Irish-based insurers weigh portfolio transfers amid Brexit uncertainty
Central Bank warned of possible transfer scenario in letter from Insurance Ireland
Minutes from a meeting of the Central Bank commission on September 29th show Central Bank officials were concerned insurers were trailing behind banks in getting ready for the UK’s exit from the EU.
A significant number of Irish-based insurers, including overseas-owned firms, have considered transferring portfolios between Ireland and the UK as they navigate uncertainty caused by Brexit and the potential impact to contracts by the event in 2019, according the industry representative group.
In a letter dated October 26th to the Central Bank’s head of insurance regulation, Sylvia Cronin, Insurance Ireland said that 55 per cent of respondents to a survey carried out among its members indicated they had considered or planned for a transfer of portfolios.
This has occurred against the backdrop of a lack of acceptance by the European Commission so far of an Insurance Ireland and Insurance Europe proposal to allow for the grandfathering of customer contracts, according to the letter, seen by The Irish Times.
Some 65 per cent of respondents, who serve 4.6 million customers, either have a contingency plan in place or are developing one, according to the survey. The plans cover sales, service provision, outsourcing and reinsurance.
Of those that took part in the survey, 17 per cent sell into Ireland out of the UK and almost 58 per cent sell into the UK from Ireland.
The letter was sent to Ms Cronin ahead of a October 31st deadline for insurers to submit detailed plans to the regulator on the impact of Brexit on their business. Minutes from a meeting of the Central Bank commission on September 29th, published last week, show that Central Bank officials were concerned that insurers were trailing behind banks in getting ready for the UK’s exit from the EU.
The Insurance Ireland letter said that “considerable time has been invested in contingency planning for Brexit, with a majority of respondents having developed a plan or are in the process of developing a plan”.
“This detailed planning has been set against the backdrop of a wide range of factors that are beyond the control of the companies and which are, in many ways, subject to change given the evolving political and regulatory situation,” it said.
Contingency planning has been impacted by uncertainty around a potential transition deal, the time required for regulatory approvals, “major cost considerations” in choosing a restructuring options and the availability of Irish and UK court time to enable portfolio transfers by March 2019, it said.
The correspondence also said that insurers are limited in their contingency planning by a lack of guidance from regulators in Ireland, the EU or UK on whether non-EU firms based in the UK can operate in Ireland as so-called third country branches post-Brexit. However, it did note that the Central Bank had committed to publishing guidelines on this.
It also highlighted concerns about data sharing.
“The UK will become a ‘third country’ post-Brexit and in the absence of an ‘adequacy decision’ by the European Commission allowing for the transfer of data between the EU and GDPR-complaint UK, then lengthy and expensive contingency planning must be undertaken,” it said. GDPR stands for the EU’s general data protection regulation.
“The transfer of data is fundamental to the smooth operation of our members’ businesses and the work being undertaken to put in place legal mechanisms are also time consuming, costly and heavily influenced by factors outside of the control of the industry,” it said.