a three-year temporary run-off regime for UK authorised insurers and distributors, which would have been put in place had the UK left the EU in 2019 without a formal withdrawal agreement in place.

The proposals are contained in the General Scheme of the Withdrawal of the United Kingdom from the European Union (Consequential Provisions) Bill (129-page / 1.7MB PDF) ('General Scheme'), which is currently before the Irish parliament. They will be welcomed by UK-authorised insurers and distributors who will have stopped underwriting new business in Ireland by the end of the Brexit transition period at the end of this year, according to insurance law expert Niall Campbell of Pinsent Masons, the law firm behind Out-Law.

Campbell Niall

Niall Campbell

Senior Associate

If enacted, the 15-year run-off period would represent a pragmatic approach by the Irish government.
Campbell Niall

Niall Campbell

Senior Associate

If enacted, the 15-year run-off period would represent a pragmatic approach by the Irish government.

"The proposed duration of the regime – 15 years compared with three years under the Brexit Omnibus Act - is to be welcomed, as in some cases three years would not have been a sufficient amount of time for a UK-authorised insurer to completely run-off its pre-Brexit Irish insurance business activities," he said.

"If enacted, it would represent a pragmatic approach by the Irish government," he said.

However, Campbell said that firms seeking to take advantage of the extended run-off period would have to be able to demonstrate that they met the conditions set out in the General Scheme.

The UK will become a 'third country' for the purposes of EU financial services regulation on 1 January 2021, when the Brexit transition period comes to an end. At this point, UK insurers and distributors conducting business in Ireland under EU 'passporting' rules will lose the right to do so freely, whether on a freedom of establishment (branch) basis or a freedom to provide services basis.

The General Scheme would amend the European Union (Insurance and Reinsurance) Regulations 2015, which give effect to the EU's Solvency II Directive in Ireland; and the European Union (Insurance Distribution) Regulations 2018, which give effect to the EU's Insurance Distribution Directive in Ireland. The amendments would create temporary domestic run-off regimes for certain insurance undertakings and certain insurance intermediaries respectively, giving firms which meet certain conditions deemed authorisation for 15 years.

A UK-authorised insurer or distributor operating under the General Scheme would not be permitted to carry out any new insurance business in Ireland. Instead, it must be "exclusively administer[ing] its existing portfolio in order to terminate its activity" in Ireland. It would also be required to comply with "general good requirements".

The firm must notify the Central Bank of Ireland (Central Bank) that it intends to rely on the provisions no later than three months from the end of the Brexit transition period. The Central Bank would be able to terminate the firm's participation in the General Scheme if it breaches the conditions, or if the firm does not "make sufficient progress" towards permanently ceasing its business in Ireland by the end of the 15-year period.

Insurance expert Iain Sawers of Pinsent Masons said that the 15-year period "reflects the period of time that the UK will provide for EEA insurers to wind down their UK business where they do not wish to continue operating in the UK market", and would therefore be welcomed by UK insurers looking to do the same in Ireland.

"UK insurers will be watching keenly to see if other EU27 regulators follow suit," he said.