News from Davos
The Treasury announced today (25 January 2019) that the Chancellor of the Exchequer has signed an agreement at Davos with Switzerland intended to replicate the effects of the exiting EU-Switzerland Direct Insurance Agreement (see here). It is proposed that the new agreement will come into force when the current EU-Swiss Direct Insurance arrangements cease to apply upon the UK’s departure from the EU. A copy of the text of the proposed agreement has not yet been produced, but the Treasury says that:
“The new arrangement will replicate the effects of the existing EU agreement with Switzerland… The UK-Swiss Direct Insurance Agreement, like the Direct Insurance Agreement with the EU, allows firms to branch into each other’s jurisdiction with greater ease thanks to the mutual recognition of each other’s insurance regulations. It will therefore ensure continuity for UK and Swiss insurers to access each other’s markets both now and in the future, consistent with the terms of the original EU-Swiss Direct Insurance Agreement.”
Who about the existing EU-Swiss arrangements?
This can be seen by considering the terms of the existing agreement between the EU and Switzerland (see here).
That agreement granted mutual and equal freedom of establishment to companies in the field of direct liability insurance in the non-life sector (which covers direct insurance for damage, e.g. household, motor vehicle, travel and liability insurance, etc.). What was agreed was equal rights of establishment: Swiss insurers were entitled to set up and acquire agencies and branches in the EU. EU insurers, including UK insurers are entitled to do the same in Switzerland. The agreement also allows branches of EU non-life insurance companies established in Switzerland and Swiss non-life insurance branches in the EU to follow a limited number of prudential rules of their home jurisdiction, supervised by the home supervisor, in particular as regards the calculation of their solvency capital requirement.
But this agreement is not applicable to life insurance companies, reinsurance companies or statutory social insurance schemes, and, most importantly, it makes no provision for cross-border services.
Replicating these arrangements is therefore a modest step towards preserving the existing status quo.