Two weeks remain to register for the Irish Temporary Run-Off Regime

UK insurers and intermediaries have until 31 March to notify the Central Bank of Ireland (CBI) of the application to them of the temporary run-off regime provided for in Part 10 of the Withdrawal of the United Kingdom from the European Union (Consequential Provisions) Act 2020. 

In this short note, we explain the background to the regime and what needs to be done before 31 March.

Background

The EU-UK Trade & Cooperation Agreement that took effect at 11pm on 31 December 2020 did not provide for passporting or equivalence. From that date, the ability of UK insurers or intermediaries to run-off existing business in Member States upon loss of the ability to passport, was left to individual Member State discretion. 

While work is ongoing on a memorandum of understanding that may establish some degree of regulatory cooperation on financial services, only the most optimistic would anticipate that a future framework will give UK insurers or intermediaries market access akin to passporting. 

It is against this backdrop that Part 10 of the Withdrawal of the United Kingdom from the European Union (Consequential Provisions) Act 2020 (the Act) was commenced on 31 December 2020. Part 10 of the Act amends the European Union (Insurance and Reinsurance) Regulations 2015 and the European Union (Insurance Distribution) Regulations 2018 by introducing a Temporary Run-Off Regime (the TRR). Under the TRR, qualifying UK/Gibraltar insurers and insurance intermediaries (Firms) may exclusively administer their pre 31 December 2020 'existing portfolio' (in the case of UK/Gibraltar insurers) and pre 31 December 2020 "insurance contracts entered into" (in the case of UK/Gibraltar insurance intermediaries) with a view to terminating their activities in Ireland.

Firms that wish to register for the TRR have until 31 March to do so (see 'How do Firms register with the CBI?' below). The position of Firms that fail to do so is somewhat unclear. At the very least, they will have breached Regulation 13A(5) of the European Union (Insurance and Reinsurance) Regulations 2015 which requires notification within the three month timeframe. Accordingly, all Firms should take prompt action to complete the requisite notification process.

Scope of the TRR

Firms that qualify for the TRR are permitted to exclusively administer their existing portfolio/insurance contracts in order to terminate their activities in Ireland for a maximum period of 15 years from 31 December 2020.

The TRR applies to all life and non-life insurance business but is silent on the treatment of reinsurance business and the treatment of reinsurance business when written alongside direct insurance business (see 'Reinsurance' below).

In January 2021, the CBI launched a TRR hub here which explains how the TRR operates and sets out the CBI's views by way of responses to frequently asked questions.

How do Firms qualify for the TRR?

In order to qualify for the TRR, Firms must satisfy the following conditions:

  • immediately before 31 December 2020, Firms must have been authorised as an insurer or registered as an insurance intermediary in the UK or Gibraltar
  • before 31 December 2020, Firms must have passported into Ireland on a freedom of establishment or freedom of services basis
  • on or before 31 December 2020, Firms must have ceased to conduct new insurance contracts and/or new insurance distribution business in Ireland
  • following 31 December 2020, Firms must exclusively administer their existing portfolio/insurance contracts in order to terminate their activity in Ireland
  • Firms must comply with the general good requirements

How do Firms register with the CBI?

A Firm availing of the TRR must complete the applicable notification form which the CBI has published here by 31 March.

In addition, no later than four months from 31 December 2020 (and at least annually going forward), Firms must provide certain information to the CBI on their remaining business by completing a further reporting form, which the CBI has published here.

The CBI is maintaining registers of Firms availing of the TRR on its website.

What about reinsurance?

Part 10 of the Act does not expressly cater for the position of Firms with run-off reinsurance in place with Irish cedants. The Act permits UK/Gibraltar insurers to "exclusively administer their existing portfolio in order to terminate their activity in Ireland". It is arguable that "existing portfolio" could encompass both insurance and reinsurance contracts. The CBI's position as set out on its website is that the Act "does not apply in respect of reinsurance contracts and products".

CBI TRR FAQs: Key Take-aways

1. Regulatory regimes: The CBI's current supervisory approach, pursuant to the Solvency II and the Insurance Distribution Directive regimes, will continue to apply except where modified by the TRR.

2. Failure to notify: Failure to notify the CBI of the intention to avail of the TRR does not necessarily preclude Firms from availing of the TRR but the CBI can exercise supervisory powers where notification is not received.

3. Mid-term adjustments: According to the CBI, policy adjustments which "establish, renew, extend, increase or resume insurance cover on an existing policy, may not be in accordance with the TRR. Immaterial and/or administrative adjustments to policies may be permissible, provided these adjustments in total, do not undermine the requirements of the TRR, which include permanently ceasing to carry on insurance business."

What is considered an 'immaterial and/or administrative adjustment' will likely be the source of debate in the months and years ahead.

4. Life insurance products and occupational pension schemes: The CBI has stated that it will consider the treatment of annuities and the addition of new members to pension schemes in the context of how a Firm is complying with the TRR's conditions generally and the Firm's contractual obligations to admit new scheme members. In both cases, the CBI advises Firms to seek legal advice.

For more information on this topic, please contact James Grennan, Laura Mulleady, Sinéad Lynch or any member of A&L Goodbody's Insurance & Reinsurance team.

Date published: 12 March 2021