Things to do for UK Insurers due to Brexit

How can UK-based insurance companies providing cross-border insurance services to Hungary prepare for 1 January 2021 (i.e. for the new era after the end of the 11-month implementation period under the Withdrawal Agreement between the EU and the UK, due to last until 31 December 2020)?

The legal issue

UK-based (re)insurers which are now providing cross-border insurance services to Hungary will lose their passporting right from 1 January 2021 (due to the fact that UK-based (re)insurers will automatically become third-country (re)insurers after 31 December 2020).

The Hungarian lawmaker has not taken any steps based on or with respect to the recommendations of the European Insurance and Occupational Pensions Authority (EIOPA) and it seems that there will be no transitional regime in Hungary from the date on which the implementation period under the Withdrawal Agreement between the UK and the EU ends (currently 31 December 2020) which would permit UK (re)insurers with no local establishment to continue providing cross-border services to policyholders in Hungary without requiring local authorisation or registration.

Possible solutions

Taking the above into account, a UK-based (re)insurer which is providing cross-border services to Hungary has the following options.

The UK-based (re)insurer may wish to:

establish, for example, a Hungarian branch office which has to be licensed to provide (re)insurance services in Hungary;

transfer its (re)insurance portfolio to another (re)insurer based on an agreement between the transferor and the transferee;

consider terminating the policies by the (re)insurer if allowed by the relevant policies and subject to the terms and conditions of such policies.

A permit issued by the Hungarian supervisory authority (i.e. the Hungarian National Bank) (“HNB”) is required for the commencement of the provision of insurance services by a Hungarian branch office and also for the portfolio transfer.

The branch offices of third-country insurance companies and the branch offices of third-country reinsurance companies may apply for such a licence to engage in the provision of insurance or for the pursuit of reinsurance activities for which the parent third-country insurance company or the parent reinsurance company is licensed in the country where established.

Third-country insurance companies may take up and pursue their activities in Hungary through a branch office licensed by the HNB.

As regards the Hungarian branches of third-country insurance or reinsurance companies, the territorial scope of the license issued by the HNB covers the territory of Hungary, and the activities may be pursued in Hungary only.

There are a number of requirements to be fulfilled and documents to be submitted when it comes to founding and licensing a branch office such as, for example, the memorandum of association of the third-country insurance company, a copy of its licence and its audited balance sheet for the previous three years, a statement from the supervisory authority of the home country in which it states that the foundation of a branch office in Hungary is not against the laws of that country and that it does not jeopardize the operation of the applicant insurance or reinsurance company, a business plan meeting the requirements of the Hungarian Insurance Act, proof that the (re)insurer has and will be able to maintain the required basic own funds meeting the requirements, organizational and operational regulations, the natural identification data of and certain documents concerning senior executives (the general representative of the branch office is also subject to licensing by the HNB), documents concerning the risk management system, proof of compliance with the material requirements, proof of payment of the procedural fee, etc.

Setting up a branch office can take approximately 2 weeks and getting the necessary licence for the operation can generally take about 4-6 months. Taking into account that a state of emergency was declared by the Hungarian Government in March due to the coronavirus pandemic, and as it is not known yet how long this state will exist, this period may even be longer.

The request for licensing can only be submitted to the HNB following the registration of the branch office with the competent Hungarian court of registration.


In the absence of preparing for 1 January 2021, i.e. if the UK-based (re)insurer is now providing cross-border insurance services to Hungary and will keep providing its services after 31 December 2020 without implementing any of the solutions prior to the end of the year, the HNB may impose a fine on the (re)insurer, or chief executive officer or non-management officer thereof, for providing/continuing (re)insurance activities without the HNB’s licence.

The amount of the fine which may be imposed on the (re)insurance company may vary between HUF 100,000 (about EUR 285) and 2 billion (about EUR 5,715,000), however, the upper limit of the fine may range up to 200% of the annual supervision fee payable by the (re)insurance company or its Hungarian branch, if this is higher than HUF 2 billion.


Taking the above into account, it is time for UK-based (re)insurers now providing cross-border services in Hungary to act. Should you need any assistance concerning the above, our law firm, Szecskay Attorneys at Law, would be happy to guide you through and assist you with any of the above procedures.

The above content does not constitute legal advice; this document merely provides a general summary of the insurance aspects of the above-mentioned issues. Should you have any questions concerning the above, please send your inquiry to and



Sándor Németh, Partner
Zoltán Balázs Kovács, Partner

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