Getting Brexit Ready – Broker Guidelines

Wed Sep 18 2019

As we write this, it is apparent that the British Prime Minister is intent on leaving the EU with or without a deal in place by 31 October.  On this basis we must prepare for the worst case scenario; a no deal Brexit.  Many brokers will already have put in place arrangements to limit the damage a no deal Brexit will cause.

As advised in March, a No-Deal Brexit would pose unique and unprecedented challenges for the UK, as well as for the EU, including Ireland. It would be impossible in a no deal scenario to maintain the current seamless arrangements between the EU and UK across a full range of sectors, including the financial services sector.

Reminder to members to prepare for a No-Deal Brexit

If there is no-deal, EU law will cease to apply to and in the UK on 31 October.  If the UK leaves the EU without a deal in place to maintain some or all of its current passporting arrangements, then passporting rights from and into the UK will cease.

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. Earlier this year, EIOPA published recommendations for the insurance sector in light of Brexit and this may be of assistance to you. https://eiopa.europa.eu/Publications/Standards/EIOPA-BoS-19-040_Recommendation_Brexit_final.pdf .

UK Insurers

Irish insurance intermediaries are not permitted to place risks with UK insurers (after withdrawal day) as they 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 their passporting arrangements, include passporting into Ireland.

UK Wholesale Brokers

A significant number of Irish brokers 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.

The FCA’s position

However, it should be noted that the FCA have taken a different approach.  They will allow UK wholesale brokers, where they are placing the risk with an EU insurer, to sell to EU brokers.  This has confused the matter for Irish intermediaries as contrary to what the FCA’s position is, EU law (and our own legislation) will not permit EU intermediaries to place business with them.

UK Based Markets withdrawing from the Irish Market

Legislation in Ireland, currently still at Bill stage, will provide 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 date of the withdrawal of the UK from the EU. During this period, they will be unable to write new insurance contracts or renew existing ones.

UK Run-Off or Temporary Permissions Regime

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 notify the FCA using its Connect system.  This notification must be filed before 30 October 2019.

If the insurer/intermediary fails 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-Brexit 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.

Your responsibility

Brokers Ireland urge members to take every precaution in preparing for a No Deal Brexit.  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-Brexit, 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.

https://www.dataprotection.ie/en/organisations/international-transfers/guidance-tranfers-personal-data-ireland-uk-event-no-deal

 


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