Brexit Update February 2020
Wed Feb 19 2020
The United Kingdom left the European Union on 31 January 2020 on the basis of the Withdrawal Agreement agreed by the European Council on 17 October 2019. The agreement includes a transition period until at least 31 December 2020. During the transition period, the UK will remain part of the EU’s Single Market and Customs Union.
UK markets, authorised by the FCA, passporting into Ireland are allowed to continue until the transition period ends. Unless otherwise agreed between the UK and EU these passporting arrangements cannot continue after 31 December 2020. Brokers in Ireland should anticipate a range of possible scenarios for the end of the transition period, including that the activities the UK markets currently conduct may not be covered by any arrangements agreed in the interim between the UK and the EU. Equally Irish intermediaries with UK clients, will have to decide if they wish to continue to service the client after 31 December. (See paragraph entitled UK Run-Off or Temporary Permissions Regime). Therefore, brokers should consider how the end of the transition period will affect them and their customers.
As it currently stands, from 31 December 2020…
- Irish based MGAs/Wholesale Brokers that place business with UK providers
All parties in the chain, from policyholder to underwriter, are required to be regulated in the EU. Irish based MGAs/Wholesale Brokers will no longer be able to place business with UK providers. Brokers must ensure that any UK or Gibraltar based entities they do business with are authorised in the EU. Insurance intermediaries in the EU including Ireland must only use the insurance and reinsurance distribution services of other EU registered Firms.
- UK Insurers
Irish insurance intermediaries are not permitted to place risks with UK insurers (after the transition period) as the UK insurer will no longer be able to avail of the EU passporting regime. Many of these insurers have set up separate legal entities in Ireland (or other EU member state) and will continue through their Irish/EU entity to conduct business as usual in respect of EU risks. If these UK insurers have not set up in the EU, brokers will have to find alternative markets.
It should also be noted that if a broker intends to place business with an EU Insurer, they must check that the Insurer’s passporting arrangements into Ireland are in place. Refer the Central Bank Registers.
- UK Wholesale Brokers
A significant number of Irish intermediaries place risks through UK wholesalers/MGAs in order to access certain insurance markets for particular risks. A number of these UK wholesalers and markets have not relocated to Ireland or other EU member state. If UK wholesalers/MGAs wish to continue to be involved in distribution activities for EU risks, placed with EU insurers, after the withdrawal date, they must be established and registered in the EU. Under IDD they will not be permitted to place the risk otherwise.
- UK Based Markets withdrawing from the Irish Market
New legislation in Ireland (Withdrawal of the United Kingdom from the European Union (Consequential Provisions) Act 2019) provides a run-off regime, which, subject to a number of conditions, will enable UK insurers and intermediaries that do not wish to be established in Ireland or other EU member state, to continue to fulfil contractual obligations to their Irish customers for a period of three years after the transition period ends. After this period, they will be unable to write new insurance contracts or renew existing ones.
- UK Run-Off or Temporary Permissions Regime
In previous communications we advised, under the UK Temporary Permissions Regime (TPR), Irish insurers and intermediaries will be deemed to have permission on a temporary basis. The scope of the permission will mirror the insurers/intermediaries current passporting permission in place pre-Brexit. It is anticipated that the regime will apply for a maximum of three years. If insurers/intermediaries wish to avail of this regime they must have notified the FCA using its Connect system. This notification was to be filed before 30 October 2019.
If the insurer/intermediary failed to apply for the TPR it will automatically be subject to the Financial Service Contracts Regime (FSCR). The FSCR was introduced by the UK Government to ensure existing contractual obligations not covered by the TPR can continue to be met. The FSCR will permit UK contracts entered into pre-31 December to continue to be serviced, so that it can wind down / run–off this business in an orderly fashion. No new business can be written under the FSCR. The FSCR will apply for a period of 15 years for insurance contracts.
Brokers Ireland urge members to take every precaution in preparing for the end of the transition period. It is the responsibility of each member to ensure that all insurance undertakings or distributors, with which they engage, have or will have, the appropriate licensing/authorisations to underwrite/place EU risks for EU policyholders.
Data Protection and Brexit and SCCs
Brokers should be mindful of where their data is being transferred, particularly, if it is currently being transferred to the UK. Post-31 December, the UK will become a third country in relation to the EU and the transfer of personal data from the EU/EEA to the UK will be subject to the conditions governing third country data flows. Examples of transfers of personal data:
- The Insurer with whom brokers are placing business are transferring the data to the UK
- Back office supplier/quote engines (OpenGI/Applied)
- Outsourced HR/IT/Payroll functions to a UK based firm
- Storage of data in the UK on a server or in the cloud
- Use of marketing company to send marketing communications to a customer database.
What this means in practice is that, in order to comply with GDPR rules, an Irish business intending to, or continuing with the, transfer of personal data to the UK will need to put in place specific safeguards to protect the data in the context of its transfer and subsequent processing. The GDPR provides several solutions which allow the transfer of personal data from the EU/EEA to a third country. One such safeguard includes the use of “Standard Contractual Clauses” or “SCCs”.
Brokers may have received SCCs from relevant Insurers, or other data processing providers. The following link provides an overview of the contents of SCCs – what each clause means, and what the appendices cover.