UK Trends and Developments Contributed by: Jamela Collins, Sukhbir Kaur, Tadgh Kelly and Oliver White, Temple Legal Protection
This may include cease and desist orders, adminis - trative sanctions, and restrictions on further activity, and may also destabilise the insurance arrangement itself. Breaches of registration requirements are a recurrent focus of supervisory action under the Insur - ance Distribution Directive, underscoring the impor - tance of structuring litigation insurance arrangements on a basis that is compliant with host‑state regulatory requirements from inception. Where a host-state regulator identifies unauthorised insurance distribution by a UK solicitor and notifies the FCA, the FCA would not enforce host-state law directly. Instead, it would assess whether the conduct breaches UK regulatory and professional standards, including expectations around cross-border compliance, gov - ernance and consumer protection. This may result in supervisory engagement, remedial directions or poten - tially a referral to the Solicitors Regulation Authority, particularly where the firm failed to assess or address applicable host-state regulatory requirements. Insurers, managing general agents and brokers: ATE distribution post-Brexit Attention must be paid not only to the authorisation of the insurer but also to the regulatory status of the intermediaries involved in the placement of ATE cover. In the EU, legal-expenses insurance falls within Class 17 under the Solvency II Directive, and where the insured risk is situated in the EEA, the insurer must be authorised to write Class 17 business in the relevant member state. Where underwriting authority is exercised through a managing general agent, for the insurer, that agent must likewise be appropriately authorised to act on behalf of the insurer, under the IDD as opposed to Solvency II, in relation to the distribution of legal-expenses insurance. The same analysis applies to brokers. Where a bro - ker facilitates the procurement of an ATE policy for an EEA‑resident client, that activity will ordinarily constitute insurance distribution for the purposes of the IDD. In a post‑Brexit environment, UK brokers no longer benefit from financial services passporting rights in the internal market and must now hold the requisite EEA authorisation, or act through an appro -
priately authorised EEA intermediary, in order lawfully to arrange cover for an EEA‑located risk. Solicitors involved in the placement process must be alive to these distinctions. The regulatory validity of the insurance structure depends not only on the insurer’s licence, but on the authorisation chain through which the policy is placed. Where that chain is incomplete, the resulting ATE policy may again be structurally incapable of responding, notwithstanding its governing law or the forum in which the litigation is pursued. Conclusion The difficulties identified above are not inevitable. They arise where jurisdiction, governing law, and insurance regulation are treated as interchangeable, and where adverse-costs protection is procured with- out reference to the location of the insured risk or the regulatory architecture that governs its validity. Where EEA‑resident claimants litigate in the UK courts, adverse-costs protection must be sourced through insurers and intermediaries that are author- ised to insure the risk where it is legally situated rather than by reference to the jurisdiction of the court hear - ing the dispute. Solicitors involved in the placement of such cover must ensure that their role does not stray into unreg- istered insurance distribution under host‑state law, and that reliance on UK‑specific exemptions is not assumed to travel cross‑border. For funders, the lesson is equally clear. ATE insur - ance cannot be treated as a formalistic tick‑box or a contingent safeguard. Unless the policy is structurally sound from the EEA regulatory perspective and legally capable of responding at the point of loss, it offers no meaningful protection, either for security for costs purposes or against non‑party costs exposure. When risk location is correctly identified, authorisation properly addressed, and adverse-costs protection structured through compliant carriers, the concerns examined in this article fall away. Where they are not, the consequences tend to crystallise late, expensive - ly, and at precisely the moment when protection is assumed to exist.
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