FCA Brexit webinar - November 2020

With six weeks to go before the end of the EU exit transition period, the FCA set out what firms need to be aware of in preparation for 1 January 2021. Discussions were against the backdrop of the ongoing EU Exit negotiations where the outcome is uncertain, and thus any agreements may not mitigate the risks that firms are facing, and the question of equivalence.

The FCA were keen to note that they have already entered 80 Memorandums of Understanding with bodies in the EU, will continue to cooperate with EEA counterparts, influence international standards and are committed to free trade.

Key elements to highlight:

Onshoring of EU law

As of 31 December 2020, EU law will no longer apply in the UK. The FCA have therefore updated their rulebook in line with EU law such that these laws will work in a UK context (‘onshoring’). These rules will apply from 1 January 2021, and the timeline feature of the FCA handbook allows firms to review these ahead of implementation.

Temporary Transitional Powers

The UK Government granted UK financial regulators, such as the FCA, Temporary Transitional Powers (TTP), which can be used until March 2022. These will aid a smoother transition for firms into onshored regulation since they can continue to operate under existing regulation for a temporary period. They are then expected to be compliant with onshored regulation as of March 2022.


Equivalence agreements between the UK and the EU would mean that financial services regulations are deemed equivalent to and therefore compliant with each other. The EU has not reached a view on UK equivalence yet, and whilst the FCA have onboarded EU laws into the UK regulation, firms should prepare for the eventuality that the EU does not assess the UK as equivalent.

The FCA confirmed that there will not be any impact to Gibraltar firms at the end of the transition period, since HM Treasury is legislating to have a permanent agreement regarding cross border services with Gibraltar.

Passporting and the Temporary Permissions Regime (TPR)

31 December 2020 heralds the end of the current passporting system. As such, UK insurers and insurance brokers who currently rely on passporting permissions in order to sell insurance through intermediaries based in other EEA countries, will no longer be able to do so come 1 January 2021. EEA based insurers who are currently conducting business within the UK under passporting permission, will have the opportunity to continue providing their services under the FCA’s Temporary Permissions Regime.

Under the TPR, firms will be able to conduct new business within their existing permissions until they gain full UK authorisation. Alternatively, the Financial Services Contracts Regime (FSCR) enables EU firms to run off business in the UK. As also explained on the FCA website[1], the FSCR contains two programmes: Supervised Run off (SRO) and Contractual Run Off (CRO). Branches wishing to run off their UK business would move into the SRO.  

There is currently no pan-European equivalent to the TPR and the FSCR. Instead, UK insurers and intermediaries operating in the EEA will need to determine whether they can continue to serve their EEA customers on a country by country basis. UK insurers will need to understand whether regulation in each relevant EEA country permits them to continue providing services to EEA customers, including migratory customers, i.e. customers sold products in the UK who have since moved to the EEA. For example, a firm that sold a pension to a customer based in the UK who is now drawing down whilst in France, will need to look at the French regulatory requirements to confirm which services they can continue to offer their customer.

Other useful examples discussed in the webinar include where an insurer has an Appointed Representative in France. In this case, the insurer will need to ensure that the representative meets French law and that they are compliant by 31 December 2020. UK insurers and intermediaries are being urged to prepare for a range of scenarios, including where they would need to comply with local law in order to sell to, and care for their customers.

Reverse solicitation

The FCA explained that, where firms are operating abroad, they need to review their services considering local regulation. The FCA stated that there should be no general presumption that business can continue under reverse solicitation, and for firms wanting to rely on reverse solicitation, the FCA cannot give advice as to what individual member states will do.

Applying to be part of the TPR

At end of this year, once the FCA have received all the applications from firms applying for TPR, the FCA will work out how to allocate landing slots. Landing slots will be issued to firms within the first two years, and the TPR will be in place for three years. Firms should be working to understand the relevant rules and input effort into their application. The FCA are currently consulting as to the authorisation of international firms and the types of factors that will be considered. This consultation is currently out for industry review and feedback so firms can respond to the consultation paper.[2]

Risks and changes at the end of the transition period

Despite preparation ahead of 1 January 2021, the FCA highlighted the following points to bear in mind as we approach the deadline.

There is a prominent risk as to the ability of firms to continue to engage in cross border business. The TPRs or the requirement for UK firms to discern local regulation, will help to reduce the disruption associated with this risk materialising.

Whilst the Information Commissioners Office is the regulator for data protection in the UK, the FCA have highlighted data protection and GDPR as a risk area, since the EU has not assessed the UK as adequate with regard to data protection. The UK has confirmed how data will be transferred from the UK to the EU. Whilst the EU previously stated that it will assess the UK’s data environment, this is yet to happen. Firms are advised to prepare for the eventuality that the UK’s data environment is not deemed adequate. For example, contractual clauses regarding how data is handled and governed should be reviewed.

In addition, the FCA indicated that near 31 December 2020, the Financial Services register will be temporarily unavailable whilst the FCA update it, as, for example, the status of EEA firms will be changing with the end in passporting rights.


Firms are encouraged to prepare for a range of scenarios, particularly given that equivalence has not been agreed and the EU’s assessment of the UK’s data handling has not yet been concluded. The overarching message from the FCA webinar to firms with interests in the EEA, was that they should understand local laws and determine if and how they can continue to serve clients, complying with local laws where required and communicating with policyholders residing in the EEA where necessary.


[1] FCA financial services contracts regime
[2] FCA CP20/20 our approach to international firms


This article covers the subjects discussed with most relevance to the insurance and broking industries. This is not a transcript of the webinar, and neither have all points and questions been included. The FCA plan to create summary videos of the main points and key issues discussed in the webinar, and the most recent and relevant information is on the FCA’s own website.