Under Solvency II, a passport is available to insurers carrying on direct
insurance business only, or a combination of direct and reinsurance business. Solvency II requires undertakings headquartered outside the EU to obtain authorisation as a third country branch if they want to provide insurance services other than exclusively reinsurance business in the EEA. So, if the UK, following Brexit, will be considered a third country under Solvency II, insurance companies headquartering in the UK would need to apply for branch authorisation in one or more EEA Member States.
The most significant impact will be linked to capital requirements, as licensed branch operating entities would be allowed to calculated their SCR in relation to their entire EEA business by taking into account only the operations of branches in the EEA.
Equivalence of the UK would have difference effects under Solvency II with view on resinsurance, the group solvency calculation as well as the group supervision.
Given the potential loss of passporting right, insurers now prepare for any necessary group reorganisations.
BACKCurrently, all EEA Member States benefit from passporting rights based on the EU’s single market directives, which include Solvency II.
Insurance groups based in the EU with UK subsidiaries as well as European entities transacting with UK based firms might have to apply stricter rules for capital purposes under Solvency II if the UK is not regarded as “equivalent” under this regulation.
Under the current EU Prospectus Directive, issuers can passport prospectuses that have been approved by their home competent authority into other EU Member States. According to the planned new Prospectus Regulation, the European Commission may declare a third country prospectus rules to be equivalent to the Prospectus Regulation which, however, requires the adoption of further cooperation arrangements and will not provide a level playing field for parties  from equivalent third countries.
So, following Brexit, UK issuers of financial instruments / securities will likely need the approval of a local regulator in the EEA. Reliance on equivalence will not provide the same effective access to the EU market.
Financial services firm authorised in their EU countries can use passports to provide services cross-border into other Member States either through a local branch or directly without facing additional registration, authorisation or licensing obligations in that host Member State. UK based banks as well as all other market participants cooperating with UK based banks, such as fintechs, will have to establish operations in an EU Member State in order to maintain access to markets in other EU Member States.
MiFID II and MiFIR will apply in the UK from 3 January 2018. With UK´s formal withdrawal from the EU, it will depend on whether the UK can make use of the third country provisions to access EU markets as equivalent party. Bearing in mind, that UK´s financial authority, FCA, has already raised certain concerns about parts of the MiFID II regulation, it is not yet clear whether UK will continue on the implementation of MiFID II after Brexit.
Brexit is likely to have significant impacts on the way fund managers are able to manage their UCITS as well as their AIF funds in the UK and to market such funds into EU Member States. Assuming the UK is given third country status, the product marketing and the provision of nearly all relevant services as asset manager will be affected and restricted to a large extend.
As a consequence, additional and separate licenses in EU Member States should be considered as well as restructuring measures on group levels and relocation of certain fund structures.
Unless UK and EU agree on specific arrangement, payment services firms will possibly not be able to provide payment services cross border from the UK into the EEA or vice versa other than in accordance with local law and the policies of local regulators.
Fintechs building their business model on certain API services based on PSD II might need to reconsider the regulatory environment post Brexit.