The Act of 19 December 2020(1) implementing the Budget Act 2021 introduced into the Insurance Contract Act(2) a new provision to secure the outcome of insurance policies underwritten by UK insurers post-Brexit.
By amending Article 2 of the act,(3) the legislature relieved any doubt as to the validity of insurance contracts in the event that:
an EEA or third-country insurance undertaking loses its approval to carry out direct insurance operations in Luxembourg while retaining its authorisation in its home state; and
a contract has been validly issued or renewed by an undertaking authorised to work in Luxembourg under the freedom of establishment or the freedom to provide services at the time of issue or renewal of the contract.
Until then, in principle, any insurance contract covering risks situated in Luxembourg concluded by an insurance undertaking which is neither approved nor authorised to carry out insurance operations in Luxembourg is null and void.
However, such contracts cannot be renewed or be the subject of any direct insurance transaction which gives rise to the issuing of premiums after the loss of authorisation. This is in line with the post-Brexit transitional regime established by the Act of 8 April 2019,(4) according to which the Insurance Commission (CAA) may exempt UK-based insurers from their approval requirement for a maximum of 21 months from the date of Brexit in relation to contracts entered into or renewed before Brexit.
For new subscriptions or policy renewals in Luxembourg, third-country insurers – including UK-authorised insurers – will need to consider a long-term regulatory and contractual framework, including with regard to the establishment of a third-country branch or an insurance undertaking approved in Luxembourg and supervised by the CAA.(5)
(1) Available here.
(2) Act of 27 July 1997.
(3) Available here.
(4) For further information please see "Luxembourg Brexit Bill for the Financial Sector".
(5) For further information please see "Luxembourg Brexit Bill for the Financial Sector".
This article was originally published in the Insurance Newsletter of the International Law Office.