Question ID: 2595 - Policyholder located in the EU and insurance policy based outside of the EU
Regulation Reference: (EU) No 2016/97 - Insurance Distribution Directive
Topic: Scope (Art. 1 IDD)
Article: 1(6)
Status: Final
Date of submission: 08 Mar 2023
Question
Our query originates from EEA clients who are seeking clarity on sourcing insurance for UK-based property. EIOPA Recommendation 9 clearly outlines guidance for instances where the policyholder and the risk are both located in the EEA. In this case, our understanding is that intermediaries must be established and authorised in the EEA country where they seek to do business. However, there appears to be a lack of guidance for circumstances where the policyholder is located in the EEA, but the risk is located in the UK. Our queries are the following: i. When a policyholder is located in the EEA and the risk (property) is located in the UK, does the EIOPA provide any guidance for policyholders? ii. Are there any relevant EEA regulations preventing an EEA policyholder from acquiring UK insurance for a UK-based property provided all UK regulations are followed? iii. Does the above answer differ if the policyholder is an individual or a business?
Background of the question
We are advising clients located in the EEA who want to take out property insurance in the UK but are finding it difficult to do so and are unclear about the EEA regulatory framework.
EIOPA answer
Article 1(6) of the IDD indicates that the Directive shall not apply to insurance distribution activities in relation to risks and commitments located outside the Union. In addition, the IDD does not regulate insurance distribution activities carried out in third countries.
Hence, when the risk (in this case, property) is located in a third country, the IDD does not apply. It is also irrelevant if the policyholder has his/her habitual residence in the EEA if the risk is located outside the Union. However, it should be noted that the EEA policyholder may be subject to the national rules of the third country in terms of, for example, claims-handling and redress mechanisms.
In addition, since Article 1(6) of the IDD is minimum harmonisation, some Member States may have introduced national provisions imposing a registration of insurance intermediaries for insurance distribution activities performed on the territory of the relevant Member State, although such insurance distribution activities may be in relation to risks and commitments located outside the Union.
The above answer does not differ if the policyholder is a natural person or legal person.