PRA published its statement on the response of ACPR to EIOPA recommendations for the insurance sector, in the light of Brexit. ACPR announced that it does not intend to comply with the sixth recommendation of EIOPA on insurance policies originally sold in the UK by UK insurers to policyholders now resident or established in France. As per the ACPR statement, to make use of the French Run-Off Ordinance, UK insurers must have appropriate passports to carry out business in France in place at UK exit day.
The EIOPA recommendation states that "where a policyholder with habitual residence or, in the case of a legal person, place of establishment in UK concluded a life insurance contract with a UK insurance undertaking and afterward the policyholder changed its habitual residence or place of establishment to a EU 27 member state, competent authorities should take into account in the supervisory review that the insurance contract was concluded in the UK and the UK insurance undertaking did not provide cross-border services for the EU 27 for this contract." ACPR cannot comply with this recommendation, taking into account the French regulatory and case-law provisions determining that, in the case mentioned in the recommendation, the place of the risk, initially located in UK or Gibraltar, is modified and is now situated in France. Accordingly, this must be covered by insurance entities authorized to exercise in France under Article L 310-2 of the Insurance code.
In a Brexit without agreement context, the Brexit Ordinance allows undertakings in the UK and Gibraltar operating in France before the Brexit date, via the European passport, which have not envisaged or finalized a contingency plan on that date, to pursue contracts subscribed before Brexit in extinctive management, until termination. Such contracts cannot be renewed or give rise to the issue of new premiums, which, however, does not prohibit the payment of mandatory premiums payable by the subscriber under the contract. This Ordinance would also apply to contracts subscribed with UK or Gibraltarian insurance undertakings by policyholders whose habitual residence or place of establishment is located in the UK or Gibraltar, and moving thereafter to France, before contract termination, provided that the insurance undertakings are, on the date of a Brexit, authorized to exercise in France by means of the European passport for freedom of establishment or freedom to provide services. Therefore, UK and Gibraltarian insurance undertakings affected by this situation are invited to proceed to passporting notifications to their home competent authorities in the coming weeks and before Brexit date, to benefit from French Brexit Ordinance regime.
This regime would allow them to continue honoring their contracts covering policyholders having moved or moving to France after Brexit date. In response to this, PRA and FCA encourage firms to seek legal advice and consider any risk arising from ACPR approach to affected policyholders as soon as possible. This should include consideration of whether a firm may wish to have any passports to carry out business in France in place prior to exit day to enable the use of the French Run-Off Ordinance. When considering passporting applications, insurers should look to submit applications only for classes of business they have previously written or currently write. Firms wishing to apply for passports should complete all relevant questions on the cross-border services notification form, along with the additional information required under paragraph 3.2.1 of the Decision on the collaboration of the insurance supervisory authorities (EIOPA-BoS-17/014).
Keywords: Europe, EU, UK, Insurance, Brexit, Gibraltar, Passporting Regime, Brexit Ordinance, PRA, FCA, ACPR, EIOPA
Previous ArticleBoE Publishes Draft of Version 1.1.0 of Form AS/FV Taxonomy
The three European Supervisory Authorities (ESAs) issued a letter to inform about delay in the Sustainable Finance Disclosure Regulation (SFDR) mandate, along with a Call for Evidence on greenwashing practices.
The International Sustainability Standards Board (ISSB) of the IFRS Foundations made several announcements at COP27 and with respect to its work on the sustainability standards.
The International Organization for Securities Commissions (IOSCO), at COP27, outlined the regulatory priorities for sustainability disclosures, mitigation of greenwashing, and promotion of integrity in carbon markets.
The European Banking Authority (EBA) issued a statement in the context of COP27, clarified the operationalization of intermediate EU parent undertakings (IPUs) of third-country groups
The Office of the Superintendent of Financial Institutions (OSFI) published an annual report on its activities, a report on forward-looking work.
The Australian Prudential Regulation Authority (APRA) finalized amendments to the capital framework, announced a review of the prudential framework for groups.
The Bank for International Settlements (BIS) Innovation Hubs and several central banks are working together on various central bank digital currency (CBDC) pilots.
The European Central Bank (ECB) published the results of its thematic review, which shows that banks are still far from adequately managing climate and environmental risks.
Among its recent publications, the European Banking Authority (EBA) published the final standards and guidelines on interest rate risk arising from non-trading book activities (IRRBB)
The European Commission (EC) recently adopted regulations with respect to the calculation of own funds requirements for market risk, the prudential treatment of global systemically important institutions (G-SIIs)