France draws up insurance emergency measures as hard Brexit nears

As the deadline for a no deal Brexit moves closer, the French government has published emergency measures relating to financial services and insurance, global law firm Clyde & Co has confirmed.

Of the two statutory instruments adopted, one clarifies the rules on insurance contracts agreed before Brexit on the basis of the European Economic Area (EEA) insurance passport.

Under this measure, a new article L. 310-2-3 of the Insurance Code has been created says “insurance contracts covering French risks via the freedom to provide services or the freedom of establishment may not be amended if such amendment entails the collection of additional premiums”. Although mid-term adjustments are not generally prohibited, it said. The test will be whether changes generate an increase in premiums, and if they don’t adjustments will be possible.

However, all renewals, including automatic ones, are prohibited, under the measures, while payment of claims does not constitute a breach. This mean British insurers can pay claims post-Brexit for at least for the first 12 months. Insurers will be able to run-off existing portfolios which have not been transferred to a risk carrier located in the EEA, Clyde and Co explained.

But a breach of these requirements will render the insurance contract null and void, the statutory instruments said. Although the ability to enforce the nullity of the contract will be “limited to the policyholders, insureds and beneficiaries,” under the new rules.

For example, the insurer will not have the right to refuse the payment of claims on the grounds that the contract is void by reason of a breach of the above-mentioned requirements.

The French insurance supervisor ACPR will retain the ability to sanction British entities having concluded contracts on the basis of the EEA passport and will continue to enforce French law provisions.

Finally, companies that are no longer in a position to renew existing contracts or issue additional premiums must inform their policyholders.

Yannis Samothrakis, partner at Clyde & Co in Paris, said: “This ordinance shows quite how real the threat of a no deal Brexit is in the mind of the French authorities but ultimately provides some very welcome clarification.

“Claims can be paid by UK insurers in the EEA in the event of a no deal Brexit but the ability of those carriers to renew policies will be restricted unless they have an EEA entity. Luckily the majority of insurers are ahead of the game but this is a stark reminder to others that the end of passporting is coming soon.”

The measures, published on 6 February 2019 and which are in the form of ordinances (ordonnances), will become law once validated by the French Parliament. They will come into force from the date of the UK’s withdrawal from the EU without a deal and remain in force for the next 12 months.

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