Freedom of services in insurance
The right of an insurer authorized in one EU state to cover risks in another without establishing there, supervised exclusively by its home country.
In July 2016 Enterprise Insurance Company, authorized in Gibraltar, went into liquidation while writing on a freedom of services basis in several member states; its policyholders were in France and Italy, its supervisor in Gibraltar. The mechanism is Article 147 of the Solvency II Directive (2009/138/EC). An insurer authorized in one member state covers risks in the others on simple notification to its home supervisor, which remains sole judge of its solvency. The passport opened competition; several failures have shown its weakness. The home supervisor has neither the means nor the incentive to police business whose policyholders, claims and litigation sit abroad, and the host supervisor, watching complaints pile up, has no power to act. The gap costs most in long-tail lines such as construction, where under-reserving takes years to surface. These failures led EIOPA to set up cooperation platforms between supervisors. The cost fell on guarantee funds where they covered such policies, and on policyholders elsewhere.
The liquidation in July 2016 of Enterprise Insurance Company, an insurer authorized in Gibraltar and writing on a freedom of services basis in several member states, left French and Italian policyholders without cover and exposed the limits of home country control.
Freedom of services in insurance, freedom of services insurance
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