The Italian “Brexit Decree” on UK Insurers’ activity in case of no-deal Brexit
With the Decreto Legge 25 March 2019 n.22 the Italian Government has set – amongst several others – some important rules on the post-Brexit operation and activity in Italy of UK-based Insurers and Insurance intermediaries in case of “no-deal”.
The “Brexit Decree” is intended to be applied only in case the UK leaves the European Union without a deal – whenever this may happen – and provides a sort of transition period starting on withdrawal date and ending at the end of the 18th month following such date. For insurance intermediaries the transition period is 6 months.
According to the Brexit Decree, UK Insurers which, at the date of withdrawal, are authorized to carry out insurance activity in Italy under the right of establishment or the freedom to provide services will be removed, from such date, from the IVASS register of EU Companies referred to under article 26 of the Insurance Code.
However, in order to ensure continuity of service to insureds and policyholders, in the transition period such insurers will continue their activity, limited to the management of contracts and policies which are pending at the date of withdrawal.
Such insurers will not be able to underwrite new contracts post-Brexit. Renewal (including tacit or automatic renewal) of existing contracts will also not be possible.
Importantly, the above UK insurers must file with IVASS a plan containing the management measures allowing such undertakings to properly and promptly perform contracts and coverages pending at the time of withdrawal, including the payment of claims. This filing must take place within 90 days from 26 March 2019 (i.e. within 24 June 2019). IVASS will be able to ask for updates and amendments to the plan.
If the insurer not unable to ensure full implementation of the plan within the transition period, it must inform IVASS at least 90 days prior to such date, by submitting application for an extension. The application will need to provide clarification by insurer on the basis of the structure, articulation and multi-year time span of the existing contracts and policies. IVASS will examine the application and the measures to be taken to protect the interests of policyholders and insureds, also by consulting the competent supervisory authority of the home state.
Subject to the above extension, the Brexit Decree does not expressly clarify what is the scenario for the relevant insurers once the transition period is over. Arguably the transition period may have to be used in order to take one of the available steps to ensure service continuity with regard to insurance contracts concluded before the Withdrawal date or to bring to an end the operation of any existing contracts or policies.
Within 15 days from the withdrawal date, the insurance undertakings must inform – also by publication on their website – policyholders and insureds of the regime applicable to them.
The Brexit Decree also provides for the right of policyholders and insureds – post withdrawal date – to unilaterally (and with no cost) terminate any existing contract whose duration exceeds one year. Such termination will be effective at the end of the yearly policy period which is running on withdrawal date.
Automatic renewal clauses included in existing policies will also be ineffective, according to the Brexit Decree.
The provision of Article 193 of the Insurance Code (essentially providing for the regulatory control over EU insurers) and any other insurance provision applicable to the UK insurance undertakings before Brexit will continue to apply to such undertakings during the transition period. IVASS may apply the sanctions referred to in Title XVIII of the Insurance Code.
A similar principle and set of rules is provided by the Brexit Decree with regard to insurance and reinsurance intermediaries (including insurance ancillary intermediaries) which, at the date of withdrawal, are authorized to carry out insurance activity in Italy under the right of establishment or the freedom to provide services. Such intermediaries must cease activity within such date and will be removed from the IVASS register referred to under article 109 of the Insurance Code.
However, in order to avoid prejudice to policyholders and insureds, such prohibition will not apply to the activities needed for the orderly termination of the existing distribution agreements, which must be completed in the shortest possible time and in any case no later than 6 months after withdrawal date.
During such 6 months transition period, such intermediaries will not be allowed to start new distribution activities or renew, even automatically, existing agreements. IVASS will give public notice of this temporary prosecution of the intermediaries’ activity.
Within 15 days from the withdrawal date, the relevant intermediaries must inform – also by publication on their website – policyholders and insureds of the regime applicable to them.
The Brexit Decree also provides that Italian undertakings which, at the date of withdrawal, are authorized to carry out insurance or reinsurance activity in the territory of the United Kingdom under the right of establishment or the freedom to provide services will continue to their activity, without prejudice to articles 22 and 59d of the Insurance Code and in compliance with the laws of the United Kingdom.