Activities in Denmark from UK based insurance undertakings after Brexit

UK’s exit from the EU will be final when the transitional period expires 31 December 2020. After that EU regulation will no longer apply to the UK and UK based insurance undertakings will not be allowed to continue doing business in Denmark from 1 January 2021. The Danish Financial Supervisory Authority (DFSA) will issue an executive order granting a temporary permission for undertakings already notified in Denmark to service existing contracts until the end of 2021.

The United Kingdom (UK) formally left the EU as of 31 January 2020. UK is therefore now a third country in relation to the EU, but according to the withdrawal agreement the UK is now in a transitional period under which EU regulation continue to apply while the parties are negotiating about the future relationship between the two. 

The transitional period is due to operate until 31 December 2020 and after that EU regulation will no longer apply to the UK. This also means that the UK will be leaving the European Single Market and with that will lose the right to free freedom of establishment and free movement of services.

One of the consequences for the financial sector will be that according to Danish law insurance undertakings with their head office in the UK, who have entered insurance contracts for risks situated in Denmark, will no longer be allowed to conduct insurance business in Denmark, including to service existing cross-border business.

Since the spring of 2019, the DFSA has been in dialogue with both Danish and British insurance undertakings informing them of the consequences of UK leaving the EU, the options available for preparing for Brexit and the importance of doing so. 

UK insurance undertakings and Danish insurance holders

Come 1 January 2021 it is expected that some UK insurance undertakings will still be holding portfolios covering risks in Denmark. To ensure that Danish insurance holders are not suddenly left without coverage, the DFSA has issued an executive order granting a temporary permission to continue servicing existing insurance contracts until the end of 2021. 
The executive order will apply to UK based insurance undertakings notified to pursue insurance business in Denmark before 31 December 2020, and it will grant them a temporary permission to continue servicing insurance contract entered into before the end of 2020, provided that the undertaking meets the requirements stated in the executive order, including reporting to the DFSA. 

Insurance undertakings are not allowed to in any way extend or renew existing contracts, nor enter new ones. 

The DFSA encourage UK insurance undertakings to inform their costumers of the consequences of the transitional period expiring and the undertaking losing its permanent permission to provide insurances in Denmark.

Danish insurance holders are encouraged to take the necessary steps to ensure that they have the required coverage, for example by finding another insurance undertaking to provide new insurances, when the existing contracts expire. 

Undertakings covered by the executive order will also be subject to the Executive Order on Good Business Practice for Insurance Mediators, the Executive Order on Fees and Other Costs for Insurance Undertaking, and for undertakings that service life insurance agreements, the rules of in the Executive Order on Information About Life Insurance Agreements also apply. As of 1 January 2021 the insurance contracts will, however, not be covered by the Danish Guarantee Fund for Non-life Insurers. 

The draft executive order was sent into public hearing on 12 March 2019. The consultation letter is accessible at høringsportalen.dk, though only in Danish. 

The Executive order in Danish can be found on Retsinformation.dk, An unofficial translation of the draft is available in blue box at the top of this page.

The DFSA will continuously assess whether an extension of the executive order is required.