Certain United Kingdom (UK) insurers that are Lloyd’s Members, currently enjoy EEA ‘passporting’ rights to enable policies to be managed within Europe without the need for further authorisation.
As a consequence of the UK’s exit from the European Union (‘Brexit’) on 31 January 2020, current EEA passporting is expected to cease at the end of the transition period on 31 December 2020. Lloyd’s is therefore proposing, on behalf of the Members, to transfer certain policies from the Members to Lloyd’s Insurance Company S.A. (“Lloyd’s Brussels”) (the “proposed transfer”). Lloyd’s Brussels is an insurance company incorporated and regulated in Belgium and is a wholly owned subsidiary of Lloyd’s.
Unless specifically excluded, the policies (or parts of policies) to be transferred under the proposed transfer are those where all or part of the risk underwritten at Lloyd’s is located in an EEA state or where the policyholder is resident in the EEA, such that the policy (or part of the policy) could not be managed post-Brexit from the UK without breaching legal or regulatory requirements (“EEA Policies”). The proposed transfer will ensure that transferring EEA Policies can be compliantly managed after Brexit, including in relation to the payment of claims.
If approved by the High Court of England and Wales (“High Court”), the proposed transfer is expected to take effect on 30 December 2020 (“Effective Date”). Please read all the information available using the links on this website and ensure that everyone covered under the policy is made aware of the proposed transfer. If your policy is a group arrangement, Lloyd’s will support you in making your policyholders, and other beneficiaries, aware of the proposals. Please contact us if you require support.
Impact on Policyholders
If approved by the High Court, the proposed transfer will not change terms and conditions of any policy, except that Lloyd’s Brussels will become the insurer and Data Controller in respect of EEA Policies. The proposed transfer has been carefully designed to ensure that it will not change how policies operate. Policyholders will see no direct administrative change as a result of the proposed transfer and the process for making claims and any payments that may be due in settlement of a valid claim is therefore unaffected by the proposed transfer.
Impact on syndicates and reinsurers
Lloyd’s Brussels and the Lloyd’s Members of each syndicate will enter into a reinsurance arrangement (quota share) under which the economic liability of each syndicate’s transferring EEA Policies will, from the effective date of the proposed transfer, be fully reinsured back to the Lloyd’s Members of that syndicate (the “Lloyd’s Brussels Reinsurance Contract”). As a result, the economic liability for the transferring EEA Policies will continue to rest with those Lloyd’s Members who underwrite those policies or inherited those policies through the Reinsurance to Close process.
Existing outwards reinsurance policies currently in place in relation to the transferring EEA Policies will not transfer under the proposed transfer. Instead, as part of the proposed transfer, such reinsurance policies will be converted to retrocession cover attaching on top of the Lloyd’s Brussels Reinsurance Contract. The benefit of each existing outwards reinsurance shall transfer from the original Member in whose name the policy was issued (as reinsured) to the new Member who has reinsured the original Member’s policy under the Lloyd’s Brussels Reinsurance Contract.
The benefit of all related collateral and other security arrangements on existing outwards reinsurance arrangements will continue to support the retrocession covers but, pursuant to the terms of the transfer, shall include such consequential amendments as are necessary to implement and reflect the fact that those arrangements will, from the effective date of the transfer, support a retrocession rather than a reinsurance.