EIOPA has published Annex II to its Decision on Collaboration Regarding the Transfer of Registered Office of Insurance and Reinsurance Undertakings (Decision), which supplements the 2021 Decision on the Collaboration of the Insurance Supervisory Authorities of the Member States of the EEA.

Annex II to the Decision (Annex II) provides for enhanced supervisory cooperation between EEA supervisory authorities where a (re)insurance undertaking relocates within the EEA using the cross-border conversion process available under Directive (EU) 2019/2121 (Mobility Directive). The European Union (Cross-Border Conversions, Mergers and Divisions) Regulations 2023 (Mobility Regulations) transposed the Mobility Directive into Irish law making it easier for companies to relocate within the EEA. Our 2023 article linked here provides further background on the Mobility Regulations.

Prior to the Mobility Directive, the process of (re)insurers relocating within the EEA was complicated and expensive and required High Court applications for inward and outward Irish involvements. Provided both jurisdictions involved in the cross-border merger have transposed the Mobility Directive into local law, the relocation process using the Mobility Directive will be a far more streamlined approach whereby the relocating company maintains its same legal personality when transferring its registered office. On conversion into Ireland, an EEA converting company will be required to obtain High Court approval for the conversion. On a conversion out of Ireland, an Irish converting company will only be required to obtain a pre-conversion certificate from the High Court. William Fry is proud to have advised on the first cross-border conversion into Ireland.

Annex II makes clear that unless there is a material change in the business model of the (re)insurer relocating, the (re)insurer’s existing Solvency II authorisation should not be re-examined during the cross-border conversion process and the firm’s prior Solvency II authorisation will transfer to the destination jurisdiction and will operate and be supervised in the new location on the basis of the previous authorisation (provided there is no material change in business model). This ease of movement marks significant progress in the free movement of (re)insurers within the EU from the time of publication of Annex I to the Decision in 2021 which refers to “rigorous examination of the authorisation information” being required of supervisory authorities.

Cooperation Between Supervisory Authorities

Annex II contains general and specific principles of cooperation that should guide supervisory authorities, including active and early engagement and establishing regular communication between supervisors. While stating that communication should be proportionate and risk-focused, it emphasises that both departure and destination supervisory authorities should be able to provide or request information on a timely basis.

More specifically, where authorisation is required to comply with national administrative laws, EIOPA expects destination supervisory authorities to assess the new application proportionately, relying on the information provided previously in accordance with Solvency II where still relevant.

Departure supervisory authorities should share relevant information with the destination supervisory authorities, including at a minimum, the latest conclusions drawn by the Supervisory Review Process and ORSA Report, an assessment of the system of governance, and permissions already granted under Solvency II.

The clear emphasis on supervisory authorities’ application of ‘proportionality’ in their engagements suggests that it would not be unreasonable to expect a more streamlined approach in their engagements around the cross-border conversion process.

Unresolved/Open Supervisory Issues

One area highlighted by Annex II relates to open supervisory issues. Annex II asserts that due consideration must be given by the destination supervisory authority to understand the extent of any existing supervisory issues that the departure supervisory authority is currently managing, and the proposed plan for their handover if they will not be concluded prior to the planned departure date. Examples of supervisory issues in scope might include open RMPs and/or governance risk assessments. Joint supervisory plans are also required for identified potential problematic supervisory issues, in particular where policyholders or beneficiaries are concerned.

If the destination supervisory authority disagrees with actions under implementation related to such issues, the authorities are obliged to try to reach a joint decision on the matter. The supervisory authorities are required to maintain adequate information exchange regarding the status of the ongoing issue for at least six months after the relocation.

Existing Permissions

While recognising that divergent views among supervisory authorities may be justified in some instances where they relate to existing permissions or approvals, Annex II highlights the importance of a consistent approach in this respect and of any conflicting perspectives being addressed cooperatively by supervisory authorities with the help of EIOPA where required.

Annex II states that where divergent views between supervisory authorities emerge, EIOPA may consider developing supervisory convergence tools, so there could likely be further guidance as to coordination between authorities in the future. Annex II also provides for EIOPA to help mediate resolution where supervisory authorities disagree on existing permissions.

New Group Supervisor

Annex II also contains additional considerations where parents of cross-border groups are relocating. In particular, where a new group supervisor is designated, any decision of the previous group supervisor remains applicable. The group supervisor is required to reassess a group internal model as a result of the relocation and, where justified, issue a new decision.

Annex II applies only to the transfer of registered office of (re)insurers, but not to intermediaries. That said, we anticipate that, with regard to Article 13 of the Insurance Distribution Directive, supervisory authorities will cooperate and exchange any relevant information to facilitate the relocation of an insurance intermediary from one EEA member state to another. Annex II should also serve as a useful proxy for supervisory authorities.

Conclusion

The publication of Annex II by EIOPA is to be welcomed and suggests that the relocation of (re)insurers across the EEA is a live consideration for many groups.

Overall, Annex II makes very clear EIOPA’s expectation that supervisory authorities should exercise proportionality in the cross-border conversion process as regards (re)insurance undertakings. The fact that EIOPA now specifically mandates greater cooperation between insurance supervisory authorities involved in cross-border conversions suggests a more streamlined application process may be availed of by those considering moving their headquarters to Ireland and for those eager to join 11 of the top 15 global (re)insurers based in Ireland.

If you have any questions about cross-border conversions or the Mobility Regulations, please contact Ian Murray, Eoin Caulfield, or any member of the Insurance team.

Contributed by Róisín Casey.