From now on, the “Trade and Cooperation Agreement” (the TCA) is the Treaty that will govern the relationship between the EU and the UK. However, the TCA does not contain an effective business continuity solution for financial services. Subject to possible further legislative changes, in order to keep doing business on the Belgian territory, UK (re)insurance undertakings and intermediaries must adapt their business to the situation with no EU or Belgian equivalence or transitional regime in place for new activities.
In this Q&A we envisage the new regulatory framework for provision of insurance services by UK insurance undertakings and intermediaries in Belgium and the transitional regime for activities related to existing insurance contracts.
For a Q&A on the Brexit impact on cross-border financial services, click here. For a Q&A on the most significant impact of Brexit on the choice of English law and of English courts in existing and future financial contracts between professionals, see here.
The EU-UK Trade and Cooperation Agreement (TCA) does not provide for an equivalence regime for financial services, including insurance products and services. Pending any future equivalence decision, UK insurance undertakings and intermediaries must therefore comply with the third country requirements set out in Belgian law. A such, UK insurance companies must obtain a specific authorisation and UK intermediaries must be registered in order to continue to carry-out their insurance activities on the Belgian market.
Pursuant to the General Agreement on Trade and Services (GATS) Treaty, implemented in Belgium by a Royal Decree of 22 February 1991 a general exception to the requirement for third country insurance undertakings to obtain a prior authorisation applies for insurance contracts related to sea-going ships, commercial aircraft or international transit of goods. As British companies have already notified the Belgian regulators of their activities under the European directives, the Belgian legislator declared it would be superfluous to repeat this procedure under the GATS agreement. UK insurance undertakings may continue to manage both existing and new insurance contracts in these specific sectors.
Pursuant to the Belgian Law of 3 April 2019 (amended on 20 December 2020) on the United Kingdom’s withdrawal from the EU, the Belgian government may implement a specific transitional regime for financial services providers located in the UK. The Law of 3 April 2019 expressly allows the government to implement a transitional regime for UK insurance undertakings and intermediaries to continue to lawfully conduct business in Belgium while the procedure to obtain the required authorisation or registration is still pending but only with respect to provision of insurance services to non-consumers. To date, no general transitional regime has been implemented.
A transitional regime has been implemented by a Royal Decree of 22 December 2020 to allow UK insurance undertakings to continue to service the insurance contracts concluded before 1 January 2021 without any requirement to obtain a licence from the National Bank of Belgium (NBB) to do so.
In order to benefit from this transitional regime, UK (re)insurance undertakings must cease all new activities in Belgium and amongst other conditions:
- notify the NBB of their intention to make use of the arrangement;
- provide the NBB proof of its compliance with English law regulatory requirements;
- provide the NBB with a plan indicating how they will wind up their business and settle their obligations under the existing contracts;
- appoint a Belgian representative;
- provide financial and operational support to their Belgian activities so that the insurance benefits can be settled in the interests of policyholders and beneficiaries; and
- inform the policyholders and beneficiaries of the continuity of insurance benefits.
This transitional regime also applies to UK insurance undertakings whose request for authorisation by the NBB is pending. Until their authorisation is granted, they will no longer be able to pursue new activities in Belgium.
A transitional regime has been implemented by the Royal Decree of 22 December 2020 to allow UK (ancillary) (re)insurance intermediaries to service the (re)insurance contracts concluded before 1 January 2020 without being registered with the Financial Services and Markets Authority (FSMA).
This transitional regime will only apply for 18 months, starting on 1 January 2021.
In order to benefit from this transitional regime, UK (re)insurance (ancillary) intermediaries must cease all new activities in Belgium and:
- have notified the FSMA before the 1 March 2021 of their intention to continue their pre-Brexit business;
- provide the FSMA with a plan indicating how they will wind up their business and settle their obligations under the existing contracts; and
- provide the FSMA proof of their compliance with English law regulatory requirements.
This transitional regime also applies to UK (ancillary) (re)insurance intermediaries whose application for registration with the FSMA as a third country intermediary is pending. Until their registration is granted, those intermediaries are prohibited to pursue new activities in Belgium.
UK insurance undertakings
From the 1st January 2021, UK (re)insurance companies no longer benefit from the "EU passport" rights. UK insurance undertakings must apply for a licence from the NBB based on the conditions set out for third countries including the opening of a Belgian branch to provide services in Belgium, including online sales. Insurance undertakings that do not hold such a license should, in principle, stop all their activities in Belgium except for the servicing of existing contracts under the conditions set out in Question 3.
Pursuant to the GATS-treaty, implemented by the Royal Decree of 22 February 1991 a general exception to the requirement for third country insurance undertakings to obtain a prior authorisation is in place for insurance contracts related to sea-going ships, commercial aircraft or international transit of goods. As British companies have already notified the Belgian regulators of their activities under the European directives, the Belgian legislator declared it would be superfluous to repeat this procedure under the GATS agreement. Thus, for those activities UK insurance undertakings do not have to apply for a prior authorisation to carry out new activities related to risks located in Belgium.
UK (ancillary) intermediaries
Since 1 January 2021 (ancillary) (re-)insurance intermediaries registered in the United Kingdom no longer benefit from their EU passport rights under the Insurance Distribution Directive (2016/9716) and are therefore no longer able to conduct business in the EU on the basis of their UK registration. UK based (ancillary) (re)insurance intermediaries must be registered with the Belgian Financial Services and Markets Authority (FSMA) before they can continue their activity of (re)insurance distribution in Belgium, including through online sales. Not registered UK undertakings should, in principle, stop all their activities in Belgium except with respect to existing contract under the conditions set out in Question 3.
Belgian law recognises various categories of insurance intermediaries: (re)insurance brokers, (re)insurance agents, insurance sub-agents, ancillary insurance intermediaries and underwriting agents. The Belgian ‘Brexit’ Law of 3 April 2019 introduced this new category of intermediaries, the underwriting agents, in order to avoid a Belgian legal vacuum in case of a hard Brexit. Underwriting agents are subject to the same registration conditions as insurance brokers, and to the same conditions for carrying out the activity as the other insurance intermediaries. As from 10 April 2019 intermediaries already registered by the FSMA as an intermediary who carried out activities as an underwriting agent could notify the FSMA and submit a request for registration as an underwriting agent until 10 April 2020. UK registered intermediaries who did not file a request for a registration as an underwriting agent before this date or new UK underwriting agents will only be able to carry out their activities in Belgium when their submission for registration is submitted and approved by the FSMA.
No registration with the FSMA is required for ancillary insurance intermediaries if:
(i) The insurance is a supplement to a good or service and covers:
- the risk of defect, loss or damage to this good or service; or
- the non-use of this service; or
- the risk of damage to or loss of luggage and other risks associated with a journey.
(ii) The premium remains below the threshold:
- the amount of the insurance premium calculated pro rata on an annual basis, not including taxes, does not exceed EUR 200.
- In case the intermediary offers as a main activity, a service whose duration does not exceed 3 months and he offers an insurance in addition to this service (in line with the conditions set out in (i)), the premium does not have to be considered on a pro rata annual basis. The amount of the premium per person may also not exceed EUR 200.
UK reinsurance undertakings
Since 2019 the Belgian legislator abolished the difference between re-insurance undertakings from third countries with or without an EU equivalent solvency regime. So, to date under Belgian law all reinsurance undertakings from third countries are treated in the same way as European reinsurance undertakings.
As such, UK re-insurance undertakings can carry out the reinsurance activities for which they have received authorisation in the UK on the Belgian market either by opening a Belgian branch or based on their free movement of services. Brexit has no impact on the applicable authorisation requirements for UK re-insurance undertakings to operate in Belgium.
Since 1 January 2021 Belgian branches of UK insurance undertaking are branches of a third-country insurance undertaking and must obtain an authorisation from the National Bank of Belgium (except for insurance activities covered by the GATS Treaty (see Question 4). This obligation to obtain a licence applies both to UK insurance undertakings which prior to Brexit carried out activities in Belgium through free provision of services as well as to existing branches of UK insurance undertakings.
The process of setting up a Belgian branch as a third country insurance undertaking is more complex than setting up a branch under the EU passport as it includes the obligation to submit an extensive scheme of operations, to cover the branch's Solvency Capital Requirement, to hold assets of an amount equal to at least one half of the absolute floor of the Minimum Capital Requirement and to deposit one fourth of that absolute floor as security. The branch is not authorised to provide services in another Member States based on the authorisation granted by the NBB. In order to carry out business in other EU Member States, the UK insurance undertaking must comply with the conditions applicable in each of those Member States.
Belgian subsidiaries of UK insurance undertakings may of course continue to operate in Belgium as EU insurance undertakings on the basis of their current authorisation. However, Brexit might entail changes on the supervisory level as the scope of group supervision under Solvency II depends in particular on whether the parent undertaking of the insurance group is located in the EU. Brexit may also affect the calculation of the group’s capital requirements.