European regulations will continue to apply in the United Kingdom during the transition period (until 31 December 2020). Specifically, this means that insurers may continue to use their European passports during the transition period. Nothing will therefore change in this regard during that period. The transition period may formally be extended by two years (although British Prime Minister Johnson has stated that he is opposed to an extension).
The European Union and the United Kingdom will try to reach a deal during the transition period. The negotiations on a deal will start the moment Brexit is a fact (31 January 2020). It is not yet clear what a deal, if any, will mean for insurers. It is in any event an established fact that European passports can no longer be used after the transition period. It is unlikely that a similar “passport regime” will be agreed on in the event of a deal.
The situation after the transition period
In the future (regardless of whether or not a deal is reached), European insurers will most likely have to apply for FCA (Financial Conduct Authority) authorisation in order to continue to provide services in or from the United Kingdom. Insurers will have to comply with legislation and regulations that apply in the United Kingdom, which will be enforced by the FCA. Conversely, the same applies to insurers that are domiciled in the United Kingdom and that wish to continue to provide services in or from Europe.
Temporary Permissions Regime and the Financial Services Contracts Regime
Because the market requires certainty, the FCA has put a temporary regime (the Temporary Permissions Regime) in place in case the United Kingdom leaves the European Union without a deal. Insurers that provided services in or from the United Kingdom on the basis of a European passport before the Brexit date and that notify the FCA (before that date) that they wish to qualify for the temporary regime may continue to provide their services in or from the United Kingdom (subject to certain conditions and for a maximum period of three years), pending the issue of the FCA authorisation required. The FCA is therefore giving insurers time to adjust to the new situation. It is likely that this temporary regime will remain in place if no agreement is reached after the transition period on the future position of insurers.
The United Kingdom furthermore offers insurers that have registered under the Temporary Permissions Regime the possibility under the Financial Services Contract Regime to settle their activities in the United Kingdom in an orderly fashion.
Please also see the articles on the impact of Brexit in other practice areas. For a more detailed analysis of the impact of Brexit on your business, please do not hesitate to contact any of our experts.