Brexit

EIOPA calls for immediate action to ensure service continuity in cross-border insurance

On 5 November EIOPA called for immediate action to ensure service continuity in cross-border insurance. EIOPA is closely monitoring the contingency planning of insurance undertakings, in particular of the undertakings from the UK and Gibraltar with cross-border business in EEA countries. 

The insurers with the largest cross-border business in the EEA countries have taken action and are implementing contingency measures. However EIOPA notes, to date, 124 undertakings from the UK and Gibraltar with cross-border business in EEA jurisdictions have no or insufficient contingency plans in place to ensure service continuity in case of a withdrawal without an agreement between the United Kingdom and the European Union. This might affect some 9.1 million EEA policyholders who might face uncertainty and delays in receiving payments. This residual cross-border business has insurance liabilities of EUR 7.4bn.

EIOPA also notes:

  • by law, insurance undertakings have to ensure continuity and regularity in the performance of their activities, including the development of contingency plans;
  • policyholders of cross-border insurance contracts with undertakings from the UK and Gibraltar should be informed by their insurer about the relevant contingency measures they are taking and the impact on their contractual relationship and services.
PRA temporary permissions regime (TPR)

If the UK leaves the EU on 29 March 2019 without an Implementation Period, EEA firms currently operating through passporting in the UK under the existing European passport framework will require a Part 4A permission under FSMA to be able to continue carrying out regulated activities in the UK.

On 7 November, following the publishing of the Statutory Instrument (SI) which sets out the legislation implementing the temporary permissions regime, the PRA issued a PRA Direction ‘Temporary permission and variation: notification before exit day’. The SI allows  firms eligible for entry into the TPR, to continue to be authorised to carry on a regulated activity in the UK under the EU passporting regime at the point of exit.

To enter the TPR firms need to inform the relevant regulator before exit day of the intention to enter into the regime. EEA firms can inform the PRA either by:
 
  • submitting an application before exit day for authorisation as a branch (EEA passporting firms that submitted a branch application prior to the TPR SI being made will be automatically entered into the TPR) or
  • notifying us in accordance with the PRA Direction made on 7 November 2018.
See the Temporary permissions regime webpage for more information.

FCA temporary permission notification direction 

On 9 November 2018, the FCA issued a temporary permission and variation notification direction under regulation 14(2) of the EEA Passport Rights (Amendment, etc., and Transitional Provisions) (EU Exit) Regulations 2018 (the Regulations). The FCA directs that a notification must:
 
  • be made by submitting the Firm Temporary Permission Notification using the Connect system (https://connect.fca.org.uk);
  • be made following any further instruction published in relation to the Firm Temporary Permission Notification form;
  • contain the information required by that form; 
  • be made during the period beginning 7 January 2019 and ending with 28 March 2019.
FCA speeches on Brexit

On 5 November, Nausicaa Delfas, FCA Director of International, gave a speech on maintaining market confidence: an update on Brexit at the City and Financial: 3rd UK Financial Services Brexit Summit. Nausicaa provided an update on what the FCA are doing to prepare for Brexit, its approach to regulation after the UK leaves the EU and what this means for financial services.

On 25 October, Andrew Bailey, FCA Chief Executive, gave a speech on Brexit and financial services at the City Banquet, Mansion House. In his talk, Andrew highlighted that the FCA is on course to be ready for a hard exit from the EU and has the resources to handle it.

Brexit: proposed changes to the FCA Handbook and Binding Technical Standards – CP18/36

In October 2018, the FCA published a first consultation on the amendments it needed to make should the UK leave the EU without an implementation period. This second Consultation Paper, published on 23 November, proposes further changes that may need to be made to the FCA Handbook and Binding Technical Standards (BTS).  These include amendments to reflect:
 
  • the temporary permissions regime; 
  • the new credit rating agency and trade repository regimes.
The FCA are also consulting on guidance on how non-Handbook guidance should be interpreted after Exit day and on its approach to forms which appear in the Handbook. The FCA do not propose wider policy changes and are not making other changes unrelated to Brexit to the Handbook or to BTS.

Comments are required by 21 December 2018.

charles.portsmouth@moorestephens.com