Netherlands amends law on cross-border service provision by third-country insurers like UK

On 17 March 2021, the Act amending the Dutch Financial Supervision Act (Wet op het financieel toezicht or DFSA), which introduces a prohibition on cross-border services by third-country insurers, entered into force.

As a result, life and non-life insurers from non-EU/EEA-countries, such as the UK after Brexit, can no longer provide cross-border insurance services in the Netherlands.

Under the former regime, these insurers based in third countries were still allowed to conduct business on the basis of a cross-border service provision. In order to do so, a notification to the Dutch Central Bank (De Nederlandsche Bank or DCB) was required, in which the insurer had to demonstrate, among other things, that it was licensed to carry out the insurance activities in its home country and that it was sufficiently solvent.

The enactment of the DFSA amendment makes this no longer possible. Third-country insurers authorised to conduct cross-border insurance business in the Netherlands before the amendment came into force (i.e. insurers who already submitted the required notification to DCB), have a transition period of 24 months to wind down existing insurance agreements with Dutch policyholders. These insurers, however, are not allowed to offer new insurance agreements in the Netherlands during the transition period.

In order to make use of the transition period, each insurer must submit a plan to DCB for approval within six months after the amendment entered into force (i.e. until 17 September 2021). The plan should outline how the insurer's activities will be steadily reduced during the transition period.

Insurers that have not already submitted the required notification to DCB cannot make use of this transition period and are required to cease their activities in the Netherlands with immediate effect (as UK insurers were also required to do at the end of the Brexit transition period of 1 January 2021). Third-country insurers can also try to obtain the appropriate licence to conduct operations in the Netherlands or become licensed in another EU/EEA member state and passport that licence into the Netherlands.

Under the new regime, third-country insurers conducting reinsurance business will be able to offer their cross-border services in the Netherlands as long as these services are limited to reinsurance and they do not qualify as an insurer with limited risk exposure. Reinsurers may only offer their reinsurance business in the Netherlands for risks within the sector for which they hold a license in their home country, and they must notify DCB of their intended cross-border service provision.

For more information on this amendment or other Dutch financial regulatory matters, contact your regular CMS partner or local CMS experts.