What does EIOPA’s Brexit warning to insurers really mean?

“Insurers should not assume that the deal they strike with their local regulator will be the final word,” says expert

What does EIOPA’s Brexit warning to insurers really mean?

Insurance News

By Lucy Hook

The European Insurance and Occupational Pensions Authority (EIOPA) released a guidance document on Tuesday, warning against UK insurers using “empty shell” EU companies in light of Brexit.

The authority had earlier said that it wanted a “harmonised and comprehensive” resolution framework for insurers, describing the current landscape as fragmented. In its opinion published this week, it recognised the fact that UK-based insurance undertakings will lose their right to do business in EU member states post-Brexit, and set out principles aiming to ensure a consistent authorisation process for the relocation of insurers from the UK.

A Brexit expert told Insurance Business that the opinion is both a warning to supervisors against lowering the entry thresholds to attract insurers to their jurisdiction, and a warning to UK insurers looking to set up elsewhere. Crucially, it means the authority will oversee any deals that insurers make.

“UK insurers looking to set up EU operations… can’t just have a ‘letterbox’ operation, with all of the decision-makers back in London,” Mathew Rutter, insurance advisory partner at DAC Beachcroft, and leader of the firm's Brexit Advisory Team, said of EIOPA’s advisory.

“There will need to be ‘a level of local staff commensurate to the nature and amount of business being run from the entity’, although it is unclear what that actually means,” he went on to say.

“EIOPA warns that it will be monitoring developments to ensure supervisory convergence rather than divergence, so insurers should not assume that the deal they strike with their local regulator will be the final word,” Rutter said of the oversight that EIOPA will maintain.

Tuesday’s guidance document described the UK as the most importance finance hub in the EU, contributing 24% of the bloc’s total financial and insurance activities in 2015.

“This unique situation requires a common effort at EU level to ensure a consistent supervisory approach to the relocation of undertakings. Communication between the UK and EU supervisors is encouraged in this context,” said EIOPA.


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EIOPA reiterates warning to UK insurers
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