Anticipating the possibility of a hard Brexit, the French government adopted two statutory instruments on 6 February 2019 relating in particular to financial services and insurance.
These take the form of ordinances (ordonnances) which will become law once validated by Parliament. The measures will enter into force from the date of the withdrawal of the United Kingdom from the European Union without an agreement concluded in accordance with Article 50 and will remain into force for 12 months thereafter. There is no indication as to what legal status will apply thereafter.
The first ordinance contains several measures to prepare for the United Kingdom's withdrawal from the European Union in financial services in general and insurance in particular.
It clarifies the rules applicable to insurance contracts entered into before Brexit on the basis of the European Economic Area (EEA) insurance passport. As such, a new article L. 310-2-3 of the Insurance Code is created which provides:
- Insurance contracts covering French risks via the freedom to provide services or the freedom of establishment may not be amended if such amendment entails the collection of additional premiums. Therefore, mid-term adjustments are not generally prohibited, the test being whether they generate an increase in premiums. If not, then such adjustments will be possible.
- All renewals, including automatic ones, are prohibited.
- Payment of claims does not constitute a breach, which is a welcome clarification enabling British insurer to pay claims post-Brexit, at least for the first 12 months. This will also allow insurers to run-off existing portfolios which have not been transferred to a risk carrier located in the EEA.
Sanctions in case of breach
Breach of the above-mentioned requirements will render the insurance contract null and void. However, the ability to enforce the nullity of the contract will be limited to the policyholders, insureds and beneficiaries. The insurer does not have the right to refuse the payment of claims on the grounds that the contract is void by reason of a breach of the above-mentioned requirements.
In addition, the French insurance supervisor ACPR will retain the ability to sanction British entities having concluded contracts on the basis of the EEA passport. The ACPR will therefore carry on the enforcement of French law provisions in relation to contracts concluded under the freedom to provide services or the freedom of establishment concluded before Brexit.
Information of policyholders
Finally, companies that are no longer in a position to renew existing contracts or issue additional premiums must inform their policyholders. A decree must specify the format and content of the information to be communicated, which has not yet been published.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.