Financial services after Brexit: The continuity of legacy insurance contracts (Altius)
Publication date: 04/01/2021
On 1 January 2021, the UK left the EU’s Single Market and Customs Union. As a result, the UK has lost the rights and benefits it had as an EU-Member State and is no longer a party to the EU’s directives and regulations, such as IDD and Solvency II.
To safeguard the continuity of legacy insurance contracts between Belgian residents and UK insurance service providers, the Belgian government has put in place a special transitional regime.
UK insurance undertakings
Since Brexit on 1 January 2021, UK insurance companies are treated as third-country insurance companies. Thus, in the absence of any equivalence decisions, they will require a prior authorisation by the National Bank of Belgium (“NBB”) to offer insurance contracts in Belgium. The UK insurance companies that do not obtain such a Belgian licence will no longer be allowed to conclude new insurance contracts and will have to terminate their Belgian activities.
However, by a Royal decree of 22 December 2020, the Belgian government has put in place a transitional regime that allows UK insurance undertakings to continue their legacy insurance contracts without obtaining the NBB licence. To benefit from this transitional regime, UK insurance undertakings have to:
- notify the NBB of their intention to make use of the arrangement;
- provide the NBB with a plan indicating how they will discharge and settle their obligations under the legacy contracts;
- appoint a Belgian representative; and
- inform their policyholders and beneficiaries of the continuity of insurance contracts and provide all useful information in this regard.
These requirements also apply to UK insurance undertakings that have requested authorisation as a third-country while they are awaiting the NBB’s confirmation.
As with UK insurance undertakings, the transitional regime provides for continuity measures for UK insurance intermediaries, including ancillary insurance and reinsurance intermediaries, that provide services in Belgium.
Since Brexit on 1 January 2021, any UK insurance intermediaries that intend to provide services in Belgium have to be registered with the Belgian Financial Services and Markets Authority (“FSMA”) under the common third-country regime. However, the Royal decree of 22 December 2020 temporarily allows such intermediaries to continue their services for insurance contracts concluded before the Brexit date, even without FSMA registration. This arrangement will apply for 18 months from 1 January 2021. It does not apply to contracts that are concluded after 1 January 2021.
Any UK intermediaries that would like to rely on the transitional regime have to:
- notify, within 2 months, the FSMA of their intention to make use of the arrangement; and
- provide the FSMA with a plan indicating how they will terminate their activities in Belgium within 18 months; and
- update the information under (i) and (ii) and provide additional information on their insurance distribution activities in Belgium as requested by the FSMA.
Again, the same requirement applies to UK intermediaries that have requested registration with the FSMA but are still awaiting official confirmation.