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Brexit: EIOPA fails the test of imagination

Hugh SavillI spoke on a Panel in Washington last week, at the EU-US Insurance Symposium, a regulatory/industry forum. The Panel was about Brexit. Distance lends perspective, the sages maintain, and certainly many of the apparently insoluble problems of Brexit seem much simpler now that I have managed to get more or less successfully through Dulles Airport.

Most of the consequences of Brexit for insurers can be dealt with through relocation and contingency plans. It is a terrible waste of time and effort, but it can be managed.

Contract continuity is different, because we cannot see a solution within our own hands that meets our customers’ needs.

The Bank of England has estimated that there are 6 million policies in the UK and 30 million in the EU27 whose insurers will lose authorisation to do insurance in the customer’s country when the UK leaves the Single Market. In most cases it will then be illegal for insurers to pay claims – an intolerable outcome for insurers and for our policyholders. We have looked at the option to transfer these contracts to an authorised insurer in the customer’s country (Part VII transfers, in the FSMA jargon). This is not a complete solution for all our customers. Some customers with savings contracts will lose money in the process of transferring their savings from one vehicle to another. Nor will it be possible to replicate the terms and conditions for commercial customers with pan-European contracts of, for example Director and Officer liability cover, when the insurer tries to break out the British portion of the contract.


Contract continuity requires action by the authorities on both sides of the Channel.

So we welcomed the announcement by the British authorities just before Christmas of plans to find a solution for the British customers of EEA-based companies.

In contrast EIOPA, the EU’s supervisor of insurance supervisors, also published an Opinion on service continuity in the light of Brexit. Reasonably enough, the Opinion encourages insurers to pursue their contingency planning against a  worst case scenario on market access. However, on contract continuity the Opinion points to the options of contract transfer, establishing a third country branch, or transferring the seat of a European company. For most insurers, that means the transfer option, which I have explained above is not a good solution for millions of EEA-based consumers.

This is curious. Why is EIOPA - which has regularly set out (and acted on) its commitment to consumer protection - so little concerned about the consequences for European consumers in this case?

The word goes that EIOPA felt unwilling to step into the political arena of the Brexit negotiations. Now this doesn’t ring true. When it suits, EIOPA regularly steps outside its role and engages in the political arena.

It may be that EIOPA felt that it could not make any assumptions about the end state of the regulatory relations between the UK and the EU. In which case they would have my sympathy – nobody wants to walk out on ice that thin.

But in this case EIOPA are simply not using their imagination. EIOPA does not need to know the end state of the regulatory relationship. All that it needs to know is that that there will be regulatory co-operation.  Or they could have stated a provisional assumption that current regulatory co-operation will continue - subject to the politics clearing up - like the Bank of England has done.

And actually this is quite easy. Both EIOPA and the British authorities are committed to the core principles of the IAIS. Principle 25 sets out clear duties of regulatory co-operation between all insurance jurisdictions, let alone ones that know each other as well as EIOPA and the British authorities. Furthermore, it is a foregone conclusion that both EIOPA and the British authorities parties will sign up to Comframe in 2019, which contains more detailed requirements on supervisory co-ordination.  

So there is no question that there will be co-operation between British and European authorities post Brexit. EIOPA’s Opinion is lacking in imagination, focused too much on the narrow point of the mechanics of Brexit withdrawal, and forgetting the wider context of international obligations.

There are a range of other Brexit-related issues where consumers risk losing out that I will address in future blogs.

Last updated 29/01/2018