EU member states were required to implement the EU Insurance Mediation Directive (2002/92/EC) by 14 January 2005, under which, broadly, all persons who carry on an insurance mediation activity:
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must be authorised by a relevant competent authority;
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are subject to certain obligations relating to systems and controls, regulatory capital, client assets and approved persons; and
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are regulated with respect to the way that they communicate with clients, issue financial promotions (including content), handle claims and advise on, sell and cancel products.
CEIOPS published a report in March 2008 and asked the European Commission to consider certain proposals relating to the scope of the directive and the requirements relating to professional indemnity insurance. As some member states implemented the directive late, the Commission postponed its review. The Commission has now published a “request for advice regarding the revision of the Insurance Mediation Directive”, launching the Commission’s comprehensive review of the directive.
The Commission has noted that it is required under Solvency II by the summer of 2010 to put forward proposals for the revision of the directive, taking into account the consequences of Solvency II for policyholders. In addition, the Commission has expressed a desire to align the directive revisions with its ongoing work on Packaged Retail Investment Products and its planned review of the Markets in Financial Instruments Directive.
The Commission has asked CEIOPS to provide technical advice in relation to the following matters:
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practical advantages of converting the directive into a Lamfalussy Directive (the four level structure that has often been used for implementing financial services reform, such as the Solvency II Directive, in the EU);
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the scope of the directive, particularly as regards secondary intermediaries and insurance intermediaries operating in a non-EU third country. The Commission notes that some of the existing problems in the application of the directive are caused by diverging interpretations of exemptions from its scope. In the Commission’s view, the directive should guarantee a real level playing field between all actors involved in selling insurance products, i.e. intermediaries and insurers. CEIOPS advice on this point should take into consideration the boundaries as well as differences between investments packaged as life insurance policies and the remaining categories of insurance products;
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the fit and proper requirements for sub-agents. The Commission is seeking advice on the extent to which a revised directive could further harmonise the requirements on knowledge and ability of insurance intermediaries and/or all actors involved in the selling of insurance products. This advice should take into account the existing differences in the qualification systems that apply in Member States. It should also be clarified that at this stage the Commission is only seeking advice on high level principles;
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ways to improve the notification process for insurance intermediaries wishing to exercise passporting rights;
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the lack of transparency in the way insurance brokers are typically remunerated;
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potential conflicts of interest and how those conflicts should be managed. The Commission notes its work on Packaged Retail Investment Products, which will affect certain insurance products, such as life insurance policies. The Commission wishes to introduce a mechanism to ensure effective management of conflict of interest in this sector; and
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ways to reduce the administrative burden of implementing the IMD.
The Commission has asked for initial advice from CEIOPS by summer 2010 to allow time to consider this advice when drafting the respective legislative proposals.
For further information, please contact:
Nadia Swann (nadia.swann@linklaters.com, (+44) 20 7456 5232);
Mark Middleton (mark.middleton@linklaters.com, (+44) 20 7456 4643).
