Brexit: Implications for Insurers as Year End Approaches

Andrew Hocking
October 28, 2020

As 2020 draws to a close, Brexit is firmly back on the radar as a concern for businesses across Europe, and the insurance industry is no exception. With the end of the transition period rapidly approaching, the UK is on course to become a third country after 31 December 2020.

The UK is currently seeking to negotiate a Free Trade Agreement (FTA) with the EU but it’s not clear whether this will be agreed by the end of the transition period and, even if agreed, whether it will be comprehensive. So, what could this actually mean for entities based in the UK looking to write insurance across continental Europe?

Regulated businesses including insurance companies will be among the hardest hit if a comprehensive FTA isn’t agreed. Many have already taken steps and implemented contingency measures to ensure they can continue to trade post-Brexit. For instance, over the last two years many insurers have pre-emptively set up additional legal entities both in the UK and Europe to ensure their ability to write premiums isn’t impacted by adverse Brexit scenarios.  The countries to most benefit from UK insurers’ Brexit strategy have been Ireland and Luxembourg. Both countries have welcomed several big London players as they set up subsidiaries in Dublin and Luxembourg city. The same applies for the Netherlands who is the domicile chosen by P&I clubs along with Ireland to house their post-Brexit subsidiary. Conversely, France and Germany have failed to attract a significant number of UK insurers.

Also, what is still unclear is how a FTA (or lack of) will impact passporting rights, which allow UK intermediaries to place certain European risks with insurers. This could ultimately result in no changes to the current rules or lead to a fundamental shift to the structure of how intermediaries place risks in Europe from next year.

In addition to this, the UK government is planning post-Brexit changes to some of the most contentious aspects of insurance regulation in a move likely to signal a departure from EU rules. For instance, currently UK insurers must comply with Solvency II, the EU’s insurance capital regime, which came into force in 2016. However, once the Brexit transition period ends on 31 December, the government will be free to set its own regulations. This may result in a relaxation of some of the capital rules associated with Solvency II, however no outcome here is certain.

With all the above in mind, unfortunately the conclusion you might draw is that nothing is certain with regards to how insurance companies may be able to operate in a post-Brexit world. Against this shifting and uncertain backdrop, it’s more important than ever to partner with a specialist provider of compliance and advisory services who can advise on risks specific to your business, as well as offering potential solutions.

Take Action

Find out why Sovos is the leading solution provider for insurance premium tax compliance in Europe.

Sign up for Email Updates

Stay up to date with the latest tax and compliance updates that may impact your business.


Andrew Hocking

Director of Managed Services. Andrew is the Director of Sovos’ Managed Services group in Europe. Based in London, he leads teams specialising in IPT and VAT compliance and fiscal representation in over 30 countries. Andrew holds qualifications in Finance and Business Law, and is a qualified Chartered Accountant with over 10 years experience in indirect tax and technology.
Share This Post

North America Tax Information Reporting
June 7, 2023
4 Ways to Elevate Your Direct State Reporting Process

Direct state reporting obligations have gotten increasingly difficult for some businesses over the past few years. With more states requiring direct reporting of form series 1099, more companies are subject to penalties if they do not comply with those obligations. As state reporting evolves, ensuring your process is efficient is critical. Strengthening your reporting process […]

EMEA VAT & Fiscal Reporting
June 7, 2023
The Value of SAP S/4HANA Add-On Software Certification

Many companies utilise SAP for their tax processes, but limitations in native software functionality add a layer of complexity. Custom coding is often required for businesses to achieve their desired results, producing the need for ongoing customisation and optimisation – this creates a hefty burden for companies, in addition to their tax compliance obligations. SAP-certified […]

North America Sales & Use Tax
June 5, 2023
Sovos Onboarding: 6 Departments Dedicated to Customer Success

If you are evaluating Sovos, we want you to understand expectations for the customer experience and what teams are there to support you. At Sovos, we have a range of teams ready to support you from the day you sign a contract. Whether it be a customer success representative to review the value you are […]

North America Sales & Use Tax
June 1, 2023
3 Things to Remember if You Get a Sales Tax Notice

Have you ever received a sales tax notice from a state department of revenue? Whether you answered yes or no, there are important things to keep top of mind to help keep your business prepared. Finding out that you have failed to comply with one or more of your sales tax obligations can be startling. […]

EMEA VAT & Fiscal Reporting
May 31, 2023
Bizkaia: What is Batuz LROE?

The Ledger of Economic Operations (Libro Registro de Operaciones Económicas), also known as LROE, is a main compliance element of the Batuz tax control system. This system is under implementation in the province of Bizkaia, located in the autonomous Basque community in Spain. Taxpayers under the Batuz mandate must comply with both TicketBAI and LROE […]