Brexit Strategy – United Kingdom

Some of our policies are underwritten by Liberty Mutual Insurance Europe SE (LMIE).  LMIE currently operates in Europe from its registered office in the UK, and across Europe via branch offices.  From 29 March 2019, when the United Kingdom is due to leave the European Union (also known as Brexit), LMIE may no longer be able to carry on business in the same way. We have therefore developed a strategy, to enable LMIE to continue operating in Europe and the UK without any disruption to our policyholders, brokers or staff.

As this may affect your policy, please read this notice carefully. When using a Liberty Specialty Markets website, this notice should be read alongside the website terms and conditions.

If you are a creditor of LMIE please read the section ‘Information for Creditors’.

Policyholder Notification Letter

This letter is important as it relates to your insurance policy with Liberty Mutual Insurance Europe SE (LMIE) – please read it carefully. You do not need to respond to this letter but, if you wish to contact us, information on where to direct your queries is provided below.   

If you are a creditor of LMIE, please refer in particular to section 6 (‘Creditors’), which applies to you. Please note that the definition of ‘Creditor’ in this context includes claimants and potential claimants. 

LMIE (CRN: SE000115) is proposing to transfer its registered office to Luxembourg under Article 8 of the European Council Regulation (EC) No 2157/2001 of 8 October 2001 on the Statute for a European company (SE).

As you will be aware, the United Kingdom will be leaving the European Union on 29 March 2019 (known as “Brexit”).  We are writing to tell you the action that LMIE is taking in response to Brexit, and the effect that this will have on your policy.

1.Proposed Post-Brexit Structure

LMIE currently carries out business across the EU from its registered office in the UK and from branches in the EU.  So that it can continue to do so post-Brexit with the least amount of disruption to our customers, LMIE is proposing to transfer its principal registered office from the United Kingdom to Luxembourg by obtaining permission from the regulatory body in Luxembourg, the Commissariat Aux Assurances (CaA), in order to continue operating across Europe.   LMIE will continue to maintain a substantial presence in the UK via a UK branch, which will be permitted to carry on insurance business in the UK.

Crucially for you, LMIE SE shall remain the same legal entity; this means that your existing contract(s) of insurance will still remain valid following the proposed transfer, and there will be no issues with LMIE’s ability to pay valid claims after Brexit.

2.The Impact on Your Policy

From the date of the transfer of LMIE’s registered office to Luxembourg, LMIE will primarily be authorised and regulated by the CaA, rather than the UK Prudential Regulation Authority (PRA) and Financial Conduct Authority (FCA) as at present.  We have analysed the impact that this will have on your policy and it is anticipated that this will be minimal.

The following contains the elements of your policy which shall remain unaffected, including (but not limited to):

  • your rights and obligations under your current insurance contract;
  • LMIE’s rights and obligations under your current insurance contract;
  • the terms and conditions of your policy;
  • any mid-term policy adjustments;
  • the way in which your insurance contract(s) are administered, for instance the collection of your premium;
  • your point of contact in the event of a claim; and
  • the entire claims handling process.

If your policy is written out of the UK branch, you will still have recourse to the UK Financial Services Compensation Scheme (FSCS) in relation to financial defaults (e.g. insurer insolvency); and to the UK Financial Ombudsmen Service (FOS) for any complaints arising under your existing policies.  If your policy is written out of any European office, you will continue to have recourse to the dispute resolution provider(s) in your home country, and you will also gain the additional right of recourse to the ombudsman in Luxembourg.  Please note that you will not be able to resort to the FSCS for issues relating to financial defaults that arise after the transfer; however, there are rules in place under which you will still be protected and therefore we still consider the impact of transfer to be minimal.

3.The Legal Element

LMIE has committed to working extremely closely with the FCA, the PRA and the CaA in order to ensure that it continues to meet all of its legal and regulatory obligations.

The transfer of LMIE’s domicile to Luxembourg will be implemented under Article 8 of the European Council Regulation (EC) No 2157/2001 of 8 October 2001 on the Statute for a European company (SE), which allows for transfer of an SE company from one EEA Member State to another, whilst remaining the same legal entity.  As per the above, LMIE will be regulated by the CaA when it is domiciled in Luxembourg.  In addition to the transfer, LMIE will be required to cancel its existing permissions under Part 4A of the Financial Services and Markets Act 2000 (FSMA), which enable it to carry out ‘regulated activities’, authorised in the UK. The statutory definition of regulated activities includes effecting and carrying out contracts of insurance.  This application to cancel its permissions will be submitted to and approved by the FCA and PRA.

Upon the proposed transfer, LMIE will establish a UK branch, which will be permitted to enter into insurance contracts and conduct insurance business in the same way as before the transfer.  After Brexit (subject to any transitional period) the UK branch will be authorised and regulated by its home regulators, the FCA and the PRA.

4.The Procedure

The transfer of LMIE to Luxembourg and the cancellation of UK permissions are expected to take place on 1 March 2019.  Immediately prior to this, LMIE will also obtain its regulatory authorisation from the CaA.

LMIE has already converted from a UK Limited company (LMIE Ltd) to a Societas Europa (LMIE SE) in order to facilitate the relocation process.  As part of this procedure LMIE Ltd first converted to a PLC; this took place in March 2018.  Finally, in order to complete the conversion to LMIE SE, LMIE PLC merged with another Liberty company, LSM Lux PLC SA in order to create the existing LMIE SE, registered in the United Kingdom.

5.Contact Details

If you do not have any concerns regarding the proposed transfer, you do not need to respond to this letter or to take any further actions.

Should you have any queries or wish to find out more, please contact BrexitProgramme@LibertyMutual.com.  Further information and FAQs can also be obtained on the Brexit page of our website at https://www.libertyspecialtymarkets.com/brexit-strategy/.  Other languages will also be available on the website. Any updates may also be posted to the website on a periodic basis.

If your query or concern relates to any other matter related to your policy, please contact us in the usual way.

The transfer of your insurance contracts will mean that LMIE SE will still remain the company which controls the processing of information relating to these contracts.  You can find out further information about our privacy and data protection policies on the ‘Privacy and Cookies’ section of the website at http://www.libertyspecialtymarkets.com/privacy-cookies/

6.Creditors

If you are a creditor of LMIE, this letter hereby notifies you of the proposed transfer of LMIE’s registered office from the United Kingdom to Luxembourg pursuant to Article 8 (1) of the European Council Regulation (EC) No 2157/2001 of 8 October 2001 on the Statute for a European company (SE) (“SE Regulation”) (“Proposed Transfer”).

The Company submitted a transfer proposal and management report in relation to the Proposed Transfer to Companies House on 20 September 2018.  In accordance with article 56(1) of the European Public Limited-Liability Company Regulations 2004/2326, copies of the transfer proposal and management report are available for inspection at LMIE’s registered office.  You have the right as a creditor of LMIE to examine the transfer proposal and the management report and to obtain copies of these documents free of charge, upon request.   If you would like to be sent copies of these documents, please make your request in writing to LMIE at its registered office: 20 Fenchurch Street, London EC3M 3AW, United Kingdom, for the attention of the LSM Group General Counsel.

LMIE is currently authorised as an insurance company by the Prudential Regulation Authority in the United Kingdom and regulated by the Prudential Regulation Authority and the Financial Conduct Authority.  After the Proposed Transfer takes effect, LMIE will be authorised as an insurance company and regulated by the Commissariat aux Assurances in Luxembourg.  At no time will LMIE be unregulated or regulated in more than one territory.

The solvency position of LMIE will remain unchanged immediately following the Proposed Transfer taking effect.  The business activities of LMIE shall continue following the implementation of the Proposed Transfer, and the financial position of LMIE shall not be affected as a result of implementing the Proposed Transfer.

Yours faithfully

 

Matthew Moore

President and Managing Director

On behalf of Liberty Mutual Insurance Europe SE

Please click here to download the signed PDF

 

FAQ's - Information on the Proposed Transfer

What is the reason for the transfer?

LMIE has decided to move its registered office from the UK to Luxembourg to ensure that we can continue to provide the same excellent level of service to our policyholders and brokers both before and after Brexit.  We have designed our Brexit strategy to minimise any disruption to our customers.

What changes are being proposed?

By moving LMIE’s registered office from the UK to Luxembourg, it will enable LMIE to continue to operate from its branches across Europe, and from a new branch in the UK, without any disruption to our policyholders, brokers or staff.  The insurance company underwriting policies will not change, and LMIE will have no issues in paying claims whether before or after Brexit.  The principal changes as a result of the transfer is that LMIE’s registered office will be in Luxembourg, rather than the UK, and its principal regulator will be the Luxembourg Commissariat aux Assurances (CaA), rather than the UK regulators, the PRA and the FCA.  Other than that there will be very little impact on the company and on our policyholders: it will still remain the same legal entity and LMIE will still be able to carry out its business in the UK, via a UK branch.

Why did LMIE choose Luxembourg as its new registered office?

Luxembourg is an established banking and life assurance centre, with a growing general insurance market.  The regulatory environment is robust, and led by a well-respected, insurance-specific regulator.

What is the legal procedure behind the proposed transfer?

LMIE is a Societas Europaea (SE), a European company.  The proposed transfer of LMIE’s domicile to Luxembourg will be implemented under Article 8 of the European Council Regulation (EC) No 2157/2001 of 8 October 2001 on the Statute for a European company (SE), which allows for transfer of an SE company from one EEA Member State to another whilst remaining the same legal entity and without having to liquidate the existing company.  Any legal contracts that the company is party to (including contracts of insurance with policyholders) remain valid notwithstanding the transfer.

LMIE converted into an SE on 18 July 2018.

LMIE has applied to the UK and Luxembourg regulators to cancel its UK authorisations and replace them with Luxembourg authorisation.

What will the effect of the transfer be on me?

If before the transfer, you entered into a legally binding contract with LMIE; after the transfer you will still have the same valid contract with the same entity – LMIE.   This means that any rights, obligations and benefits that you currently exercise under your contract will remain unchanged; and LMIE’s rights and obligations will likewise remain unchanged.

The only element which may be different is your right of recourse to the FSCS or the FOS for European policyholders; more details on this are provided below.

Do I need to take any action?

Please read the enclosed information very carefully, as it may impact your policy.  You do not need to do anything in response to this notice.  If you have any questions, or if you wish for any clarification or further information then you may contact us via the details provided below.  

FAQ's - Your Rights

How will policyholders’ rights be safeguarded under the proposed transfer?

To date, LMIE has and will continue to work extremely closely with the FCA, the PRA and the CaA to ensure that we meet all of our legal and regulatory obligations.  The transfer will have no material impact on your contractual rights as LMIE will remain the same legal entity after the transfer.  This means that all contracts of insurance between you and the company will continue to be entered into with LMIE; the main difference is that it will be the regulator in Luxembourg, the CaA, that will provide permission from LMIE to enter into contracts of insurance following the transfer.

What is the Financial Services Compensation Scheme (FSCS)?

The Financial Services Compensation Scheme (FSCS) offers statutory protection in the event that an insurer is unable to pay a claim that has successfully been brought against it by an eligible policyholder, for instance due to the insurer’s insolvency.  At the timing of writing, eligible claimants are restricted to private individuals and small businesses.

Will I still have recourse to the FSCS from the date of the transfer?

If you are a UK policyholder (or your policy is issued by LMIE in the UK) who is an eligible claimant, your right to compensation from the FSCS will be unaffected, as the UK branch of LMIE will continue to be regulated by the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA).

If you are a European policyholder (or your policy is issued by LMIE in the EEA), you will continue to be protected by the FSCS until the date of the transfer.  Following the transfer, it is likely that you will not have recourse to the FSCS.

What rights will I have if I lose my protection under the FSCS following the transfer?

Luxembourg, where the European registered office of LMIE will be regulated, does not offer a similar, State owned scheme protecting insurance creditors; however, there are rules in place in order to protect policyholders and creditors in the event of insolvency of a Luxembourg insurance company.  In addition to this you may be eligible for protection under a compensation scheme within the jurisdiction of the EEA Member State that you reside in. Please contact the local administrator of your policy in order to find out more information about this.

What protection is offered for creditors and claimants in Luxembourg in the event of insolvency?

In Luxembourg protection is offered in the form of collateral type arrangements. Certain procedures must be followed by insurance firms in order for these to be effective; insurance firms should put provisions in place in order to match all liabilities under insurance contracts with equivalent collateral.  These are known as ‘tied assets’ and under Luxembourg law, they are considered to be completely segregated from the firm’s other assets and liabilities. They are also required to be retained in a separate account with a bank approved by the CaA.

Further protection is offered in that these tied assets are required to be free from any third party rights over them.  Any claimant or creditor entitled to these tied assets is thereby treated discretely from other creditors and as long as the correct procedures have been implemented, will receive the requisite compensation should a company become insolvent and thereby unable to pay a claim.

All tied assets are held in a pool, rather than separately for each potential claimant or creditor, and all insurance creditors rank equally regardless of the amount of their claim or the date on which their debt was created. If an event arises whereby the tied assets are not sufficient to satisfy a claim (for instance, depreciation), allocation of the entire pool of tied assets will be distributed amongst insurance creditors in proportion to their claims.  However, Luxembourg law provides an additional layer of protection for insurance creditors in that if there is insufficient resource to cover a claim, creditors and claimants will have preferential right over any assets of the insurance company in question, subject to a list of statutory exceptions.

What is the Financial Ombudsman Service (FOS)?

The Financial Ombudsman Service (FOS) provides an impartial free service in order to allow eligible complainants to settle disputes with insurance companies who issue policies in the UK; its decisions are binding on UK insurance companies.

At the time of writing, eligible complainants are: (a) Private policyholders acting outside their trade, business or profession; (b) charities with an annual income of less than £1m; or (c) commercial policyholders with a group annual turnover of less than €2m and fewer than 10 employees (also known as micro-enterprises).

Will I still have recourse to the FOS from the date of the transfer?

UK policyholders will continue to have recourse to the FOS after the transfer and will retain these rights should they choose to renew their policy with LMIE.  EEA policyholders whose policy is issued in the UK will also continue to have access to the FOS from the date of the transfer.

European policyholders whose policy is issued from an EEA country will have recourse to the dispute resolution in your Home Member State, and you may also gain recourse to the equivalent body in Luxembourg.

Will the solvency and capital requirements of LMIE be affected by the transfer?

LMIE will not be making any changes to the way in which it calculates its solvency and capital ratios upon the transfer.   Currently LMIE is rated ‘A’ (Strong) on the Standard & Poor’s credit rating benchmark system and this is not expected to change.

What will the tax implications of the transfer be?

Following the transfer LMIE will be a tax resident of Luxembourg; however, this is not anticipated to have any material impact on customers.

What impact will the transfer have on reinsurance contracts?

The transfer will not impact LMIE’s reinsurance contracts.  None of LMIE’s reinsurance contracts entitle the reinsurer to terminate the arrangement as a result of the transfer.

FAQ's - The Transfer Process

When will the transfer be effected?

The transfer is currently planned to take place on 1 March 2019.  This is the date on which LMIE will become an insurance company authorised by the CaA and entered onto the register in Luxembourg.  On the same day, LMIE’s UK Part 4A permissions will be cancelled and the company will be deleted from the UK register. Please note that these two events are not contingent on one another, although they are planned to happen simultaneously.

How will LMIE continue to operate in the UK?

Upon the transfer, LMIE’s UK operation will be a branch.  Following Brexit the current rules which allow EU companies to establish branches in other countries may change.  If and when that happens, the UK branch will become a “third country” branch authorised by the FCA and the PRA.

Will LMIE carry on its business from its existing branch offices when it becomes registered in Luxembourg?

Yes, LMIE will continue to operate from its existing EU and Switzerland branch locations.

Who will bear the cost of the transfer?

LMIE will bear all costs and expenses incurred due to the transfer.  There will be no administrative charges applied to any contracts or policies as a result of the transfer.

FAQ's - Administration and Service Levels

Will the terms and conditions of my policy change after the transfer?

No – the terms and conditions of your policy will not change after the transfer.

Will there be any changes regarding my premium payments following the transfer and will I have to pay my premium to a different bank account?

There will be no changes to the premium or the method of paying your premium as a result of the proposed transfer.  Following the transfer, the company shall be the same legal entity and payments will continue to be made to LMIE.

Will you reissue my policy documentation following the transfer?

Policy documentation will not be amended or reissued following the transfer.  Your policy will continue to be valid and you do not need to take any additional actions.

Will there be any changes to coverage under my policy following the transfer?

There will be no changes to the coverage under your existing policy following the transfer.  This includes any benefits, limitations and/ or exclusions of your policy.

How will my policy be administered after the transfer?

All contact details for administrators of your policy, including your usual claims contact details, will remain the same following the transfer.

Has my broker been notified of the transfer?

Yes – all brokers and intermediaries have received notification of the transfer in the same way as policyholders so that they are aware of the changes and the impact this may have.

Will the transfer affect the renewal date of my policy; for instance, will my policy be considered ‘renewed’ on the date of the transfer?

The transfer will not affect any of the terms of your policy therefore it does not mean that your policy will be renewed on the date of the transfer: your policy will continue in force unaffected by the transfer.  The renewal date of your policy will not change.

Where will the LMIE UK office be located?

LMIE UK will continue to operate from its current address of 20 Fenchurch Street, London, EC3M 3AW, with company number SE000115.

Where will the LMIE Luxembourg office be located?

LMIE will operate from offices at 5-7 rue Léon Laval, L-3372 Leudelange, Grand Duchy of Luxembourg.

Who will my point of contact be for claims after the transfer?

Your existing claims handler will continue to be your point of contact for claims following the transfer.

Will the proposed transfer impact on any outstanding or unresolved claims under my policy?

There will be no impact on the claims process under your current policy. Please refer any additional queries to your usual claims handling contact, who will be able to assist you.  Any outstanding claims will continue to be processed and any new claims should be notified in the usual manner.

Am I entitled to cancel my policy as a result of the transfer?

The transfer itself does not provide any right to cancel the policy.

FAQ's - Information for Creditors

How can I find out more information about the transfer?

Copies of the transfer proposal and the management report are available for inspection at the company’s registered office. As a creditor of the company, you are entitled to examine these upon request should you wish to do so.  If you would like to receive a copy of these documents please address your requests to do so to the Liberty Specialty Markets General Counsel at 20 Fenchurch Street, London, EC3M 3AW, UK.

What will the impact of the transfer be on me as a creditor?

Following the transfer, the company will be primarily regulated by the CaA as opposed to the FCA and the PRA.  At no time will the company be unregulated or regulated in more than one territory.

Aside from this, the impact of the transfer will be minimal in that LMIE will be bound by the same rights and obligations to all of its creditors and we do not anticipate that there will be any change to the solvency position or to the credit rating of the company, as outlined above.  The financial position of the company will not be affected by the transfer.

FAQ's - Additional Questions

Will I receive a notification on the date that the transfer is completed?

We will not send you any additional notification on the date that the transfer is completed.  If you do not hear anything further regarding the transfer, then it can be presumed that the transfer has gone ahead as planned.

Who can I contact for more information?

Should you have any queries or wish to find out more information, please contact brexitprogramme@libertymutual.com

Updates

From time to time we may need to make changes to this notice. We will provide you with the most up-to-date notice and you can check our website here periodically to view it.

This notice was last updated on 09/10/2018.

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Liberty Specialty Markets is the trading name for: Liberty Managing Agency Limited (LMAL) for and on behalf of the Lloyd’s underwriting members of Lloyd’s syndicate 4472 (Syndicate 4472); Liberty Mutual Insurance Europe SE (LMIE); Liberty Specialty Services Limited (LSSL); Liberty Specialty Markets Europe Sarl (LSME) and Liberty Specialty Markets MENA Limited (LSMM). LMAL, LMIE and LSSL are each registered in England and Wales (company numbers 3003606, SE000115 and 04845458 respectively), with their registered office at 20 Fenchurch Street, London EC3M 3AW. LMAL and LMIE are authorised by the Prudential Regulation Authority (PRA) and regulated by the Financial Conduct Authority (FCA) and the PRA (reference numbers 204945 and 202205 respectively). LSME is incorporated under the laws of the Grand Duchy of Luxembourg (company number B216199), whose registered office is at 32-36 Boulevard d’Avranches, L-1160 Luxembourg. LSME is licensed by the Luxembourg Minister of Finance as an insurance and reinsurance agency with authority to enter into contracts of insurance and reinsurance on behalf of LMIE and Syndicate 4472, which is managed by LMAL. LSME is supervised by the Commissariat aux Assurances. LSMM is a company registered in the Dubai International Finance Centre (DIFC Licence No 1794), whose registered office is at Unit 408, Level 4, Gate Village Building 5, DIFC, PO Box 506574, Dubai, UAE. LSMM is regulated by the Dubai Financial Services Authority (firm reference F002783). LSSL is an Appointed Representative of LMAL and LMIE. LSSL and LSMM are both authorised service company coverholders, with authority to enter into contracts of insurance on behalf of Syndicate 4472, which is managed by LMAL. LSSL and LSMM have authority to enter into contracts of insurance on behalf of LMIE. LMAL, LMIE, LSSL, LSME and LSMM are all part of the Liberty Mutual Insurance group of companies. When we offer insurance products to you (the policyholder) we will make sure we tell you which insurer in our group will underwrite the policy.