On 31 January 2020, the UK left the European Union (“Brexit”) and entered a transition period lasting until 31 December 2020 (“the Brexit transition period”). During the transition period, the UK and the EU are negotiating their future relationship and EU law continues toapply in and to the UK.
Following the end of the transition period, it is anticipated that Lloyd’s members will no longer benefit from EU passporting provisions and will no longer have permission to underwrite European Economic Area (EEA) (re)insurance business.
As a result, all new EEA non-life direct insurance policies have been written by Lloyd’s Insurance Company S.A. (“LIC”), rather than by Lloyd’s syndicates, starting from 1 January 2019, with a few minor exceptions. LIC is an insurance company incorporated and regulated in Belgium and is a wholly owned subsidiary of Lloyd’s.
In addition, Lloyd’s is in the process of transferring all relevant non-life direct EEA insurance and inwards German reinsurance business that has been written by the Lloyd’s market between 1 January 1993 and 12 April 2019 (in respect of direct business) and 29 October 2020 (in respect of inwards German reinsurance) from the Members to LIC. This is being undertaken via an insurance business transfer under Part VII of the UK’s Financial Services and Markets Act 2000 (the Part VII transfer). If approved by the High Court of England and Wales on 18 November 2020, the proposed transfer is expected to take effect on 30 December 2020.
One aspect of the future relationship between the UK and the EU that continues to be unclear is whether the UK will be granted reinsurance equivalence under the Solvency II Directive (2009/138/EC), and vice versa. If the UK is granted equivalence for reinsurance,this would enhance the ability of Lloyd’s underwriters in the UK to write reinsurance business in EEA territories. However, given the current uncertainty, this Market Bulletin is prepared on the basis that no equivalence decisions will be in place.