On 21 November 2018, HM Treasury published a draft version of the Insurance Distribution (Amendment) (EU Exit) Regulations 2019, together with an explanatory information document.
The purpose of the Regulations is to correct deficiencies in retained EU law relating to the Insurance Distribution Directive ((EU) 2016/97) (IDD) that arise from the UK leaving the EU, to ensure that the UK’s standalone insurance distribution regime will work effectively. The IDD will not be retained EU law as it is a directive that has already been implemented in the UK by way of domestic law and FCA rules. The Regulations intend to fix deficiencies in the directly applicable EU delegated regulations that have been made under the IDD (that is, Commission Delegated Regulations 2017/2358 and 2017/2359).
The Regulations transfer certain key functions from EU entities to appropriate UK bodies. Non-legislative functions will be transferred to the FCA. This includes the power to make technical standards regarding a standardised presentation format for the insurance product information document (IPID) (currently set out in Commission Implementing Regulation 2017/1469). Legislative functions, such as the European Commission’s power to adopt delegated acts, will be transferred to HM Treasury. This includes powers to make regulations about conflicts of interest, inducements, suitability assessments, appropriateness and reporting to customers. HM Treasury will also have the power to specify principles for product oversight and governance (POG).
In addition, the Regulations replace cross-references to EU law with the relevant UK measures that implement these provisions, and remove other EU references that will no longer be appropriate.
The Regulations are also intended to apply the current scope of the IDD delegated regulations. This will include all UK-based firms conducting insurance distribution in the UK, as well as intermediaries and insurers operating under the temporary permissions regime (TPR) after the UK leaves the EU.
HM Treasury has published the draft version of the Regulations ahead of formally laying it before Parliament. It intends to lay the Regulations before Parliament before exit.
The Regulations will enter into force on exit day.
The FCA is expected to consult on changes to its rules that implemented the IDD, including in relation to the IPID, in November 2018.
To track draft and final texts of statutory instruments (SIs) laid, or to be laid, under the European Union (Withdrawal) Act 2018 (EUWA) relating to financial services, see Brexit and financial services: statutory instruments tracker and Brexit statutory instruments: tracker.