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France Introduces Transitional Measures For a Hard Brexit

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France in February 2019 published transitional (or emergency) measures related to insurance in case of a no-deal Brexit.

As per the new rules,

  • contracts may not be amended if additional premiums are collected
  • renewals, including automatic renewals are not allowed
  • payment of claims will not be considered a breach for at least the first 12 months

The new rules apply to contracts covering French risks and entered into before Brexit under European Economic Area (EEA) passporting rights; they become effective on the date of Brexit and will stay in force for 12 months. Brexit will occur on 29 March 2019 unless an extension is agreed between the UK and the EU. All policies written under the freedom of services or the freedom of establishment regimes are concerned.

Violation of any of the requirements above results in the insurance contract becoming void. However, the nullity of the contract can only be requested by the policyholder, by an insured party (as in open groups), or beneficiaries.

For group insurance policies, this means any employee or dependent can claim nullity in case of a breach, not only the employer.

Whether these rules apply to UK-issued iPMI (international private medical insurance) policies covering people residing and working in France is unclear at this time. Traditionally, foreign policies covering expatriate personnel were considered legal by most jurisdictions, the U.S. since Obamacare and the UAE being two rare exceptions. Unless an exception is carved out for expat policies, UK firms sending people to France will have to consider substituting current arrangements with EU-based “inpatriate” policies at the next renewal date.

A leading iPMI expert, who declined to be identified, commented on the new measures being prepared in the Continental EU. According to him, and from a practical perspective, most iPMI insurers that write business with contract location in the EU, utilizing a UK license with current freedom-of-services or passporting rights, are making plans to relocate that business to one of their EU-based insurance licenses, when and where available. In addition, there isn’t absolute clarity as to whether group iPMI contracts written in the UK but covering insured members physically based in EU countries will also need to be carved out into sub-policies issued in those EU countries under a EU-wide insurance license. He concluded by saying that most provisions envisaged today may well allow for a more orderly transition of existing UK business to an EU license.

Certainly, wholesale cancellation of UK-issued policies on 29 March 2019 and prohibition of any claim payments thereafter would be far more disruptive to policyholders and insurers alike than the stop-gap measures being enacted or discussed at this time.

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