Getting Brexit Ready
Wed Sep 23 2020
BREXIT – BE READY
As you have seen by recent events in the news, there is very little chance an agreement will be reached between the United Kingdom and the European Union. If this is the case, the United Kingdom will no longer be a part of the EU’s Single Market and Custom’s Union from 31 December 2020.
Brokers should ready themselves for a no-deal Brexit.
This means after 31 December, UK markets authorised by the FCA will no longer be permitted to passport into Ireland. Equally Irish intermediaries with UK clients, must have in place the appropriate arrangements if they wish to continue to service their clients after 31 December.
In the case of a no-deal Brexit, from 31 December 2020…
Irish based MGAs/Wholesale Brokers that place business with UK providers
If the customer is EU based, then all parties in the chain, from intermediary, to MGA, 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 with which they place business 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.
Irish insurance intermediaries will no longer be permitted to place risks with UK based insurers 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 another 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. It should be noted that the Government is considering a proposal to extend this period to 15 years. This was included in a Bill which was published by the Government on 9 September; the General Scheme of the Withdrawal of the United Kingdom from the European Union (Consequential Provisions) Bill 2020 (the “General Scheme”).
Irish Intermediaries with UK Clients; Temporary Permissions Regime and Financial Services Contracts Regime
Irish intermediaries that have UK clients, and wish to continue to service these clients and take on new UK clients, will under the UK Temporary Permissions Regime (TPR), be deemed to have permission to continue to service these clients, on a temporary basis if they register their interest with the FCA using its Connect system. The scope of the temporary permission will mirror their passporting permission in place pre-no-deal Brexit. For firms that have not registered yet, and wish to do so, the Connect system is re-opened from 30 September and will remain open until the end of the transition period. The temporary permission will stay in place until the firm has completed the full application process with the FCA.
If the intermediaries with UK clients do not apply for the TPR they will automatically be subject to the Financial Service Contracts Regime (FSCR) which 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 business in an orderly fashion. No new business or renewals can be written under the FSCR. The FSCR will apply for a period of 15 years for insurance contracts.
The responsibility of brokers is 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.