Post-Brexit: Contract continuity in the insurance sector

We were all already tired hearing about Brexit long before 31 January 2020 when it finally happened. This does not mean that everything was agreed, in fact, for the time being and all until 31 December 2020 (or perhaps even until 31 December 2022) we are in a limbo or, properly speaking, a transition period. During this period, EU law will remain applicable and “business between UK and EU will continue as usual”. The transition period is meant to allow all effected parties to make the necessary arrangements in light of the new legal framework that is expected to be negotiated by the end of the transition period. Several questions remain open and there is a great deal of uncertainty regarding the future relationship between UK and EU.

Impact on UK based insurers providing services in Slovenia

In anticipation of Brexit, UK insurers have invested significant resources in reorganisation to ensure business processes or policyholders are not disrupted after Brexit, the most popular course of action being to move their operations from UK to other EU countries. Their biggest fear was facing a hard Brexit without a transition period and the consequent inability to continue conducting insurance business within the EU. Under EU law, insurers with insurance licences in their country of domicile may conduct insurance business in another EU member state without applying for a new licence in the host country or countries. This freedom is part of the freedom to provide services (FOS) and freedom of establishment (FOE). In the worst-case scenario, after the transition period ends, UK insurers will lose these rights and be in the same position as other third-country insurers.

What will happen to the rights and obligations arising from existing insurance agreements concluded before Brexit?

The European Insurance and Occupational Pensions Authority (EIOPA) adopted a guideline on this issue. According to EIOPA, competent authorities should apply a legal framework or mechanism to facilitate the orderly run-off of business that will become unauthorised or they should require the insurers to take all necessary measures immediately to become authorised under EU law. The focus should be on minimising detriment to the policy holders and beneficiaries.

The Slovenian Insurance Supervision Agency (AZN) adopted a similar approach in its press release published in April 2019. AZN takes into consideration that insurance agreements at the time (i.e. before Brexit or before the end of the transition period) were concluded in line with the Slovenian insurance legislation, meaning that Brexit will not cause any issues in servicing the existing insurance policies as long as no significant amendments to these policies is made (such as the conclusion of a new insurance policy).

Apart from the press release mentioned, no other temporary measures aimed at mitigating the impact of a potential no-deal Brexit were introduced in Slovenia. We will pay close attention to any developments and will duly report on them.