New Brexit Omnibus Bill Proposes a Run-off Period of up to 15 years for UK and Gibraltar Insurers or Insurance Intermediaries
The General Scheme of the Withdrawal of the UK from the European Union (Consequential Provisions) Bill 2020 proposes a run-off period of up to 15 years under Ireland's temporary run-off regime for UK and Gibraltar insurers or insurance intermediaries. The new proposals will be welcomed by the insurance industry and policyholders, as it is a significant extension to the previous proposed run-off period of 3 years.

 

The Irish Government proposes a run-off period of up to 15 years in Ireland's new temporary domestic run-off regime. The regime will be open to United Kingdom (UK) or Gibraltar insurance undertakings or insurance intermediaries (Firms) who have existing portfolios of Irish insurance business. It will come into operation at the end of the UK's transition period under the 'Withdrawal Agreement'. 

The proposals are contained in the Government's General Scheme of the Withdrawal of the United Kingdom from the European Union (Consequential Provisions) Bill 2020 (the General Scheme). The proposals will be welcomed by the insurance industry and policyholders, as it is a significant extension to the previous proposed run-off period of 3 years

The Irish Brexit Act – repealed and replaced

Part 8 of the Withdrawal of the United Kingdom from the European Union (Consequential Provisions) Act 2019 (the Irish Brexit Act) introduced into Irish law a temporary run-off regime to deal with the servicing of existing insurance contracts with Irish policyholders by UK/Gibraltar based entities, as part of the then Government's preparations for a No Deal Brexit. However, Part 8 of the Irish Brexit Act was not commenced as the European Union (EU) and UK ultimately agreed the 'Withdrawal Agreement'. The General Scheme now proposes that Part 8 of the Irish Brexit Act will be repealed when the General Scheme is enacted.

The 'temporary domestic run-off regime' & extended 'run-off period'

The proposals for the new run-off regime are contained in Part 10 of the General Scheme (Part 10). The European Union (Insurance and Reinsurance) Regulations 2015 and the European Union (Insurance Distribution) Regulations 2018 (the Updated Regulations) will be amended to provide for a temporary run-off regime with a run-off period of up to 15 years for UK and Gibraltar authorised insurers and registered insurance intermediaries.

Although these entities will not be allowed to write new business during this period, the new provisions will allow them to continue to service existing contracts for a longer period.

To avail of this regime, a Firm must have been authorised or registered in the UK/Gibraltar and have passported into Ireland (on either a freedom of establishment or services basis) immediately before the 'relevant date'. The relevant date:

  • is the date on which Part 10 of the Withdrawal of the United Kingdom from the European Union (Consequential Provisions) Act 2020 (Part 10) comes into operation; or
  • shall be deemed to be a time on a particular date, where such a time is appointed as the time at which Part 10 shall come into operation.

In addition to the authorisation/registration and passporting requirements, a Firm must also comply with the following conditions for the duration of the 15-year period:

  1. on or before the relevant date, it must cease to conduct new insurance contracts (or insurance distribution) in Ireland;
  2. after the relevant date, it must exclusively administer its existing portfolio in order to terminate its activity in Ireland; and
  3. it must comply with the general good requirements (if it is an insurer) or the general good rules (if it is an insurance intermediary).

All of the Irish business of the Firm must be in run-off. A Firm cannot rely on the run-off regime to write new business in Ireland while it seeks authorisation (e.g. by establishing a third-country branch in Ireland) to continue writing Irish business from the UK/Gibraltar. 

Firms within the scope of Part 10, that intend to avail of this regime (and the 15-year run-off period), must notify the Central Bank of Ireland (CBI) of the applicability of the Updated Regulations to them no later than 3 months from the 'relevant date'. 

The CBI may issue a 'withdrawal notification' terminating the right of a Firm to carry out business during the 15-year period where the CBI is satisfied that the Firm has: 

  • carried on insurance business (or insurance distribution) in Ireland, other than the administration of its existing portfolio (or insurance contracts) in order to terminate its activity in Ireland;
  • permanently ceased to carry on insurance business (or insurance distribution) in Ireland having completed the administration of its existing portfolio (or insurance contracts) in order to terminate its activity in Ireland;
  • failed to make sufficient progress towards permanently ceasing to carry on insurance business (or insurance distribution business) in Ireland by the date that is 15 years from the relevant date; or
  • failed to comply with the general good requirements (or general good rules in the case of an insurance intermediary).

The decision of the CBI to issue a 'withdrawal notification' is an appealable decision under the Central Bank Act 1942.

Part 10 will also require the CBI to make a report to the Minister for Finance at the end of year-12 setting out the CBI's view on the run-off regime covering both insurers and insurance intermediaries. The CBI's report should consider a number of principles and policies, including the need to protect policyholders, the number of Firms remaining in run-off, and the nature of the policies in question.

Reinsurers / reinsurance intermediaries 

It is worth noting, as was the case in the Irish Brexit Act, that the new regime (and the extended run-off period) will not apply to UK or Gibraltar reinsurers or reinsurance intermediaries. 

UK or Gibraltar intermediaries which are registered as both insurance and reinsurance intermediaries will need to be especially mindful of this distinction. It is not clear whether this distinction will be legislated for as the General Scheme passes through the Oireachtas. 

If you would like to know more about the services which we are offering or have any queries in relation to Brexit and the impact on the insurance industry, please contact our partners listed here or your usual contact at William Fry.

 

Contributed by Shannon O'Neill

 

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