In December we commented on the regulatory position of Scottish insurers post-independence (should this come to pass).
These insurers should also be thinking about their legal and operational structures, and any changes that may be required as a result. The point stems from an arcane EU Directive which provides that an insurer must have its head office in the same member state as its registered office and that it must actually operate there.
If independence were to happen, these provisions will be thrown into play. This is regardless of whether Scotland is itself admitted to the EU or not – since either way it will have left a member state, the UK.
Is this an issue in practice? In most cases, the head and registered offices of a Scottish insurer are in the same place – Edinburgh, but if (as the SNP wishes) the Bank of England is to continue to be the prudential regulator post-independence, what stance will it take? The directive strongly implies that an insurer's head office should be located in the member state where it conducts the bulk of its activities. In particular it requires that authorisation should not be granted (or withdrawn) where the "geographical distribution of the activities actually carried on indicate clearly that [it] has opted for the legal system of one Member State for the purpose of evading the stricter standards in force in another Member State within whose territory it carries on or intends to carry on the greater part of its activities". Whilst there would be no suggestion of intentional regulatory arbitrage in this case, could the Bank of England nonetheless require a Scottish insurer to move its registered/head office to the UK on the basis that this is where the bulk of its policyholders lie?
This may appear to be a technicality, and indeed there are bigger commercial issues driving a Scottish insurer's decision about its place of domicile, but it does illustrate nicely the complexities involved in the implementation of the SNP's project and, at the same time, the extent to which Scotland and the rest of the UK are bound together.