Financial Services: Settlement Finality (Third Country Provisions)
Department of Finance
Euronext Dublin, formally known as Irish Stock Exchange, uses a UK based CSD (CREST) operated by Euroclear UK and Ireland to settle trades in Irish equities and exchange traded funds. In a no-deal Brexit scenario, under the CSD Regulation, Euronext Dublin would not be able to continue using the
CREST system as the UK would become a third country, outside the EU. The inability to continue settling trades through CREST may also impact on the collection of stamp duty on equity trades.
For the contingency of a no-deal Brexit, the EU Commission has adopted a temporary and conditional equivalence decision for UK based CSD services for a period of 2 years. This is to allow sufficient time to complete the transition of the Irish market to an EU based CSD.
The purpose of this Part of the bill is to introduce legislative amendments to support the implementation of the European Commission’s equivalence decision under the Central Securities Depositories (CSD) Regulation and to extend the protections contained in the Settlement Finality Directive to Irish participants in relevant third country domiciled settlement systems.
Head 1 – Interpretation
Explanatory Note:
This is a standard legislative provision to provide for the inclusion of additional definitions.
Head 2 – Settlement Finality (Third Country Provisions)
This Head will provide for the Minister of Finance to designate a third country system for the purposes of the Settlement Finality Regulations. This will extend the protections of the Regulations to Irish firms using settlement or payments systems in a third country.
The legislation protects payments and transfers of securities made by Irish participants into “third country designated systems” in case such participants become insolvent. This will be required for Irish firms to continue using systems in the UK if they become a third country.
It will require the Central Bank of Ireland to carry out a technical equivalence assessment of law governing the third country system for its equivalence with Irish Law and also an assessment as to its compliance with the Regulation 7.
Head 3 – Commencement
Provide for the commencement of the Part on the lines of the following –
This Part shall come into operation on such day or days as the Minister for Finance may by order or orders appoint either generally or with reference to any particular purpose or provision and different days may be so appointed for different purposes or provisions.
Part 8 – Financial Services: Amendment to the European Union (Insurance and Reinsurance) Regulations 2015 and the European Union (Insurance
Distribution) Regulations 2018
Department of Finance
The European Commission has advised that Member States may take appropriate national measures in relation to the issues of insurance contract continuity in the context of Brexit,subject to appropriate engagement with the European Insurance and Occupational Pensions Authority (EIOPA).
Consequently, this Part of the Bill is designed to ensure that Irish policyholders that hold existing life and non-life insurance policies with insurance undertakings or through insurance intermediaries, operating in Ireland from the UK or Gibraltar, will not be affected by those undertakings losing their right to conduct business in EU Members States post Brexit. Its primary purpose is therefore to ensure the continuing ability of such firms to service insurance contracts written prior to any no-deal Brexit – such as paying out on claims or accepting premium payments.
This Part of the Bill provides for a temporary run-off regime, which, subject to a number of conditions, will enable insurance undertakings and intermediaries to continue to fulfil contractual obligations to their Irish customers for a period of three years after the date of the withdrawal of the UK from the EU. However those insurers/intermediaries will no longer be able to write new insurance contracts or continue insurance distribution in respect of new insurance contracts in Ireland until they obtain a relevant authorisation under the EU insurance supervisory regime.
Provisions in this Part of the Bill are consistent with Ireland’s full support for the agreed EU position in Gibraltar in the context of Brexit. They do not constitute a new agreement and are designed simply to provide a temporary run-off regime for contracts entered into in advance of the UK’s withdrawal.
Head 1 – Amendment to the European Union (Insurance and Reinsurance) Regulations 2015
The purpose of this head is to add a new regulation to the European Union (Insurance and Reinsurance) Regulations 2015 that will establish a temporary domestic run-off regime for certain insurance undertakings for three years. The head sets out the undertakings to which the Regulation applies and these are described by reference to their meeting four criteria, namely that immediately before Brexit they:
a. are authorised in the UK / Gibraltar;
b. have exercised their right to carry on insurance business in Ireland through FOE / FOS;
c. have ceased to write new business here; and
d. exclusively administers its existing portfolio.
The head, in paragraph (2), provides for the Central Bank (referred to as ‘the Bank’) to impose and vary conditions on undertakings deemed authorised under Paragraph (1). Paragraph (3) provides for the Central Bank to withdraw such an authorisation where the undertaking no longer meets the criteria above or either is making insufficient progress to terminate its business with the three years; or has terminated its run-off. Paragraph (4) provides that an undertaking which is authorised under Paragraph (1) will not be subject to a number of the 2015 Regulations. Paragraph (5) provides for the requirement for undertakings deemed authorised under Paragraph (1) to notify the Central Bankof this within 3 months of the authorisation.
Head 2 – Amendment to the European Union (Insurance Distribution) Regulations 2018
Please note Article 1(6) of the Insurance Distribution Directive provides a legal basis in respect of insurance and reinsurance undertakings or intermediaries established in a third country and operating on its territory under the principle of freedom to provide services. The Bank has concluded its analysis in relation to firms operating on a FoE basis and confirms that should be captured by the run-off regime. Please note that run-off regimes in other EU MS (e.g. Germany) are quite broad and include both FoS and FoE intermediaries.
Explanatory Note:
The purpose of this head is to add a new regulation to the European Union (Insurance istribution) Regulations 2018 that will establish a temporary domestic run-off regime for certain insurance intermediaries for three years. In that respect, it provides that intermediaries which meet certain conditions shall be deemed to be authorised for three years following the withdrawal of the UK for the purposes of running off their existing portfolio. The undertakings to which the Regulation applies are described by reference to their meeting four criteria, namely that immediately before Brexit they:
a. are registered in the UK / Gibraltar;
b. have exercised their right to carry on insurance business in Ireland through FOE / FOS;
c. have ceased to carry on new business here; and
d. exclusively administers its existing portfolio.
It provides, in paragraph (2) for the Central Bank to impose and vary conditions on intermediaries deemed to be registered under Paragraph (1). Paragraph (3) provides for the Central Bank to withdraw registration where the undertaking no longer meets the criteria above or either is making
insufficient progress to terminate its business with the three years; or has terminated its run-off.
Paragraph (4) provides that an undertaking which is registered under Paragraph (1) will not be subject to a number of the 2018 Regulations. Paragraph (5) provides for the requirement for undertakings deemed registered under Paragraph (1) to notify the Central Bank of this within 3
months of the registration.
Head 3 – Commencement
Provide for the commencement of the Part on the lines of the following –
This Part shall come into operation on such day or days as the Minister for Finance may by order or orders appoint either generally or with reference to any particular purpose or provision and different days may be so appointed for different purposes or provisions.
