Moving into a new insurance/reinsurance market - some practical advice

If you are looking at underwriting direct business in a new jurisdiction then there are some practical matters to address before you can underwrite the first risk. These will differ depending on whether or not your intended new markets are within the EU:

  • Do you have the right authorisations to write risks in that location?- if it is an EU jurisdiction and you do not want to have a physical office presence then the process is relatively simple and is known as “ freedom of services”. Under the EU “passporting” Directives you simply need to give a prescribed form of notification to the PRA which will in turn send this on to the relevant regulators in each of the relevant jurisdictions. After a set-period has expired you should be able to commence underwriting risks as the local regulator only has very limited powers to object to your writing risks in its jurisdiction.
  • If it is an EU jurisdiction and you wish to establish a physical branch then this is known as “freedom of establishment”. This requires the submission to the PRA of a more detailed prescribed form of business plan and a longer notification period but as previously the local regulator only has very limited grounds for objecting to your presence.
  • In both cases you are likely to be subject to the local conduct of business rules for the selling of policies in the relevant jurisdiction.
  • Do not forget that there is likely to be tax consequences whichever route is taken. IPT is likely to be payable in the jurisdiction where the risk is located and there are reporting requirements in the UK to the PRA  in relation to IPT. In addition if you establish a local branch then you are also likely to be subject to the tax regime generally of the relevant jurisdiction.
  • For jurisdictions outside the EU then it will almost inevitably require you to use either a “fronting” insurer authorised locally or to establish your own locally authorised and capitalized insurer. A failure to do so may potentially leave you open to civil and/or criminal sanctions as a number of jurisdictions have prescribed strict penalties for breaches of their domestic licensing requirements.

The above is a general guide to some of the strategic issues that will have to be addressed. You will need to get local advice once you have identified the relevant jurisdictions. We can assist you both in relation to the UK PRA requirements and in co-ordinating with local advisers through Clausen Miller International and our network of trusted specialist insurance firms.

 

Jonathan Drake, Partner

Phone: +44 (0) 20 7645 7980

Email: jdrake@clausen.com

 

 

 

 

 

 

 

 
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