FIN. TeamOn 20 November 2018, Germany’s Federal Ministry of Finance announced that it had prepared draft legislation to provide continuity of business for UK insurers and banks. The draft legislation referred to as “Draft Act Supplementing the Act on Tax-Related Provisions concerning the Withdrawal of the United Kingdom of Great Britain and Northern Ireland from the European Union” (the Draft Act) amends the Insurance Supervision Act and the Banking Act.
Whilst not the same as the UK’s EEA Passport Rights (Amendment, etc and Transitional Provisions) (EU Exit) Regulations 2018, its aims are nonetheless the same: to provide continuity of services for financial services firms in the EEA.
Changes to the Insurance Supervision Act
Under the Draft Act, BaFin, the German financial services regulator would be given the power to allow UK firms to continue to provide insurance services, either on a cross border or permanent basis post Brexit until the end of 2020. In doing so, there would be minimal disruption for businesses and it would avoid “any harm to policyholders and the beneficiaries of the insurance contracts.”
The Federal Ministry of Finance said that the transitional arrangement would also “enable insurance companies based in the UK to transfer or terminate existing contracts within a reasonable timeframe, or where this is not possible, to meet the necessary prudential requirements for an orderly run-off of such contracts.”
Changes to the Banking Act
The Draft Act also includes the same amendment for banks that are currently providing services on a cross border or branch basis to continue to operate in Germany until the end of 2020.
UK banks and insurers can only benefit from the transitional rules if their banking or insurance transactions are concluded after 29 March 2019 insofar as the transactions are “closely connected to transactions that existed at the time of withdrawal.”
