07 February 2020

Commercial Risk Europe: French risk managers reassured over post-Brexit contract certainty

French risk managers have been reassured by their association AMRAE and market experts that there is no need to panic about the validity of coverage placed with UK-based insurers post-Brexit, but have been advised to double-check sooner rather than later.

National insurance supervisors across Europe and the European Insurance and Occupational Pensions Authority (EIOPA) have worked hard during the last three years to make sure there is maximum legal certainty about the validity of cross-border insurance contracts and subsequent claims, however Brexit pans out.

At the end of October last year, EIOPA published the responses from national supervisors on their compliance, intention to comply or non-compliance with its ‘Recommendations for the insurance sector in light of the United Kingdom withdrawing from the European Union’.

“According to the information received, all national competent authorities comply or intend to comply with almost all recommendations. The recommendations were addressed to national competent authorities of European Economic Area countries except the United Kingdom, with the goal of minimising detriment to policyholders in the event of no withdrawal agreement between the United Kingdom and the European Union,” it stated at the time.

The recommendations covered nine different areas including orderly run-off, portfolio transfer, change in the habitual residence or establishment of the policyholder, authorisation of third-country branches, lapse of authorisation, cooperation between national competent authorities, communication to policyholders and beneficiaries, and distribution activities.

Alarm bells were set off in France, however, as the French Prudential Supervision and Resolution Authority (ACPR) announced that it did not intend to comply with EIOPA’s sixth recommendation on insurance policies originally sold in the UK by UK insurers to policyholders now resident or established in France.

The sixth EIOPA recommendation states: “Where a policyholder with habitual residence, or in the case of a legal person, place of establishment in the 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.”

But the ACPR said it “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”, adding: “Accordingly, this must be covered by insurance entities authorised to exercise in France under Article L 310-2 of the Insurance Code.”

Experts agree, however, that this exception will only really affect life policies taken out by individuals who change their residence and should not overly concern companies with business insurance coverage.

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