The announced end of “passporting” in the insurance and insurance broking sector

December 17, 2016

Passporting“, provided for by the Directive 2009/138, enables insurance companies, once authorized by their regulator of origin, to conclude policies in any European country.

The passport is “the faculty for a certified company of a Member State of the European Economic Area to offer its services on the territory of another Member State using a permanent establishment (for example, a branch or an agency)“. It can be carried out either in freedom to provide services, or by the establishment of a local branch, which does not have to be authorized by the local regulator.

The same should be applicable to insurance intermediaries benefiting from a passport according to a similar structure pursuant to the Directive 2002/92 amended by the Directive 2016/97 of 20 January 2016.

Exit of Great Britain from the EU will lead to important consequences for insurers and insurance intermediaries. Indeed, British insurance companies would not have the possibility anymore to resort to approbation of the British regulator to exercise these passport rights in the rest of the EU. British insurance companies could therefore not settle for approbation of the British regulator to be able to sell their products within the EU, but should consider to relocate their headquarters to a EU State and submit their authorization request to the control authority of the State where they establish their head office.

In order to continue benefiting from the European passport, many insurance and broker companies may consider transferring their headquarters to a EU State or ask for an authorization for their existing or future branch, which will particularly imply a capitalization in equity of the structure located in the EU. It is the case for instance of the British insurer HISCOX, which is said to have declared considering in the short term to relocate its head office to a EU country.

Inversely, insurance companies established in the EU and selling their products on the British territory while benefiting from the passport, could not do it anymore through this way, and should have a local establishment authorized by the British regulator. According to S&P, there are today 562 underwriters and 177 life insurers outside United-Kingdom who underwrite risks there via a passport.

Everything will obviously depend on agreements that will be negotiated (see our introduction above).

Our law firm, expert in insurance regulation and insurance intermediation, remains available for any related questions.

On the same subject :

The end of “European passport” for UK companies ?