The Prudential Regulation Authority has given insurers a 14th July 2017 deadline for firms to provide confirmation they have a worse-case scenario plan for trading with the European Union post-Brexit.
The PRA wrote to all CEOs/ branch managers on contingency planning for the UK’s withdrawal from the European Union.
This letter is relevant to insurers undertaking cross-border activities between the UK and the rest of the European Union (EU) and EFTA. This includes branches of insurers from other EU states operating in London on a passport or branch basis.
The PRA expects all firms with cross-border activities to undertake appropriate contingency planning for the UK’s withdrawal from the EU.
International accountants and advisers Moore Stephens say that medium to small insurers will be hit hardest by the PRA’s stance.
Alex Barnes, Partner at Moore Stephens explains: “There have been some companies that were sitting on the fence over the issue of redomiciling and waiting to see where the rest of the market moved. Two and half months may seem a decent period of time, but firms will need to finalise their plans and discuss them at board level before they submit them to the PRA by the July deadline.”
Moore Stephens recently carried out its own research into the attitude of the insurance sector to Brexit and found:
* Over 40% intend to change operation model due to exit.
* 30% intend to create operations in another jurisdiction
* 15% intend to increase operations in another jurisdiction
* The top three locations are Ireland, Luxembourg and Germany
* Key drivers for choosing countries are the opportunities for new business in that region, the availability of skills and expertise and the legal framework that exists there.
European insurers operating through branches in the UK may need to gain authorisation from the PRA for the branch or a new subsidiary company. The UK has implemented a gold-plated version of Solvency II and this will not be relaxed post Brexit. This may cause issues for European insurers in terms of the requirements of the PRA for authorisation.
BREXIT and INSURANCE: What BREXIT Means For Insurers And Brokers Operating In Or Planning To Operate In The UK And Europe
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For those UK insurers, EU insurers, brokers and agents selling- or planning to sell- into the UK and/or European markets; BREXIT is a legal and logistical nightmare.
UK regulators have demanded that every UK insurer now doing business in the EU/EFTA - whether by passport or local subsidiary- and every EU/EFTA insurer doing business in the UK on a passport or full basis -must show them their contingency plan that covers all options including the nuclear one of a UK exit with no deals.