The Bulgarian Financial Supervision Commission (FSC) has published guidelines to UK-based insurers and insurance intermediaries operating in Bulgaria on their status in the event of a no-deal Brexit, should no agreement occur before the latest deadline of 31 January 2020. The guidelines are related to EIOPA Recommendation 6 (EIOPA-Bos-19/040 BG), and aim to minimise damage to Bulgarian policyholders and beneficiaries should a hard Brexit take place.
Under these guidelines, contracts concluded with UK-based insurers will remain valid and effective between the parties following Brexit, unless a portfolio has been transferred to another insurer.
Following a no-deal Brexit, UK-based insurers (operating on a freedom of services or freedom of establishment basis) will be treated like Bulgarian-based insurers whose licences have been withdrawn.
They will not be entitled to enter into new insurance contracts and amend or extend the terms of existing ones, but will only be able to serve existing claims.
If these UK-based insurers wish to undertake a new business in Bulgaria, they will have to register a branch or a subsidiary in Bulgaria and obtain an insurance licence from the FSC. Otherwise, they will be sanctioned for undertaking insurance activities without a licence.
As a general rule, selling or distributing insurance in Bulgaria (in relation to Bulgarian risks) requires compliance with the licensing regime under the Insurance Code. In the general case, the insured risk is considered to be located in Bulgaria if the habitual residence or the legal policyholder's establishment is in Bulgaria.
Under the Insurance Code, carrying out insurance activities in Bulgaria without a licence can result in fines of up to EUR 100,000. Any person acting as an intermediary in an insurance contract without registration or passporting can be sanctioned up to EUR 25,000.
The FSC can also impose coercive administrative measures in these situations.
For information on these guidelines and the Bulgarian insurance industry, contact your regular CMS source or our local CMS expert: Nevena Radlova.
Article co-authored by Kalina Krastanova.