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The regulators urge insurers to continue mitigation work to ensure that risk of disruption and instability are kept to a minimum.
“Some market volatility and disruption to financial services, particularly to EU-based clients, could arise,” the regulators say. “Final steps by individual firms are required to ensure their preparedness for the end of the transition period,” they add.
The FCA and the Bank of England’s Prudential Regulation Authority say insurers should also take steps to check their clients are ready for the end of the transition period.
“It is imperative that firms continue to build on their preparatory work to ensure that they, and to the extent possible their clients, are ready for a range of scenarios at the end of the transition period,” the letter says.
Firms that intend to run off outstanding EU liabilities, either through an EU run-off regime or by transferring liabilities to an EU insurer, should finalise preparations, or put in place contingency plans ahead of 31 December, the letter continues.
This is in line with Eiopa’s expectations that were published earlier this month. It said firms should be ready for the end of the transition period, with measures in place to prevent unauthorised insurance activity and ensure continuity of cross-border business.
The UK regulators say insurers and brokers should inform customers about the possible impact of the UK’s withdrawal from the EU on insurance contracts. The FCA says customers that will be affected by a reduction in, or cessation of, services should be treated fairly and given sufficient notice.
The FCA highlights several other areas that insurers may need to address. These include Part VII saving provisions, data, EEA bank account closures, EEA passporting firms and the temporary permissions regime. The latter kicks in at the end of the transition period to allow EEA passporting firms to operate in the UK, pending authorisation as third-country branches.