Intermediaries need to check whether their regulatory permissions allow them to continue to service existing insurance policies. It might be the case that following the end of the transition period a UK intermediary is no longer permitted to continue to service existing policies in respect of risks or customers located in an EEA territory.
For UK capacity providers who have retained EEA insurance policies in their UK entity there is a risk that servicing these contracts might constitute unauthorised activity in respect of an individual jurisdiction. EIOPA has recommended that national regulators apply a legal framework or mechanism to facilitate the orderly run-off of business which became unauthorised or they should require insurers to immediately take all necessary measures to become authorised under European law.
UK registered firms operating in EU27
As noted above, EIOPA has recommended that national regulators should establish orderly run-off regimes or require insurers to immediately take all necessary measures to become authorised under European law.
A number of jurisdictions, including the UK, had previously announced temporary regimes which would enable the orderly run-off of such business.
Such orderly run-off regimes were conditional on the UK leaving the EU without a Withdrawal Agreement (i.e. a ‘no-deal’ Brexit). As the UK left the EU with a Withdrawal Agreement on 31 January 2020, the legislated run-off regimes did not and will not come into effect. Many countries have not yet legislated for a similar run-off framework to come into effect at the end of the transition period.
It is therefore important to clarify the position with the relevant competent authority.
EEA firms operating in UK
In the UK, there are two main transition regimes in place: the Temporary Permissions Regime (TPR) and the Financial Services Contracts Regime (FSCR).
Under the TPR, EEA firms can notify the appropriate UK regulator of their intention to enter the Temporary Permissions Regime on the basis of their existing passporting rights. These firms would continue operating in the UK for a limited time until they have become authorised.
Under the FSCR, EEA firms operating in the UK which have not applied to enter the TPR or have exited from the TPR, can continue to service existing policies.
The FSCR distinguishes between a contractual run-off (CRO) regime and supervised run-off (SRO) regime.
The principle difference between CRO and SRO lies with the level of authorisation. SRO firms are deemed to have Part 4A authorisation (i.e. permission to conduct regulated activity) and are therefore supervised by UK authorities. CRO firms, on the other hand, are not PRA authorised persons and are not supervised by the UK authorities, however they are required to have EEA home state authorisation in order to be classified as CRO