Two MoUs have been agreed, although the terms have not been made public. The first is a multilateral MoU between the UK's Prudential Regulation Authority (PRA) and Financial Conduct Authority (FCA) and their counterparts in the European Economic Area (EEA), covering supervisory cooperation, enforcement and information exchange. The second is a bilateral MoU between the PRA and FCA and the European Insurance and Occupational Pensions Authority (EIOPA) on information exchange and mutual assistance.
The MoUs will only take effect in a 'no deal' Brexit scenario. They will allow for the mutual exchange of "appropriate and reliable information" necessary for the effective regulation of cross-border insurance and reinsurance establishments and groups, and allow UK and EEA regulators to maintain "sound prudential and conduct supervision" over cross-border insurance and reinsurance activity, according to EIOPA.
EIOPA chair Gabriel Bernardino said: "These MoUs contribute to meet our primary objective of protecting policyholders and beneficiaries in the EEA member states and the UK, in case of 'no deal' Brexit scenario. They will ensure a continuous strong and close cooperation with our UK colleagues in any scenario".
Insurance regulation expert Tobin Ashby of Pinsent Masons, the law firm behind Out-Law.com, said: "It is good to see the pragmatic approach of the UK regulators in recent months finally starting to be supported by their EU counterparts".
"From the perspective of UK firms with customers in other EU states, EIOPA's recent opinion on the approach of local regulators to continuity of existing insurance business may have been a more important immediate announcement, but cooperation between regulators of the kind now agreed through these MoUs can only help overall continuity in financial services in the event of a no-deal Brexit," he said.
The UK will become a 'third country' on 30 March should the UK exit the EU without a withdrawal agreement and implementation period in place. UK insurers and distributors will therefore lose the right to conduct business freely in the EU.
Last month, EIOPA published recommendations for national EU insurance regulators, aimed at minimising disruption to policyholders in a no-deal Brexit scenario. It has advised national regulators to allow for the orderly run-off of existing cross-border business with appropriate supervision; although UK insurers will not be permitted to enter into new contracts or renew or extend existing contracts unless they have sought authorisation in an EU member state. EIOPA also confirmed that any transfers of business from UK insurers to EU insurers which were initiated before Brexit will be allowed to proceed to conclusion, if they have not already done so.
The majority of UK and Gibraltar insurers have already begun implementing contingency measures to ensure that they can continue to service cross-border contracts in a no-deal scenario, according to the latest figures from EIOPA. Only 0.16% of EU insurance business does not yet have sufficient contingency measures in place, the majority of which relates to low value, non-life liabilities with two years or fewer left to run.