In light of the impending exit of the United Kingdom (UK) from the European Union (EU) the Austrian Financial Market Authority (FMA) is stepping up its activities, both to protect insurance policyholders in Austria as well as to ensure that the Austrian insurance undertakings are also adequately prepared. It is therefore reacting to the slow progress made in negotiations over the UK’s exiting of the EU, and the uncertainties regarding the future relationship between the UK and the EU and the European internal market. The FMA’s Executive Board members, Helmut Ettl und Klaus Kumpfmüller have commented: “The eventuality of a hard Brexit is something that is increasingly becoming a realistic possibility. We are therefore ensuring that both insurance customers and insurance undertakings are adequately prepared for such a scenario. In particular, insurance customers must receive complete information from the insurance undertaking about the possible consequences. In the event that this is not done to an adequate extent, then we should also consider legally anchoring this information requirement.”
Increased information for the protection of insurance policyholders in Austria
In order to protect Austrian policyholders, the FMA is pressing that insurance undertakings from the UK should inform their customers in Austria about the consequences of a potential hard Brexit. Insurance undertakings with a premium volume of approximately € 240 million in the field of non-life and accident insurance (according to figures from 2016). The FMA is working closely together with the European Insurance and Occupational Pensions Authority (EIOPA). An EIOPA opinion published on 28 June 2018 urges that insurance undertakings should satisfy the corresponding information requirements towards policyholders about a hard Brexit.
Life insurance contracts that are concluded prior to Brexit, that are concluded between insurance undertakings in the UK and customers in Austria, generally remain effective. However, in the event of a hard Brexit it could arise that insurance companies in the EU or the UK are no longer allowed to be active in the other respective legal area using their existing licences. Austrian customers must be informed by the insurance undertaking about this being the case, as well as about what consequences this will have for their existing contract. This means, for example, in the event of the insurance undertaking moving its registered office, or in the case of a portfolio transfer of insurance contracts to an entity that is located in the EU, they should be informed about who their future contractual partner will be and which legislation shall apply for the contract. In this case, further essential information should also include information about the competent mediation body and supervisory authorities.
Brexit preparations of Austrian insurance companies
In addition to providing detailed information to the insured persons, the FMA also demands that Austrian insurance undertakings take all necessary measures to be able to also withstand the effects of a hard Brexit. The FMA generally assesses the level of the Austrian insurance sector as currently being adequate. Further preparations nevertheless remain essential.
Nine Austrian insurance undertaking are directly affected by the risk of a hard Brexit as a result of their cross-border business with UK customers. The volume of premiums is low, standing at less than € 10 million. For the purpose of comparison: according to EIOPA figures, the affected premium volume throughout the EU stands at € 26.5 bn.
Mr. Stefan Maier
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