Brexit Implications Disclosure Notice to Policyholders

Background

Catalina Insurance Ireland dac (the “Company”) is an insurance undertaking authorised by the Central Bank of Ireland, pursuant to the European Union (Insurance and Reinsurance) Regulations 2015, to carry on non-life insurance business in classes 1 to 18 as defined in the European Union (Insurance and Reinsurance) Regulations 2015 (SI No 485 of 2015), with the right to carry on such classes in other EU jurisdictions on a freedom of services basis.

The Company was previously part of the HSBC Group and was acquired by Catalina in October 2012. Following this acquisition the Company was renamed to Catalina Insurance Ireland dac (formerly HSBC Insurance (Ireland) Ltd.).

Brexit Exposure
When part of the HSBC Group, the Company underwrote personal lines business in the UK and Northern Ireland. These business lines have been in run-off since July 2012. During 2015, the Company acquired a portfolio of claims liabilities from Quinn Insurance Limited (Under Administration). The business is predominately UK and Northern Ireland motor and professional indemnity and some employer’s liability and public liability business. The majority of this business has been in run-off since 31 December 2012, with the exception of a portfolio of professional indemnity risks which have a run-off period of 6 years once the policy has expired.

The Company’s UK and Northern Ireland claims are administered in the UK, with the claims handling outsourced to UK companies.

Brexit Contingency Planning

The Company is committed to honouring all of its contractual obligations. Therefore, in order to minimise any potential disruption to its policyholders the Company has put in place contingency plans.

The UK had been due to leave the EU on 29 March 2019, two years after it started the exit process. However, having granted an initial extension of the process until 12 April 2019, EU leaders backed a further six month extension request by the UK until 31 October 2019. As part of its Brexit planning, the Company has considered a number of potential scenarios with appropriate mitigating actions planned.

The UK government has legislated for the potential scenario of a “no-deal / hard” Brexit occurring on 31 October 2019 with no transitional arrangements in place. On 28 February 2019, the Financial Services Contracts (Transitional and Saving Provision) (EU Exit) Regulations 2019 (“FSCR”) statutory instrument (“SI”) was made law. The SI establishes a Financial Services Contracts Regime that will ensure any EEA firms who do not enter the temporary permissions regime (“TPR”) can continue to service their UK claimants post Brexit. If there is an implementation period agreed, then the changes made in the SI would not take effect when the UK leaves the EU.

The FSCR will provide two discrete mechanisms, Supervised run-off and Contractual run-off (“CRO”). Of these two mechanisms, it has been identified that the CRO is the best fit for the Company and it will automatically enter the CRO as it did not apply to enter the TPR.

CRO firms need not have an existing relationship with UK regulators. Under the CRO, the Company will remain supervised by its home state regulator (the Central Bank of Ireland). The CRO will work on the basis of a limited exemption from the general prohibition (Section 19 of FSMA) – which states that no person can carry on a regulated activity in the UK unless that person is authorised or exempt – for the purposes of winding down UK regulated activities in an orderly manner. Providers will not be able to enter into new contracts with UK customers, they will only be allowed to carry out the regulated activities which are required to service their pre-existing contracts and wind down relevant contracts.

If there is an implementation period until the end of 2020 - claims handling will continue in the UK until the end of 2020 and then transfer to Ireland.

Brexit implications will continue to be assessed by the Company based on available information.