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EEA: Determining Freedom of Services and Establishment Transactions

Lloyd’s recently revised its explanations of freedom of services and establishment business on Crystal to clarify how they apply to the Lloyd’s market.

Mon 18 Aug 2014

Lloyd’s recently revised its explanations of freedom of services and establishment business on Crystal, setting out how they apply to the new categories of binding authority agreement which are outlined on page 3 of Market Bulletin Y4739 dated 8 November 2013. There is also a table that summarises the possible placement scenarios that may be encountered. This is intended to make it easier for managing agents to determine whether the business that its syndicate or coverholder/service company is writing on behalf of Lloyd’s underwriters is considered to be services or establishment business. For details, please refer to the Freedom of services and establishment sub-section under the Lloyd’s authorisation section on Crystal for each EEA member state.


Under the EU Insurance Directives and the Insurance Mediation Directive, insurance undertakings and insurance intermediaries in the European Economic Area (EEA) have the right to carry on business from another EEA member state under “the freedom to provide services”, i.e., to provide business services on a cross-border basis. They also have the right to carry on business in another EEA member state under “the right of establishment”, namely, to provide business services through a permanent presence in another EEA member state. Insurers and insurance intermediaries exercise these rights by notifying their home state regulator through the ‘passporting’ system that operates between EEA insurance regulators.

In 2000, the European Commission set out that the main criterion for establishment business is whether the underwriting activity happens in the same country as the location of the risk. For the purposes of Lloyd’s structure and operations in the EEA, the risk is written on an establishment basis where the coverholder or service company:

  • is located in the same country in which the risk is located; and
  • has authority to make an underwriting decision regarding that risk.

All other underwriting, including all open market business, is on a services basis. 

Lloyd’s has, on behalf of Lloyd’s underwriters, carried out the establishment passporting procedure under the Insurance Directives in relation to 17 EEA member states and under the freedom to provide services in relation to all 30 EEA member states (outside the UK). Managing agents should note that:

  • in some EEA member states, Lloyd’s underwriters are authorised to write certain classes of business on a services basis but not on an establishment basis.
  • authorisation granted to Lloyd’s underwriters to carry out insurance activity in or from a particular EEA member state is not related to the authorisation granted to managing agents to carry out insurance intermediation activity in or from that member state.