Annual Report. European Federation of Insurance Intermediaries

Transcription

1 Annual Report European Federation of Insurance Intermediaries

2 BIPAR The European Federation of Insurance Intermediaries BIPAR groups 52 national associations in 32 countries. Through its national associations, BIPAR represents the interests of insurance agents and brokers and financial intermediaries in Europe. Apart from some large multinationals, the insurance intermediation sector consists of hundreds of thousands of SMEs and micro-type operators. It accounts for 0.7% of European GDP, and over one million people are active in the sector. Insurance and financial intermediaries facilitate the insurance and financial process for several hundreds of millions of customers. The variety of business models, the high level of competition and the geographical spread in the sector ensure that everyone in Europe has easy access to tailor-made insurance and financial services. BIPAR is a member of the World Federation of Insurance Intermediaries (WFII). Founded in Paris in 1937, BIPAR has been established in Brussels since Annual Report 06/ /2014 (Editorial deadline: 3 June 2014) 1

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4 Foreword by the Chairman As insurance and financial intermediaries, we are involved in a properly functioning industry that has provided comfort and protection to millions of consumers and businesses. Over the last 5 years, BIPAR and all intermediaries have seen a wave of new European regulation coming into the sector. Consumer protection was one of the main objectives. Will this wave of new rules and procedures, which will come into place in the coming two to three years at national level indeed result in efficient improvements or will it just be the source of extra cost and administrative burden for governments, intermediaries and, in the end, for the consumer? Via our BIPAR position papers, background notes, memos and other publications, our associations know BIPAR s position on a large number of subjects. In this Annual Report, the reader will find a brief summary of all of these dossiers. This Annual Report also illustrates that the so-called impact assessments, which need to be made before Europe takes new initiatives, are of relative value. Indeed, the real impact on business can only be measured if the combination of the initiatives is taken into consideration. Therefore, this Annual Report is not only a source of information about the broad range of issues BIPAR is dealing with, but also the illustration of the broad range of rules intermediaries have to or will have to comply and deal with. I refer here to MiFID II, PRIPs, IMD, BIPAR is not against regulation but BIPAR will continue to ask for attention to the dangers of overregulation and administrative burden. As the single voice, united, sector representative BIPAR also have had the opportunity to give its views and to participate in many consultations related to a variety of European initiatives. Nobody can tell exactly what the outcome of some regulatory initiatives would have been if we had not taken the opportunity to promote strongly our points of view which are based upon daily reality but many would have had drastic negative consequences for consumers and for the sector. We will continue to promote our views in the future. On behalf of all members, I would like to thank all the chairpersons of our various committees and working parties, the members of the Management and Steering and Directors Committees and the members of staff for their loyalty and great teamwork over the last year in the interest of all intermediaries in Europe. I would like to deliver a personal thanks to my predecessor, Paul Carty, whose outstanding commitment to BIPAR and his deep knowledge of European affairs gave me an easier task to serve as BIPAR Chairman in the past year. Alessandro de Besi BIPAR Chairman 3

5 Contents European Affairs 5 Foreword by the Chairman of the EU Standing Committee 7 IMD II recast proposal 10 Distribution and direct sales of insurance-based investment products - IMD I amended by MiFID II: "IMD 1.5" 11 Markets in Financial Instruments Directive (MiFID II) 15 Regulation on key information documents for investment products (PRIIPs) 17 Revision of the Occupational Pension Funds Directive 18 Directive on credit agreements for consumers relating to residential immovable property 20 Solvency II and Omnibus II Directives - Insurance intermediaries' issues 21 Pools and ad-hoc co-(re)insurance agreements on the subscription market 22 Taxation 23 European Insurance Contract Law 24 Insurance Guarantee Schemes 24 Alternative Dispute Resolution 25 Environmental Liability Directive 25 Natural and man-made catastrophes 27 Use of gender in insurance 28 Data protection 29 Anti-money laundering 30 ecall systems 31 Cyber risk 32 European Supervisory Authorities and BIPAR 34 Social Affairs 35 Corporate Social Responsibility 35 Shadow banking 36 New rules for the European Public Procurement Market 37 Next EU Presidencies EU elections - Impact of the new rules BIPAR Agents' and Brokers' Standing Committees 38 A word from the Chairman of the Agents' Standing Committee 39 Reinforced cooperation of agents at European level 40 A word from the Chairman of the Brokers' Standing Committee International Affairs 41 World Federation of Insurance Intermediaries (WFII) 44 Glossary 45 BIPAR member associations 48 BIPAR Steering Committee 48 BIPAR Permanent Secretariat 4

6 Foreword by the Chairman of the EU Standing Committee Now that we start having a clear view of the new EU regulatory landscape in which the insurance and financial intermediaries will have to work in the coming years, I feel that I must look at a little history of the EU legislative developments of relevance over the last few decades. This short historic overview together with the report may help in our reflections about the future. The first brush of EU regulation for insurance intermediation was the 1976 Insurance Agents and Brokers Establishment Directive (EEC/77/92), this created a system for the mutual recognition of qualifications and experience to allow brokers and agents to establish in the various Member States. This was followed by the insurance intermediaries Recommendation of 1991, which proposed a move from regulation by nomenclature to activity based regulation and it also (unsuccessfully) suggested a division of insurance intermediaries into dependent and independent intermediaries. Then we had the IMD (Insurance Mediation Directive) in 2002 which came into effect officially as recently as January The IMD remains the spine of insurance intermediary regulation in the Member States of the EU. The IMD represented huge progress but is a minimum harmonisation Directive which allowed Member States to elaborate on the core elements of the Directive by introducing their own conduct of business rules. The phrase most commonly used to describe that elaboration is gold-plating. During this period we had the creation of the Single Market in 1991 and in 1999 the publication of the Financial Services Action Plan (FSAP) with its 48 separate pieces of financial services legislation including the IMD. We also had the introduction of the Lamfalussy procedure for EU legislation and the creation of CEIOPS which has post financial crisis morphed into EIOPA, one of the three new ESAs. I only mention CEIOPs because from an insurance intermediary s perspective it was CEIOPs that has provided us with the Luxembourg Protocol which defines what constitutes or triggers freedom of services (FOS) business. We have also had the three related Directives from the mid 90 s: the ISD (Investment Services Directive 1995), the CAD (Capital Adequacy Directive 1993) and the ICD (Investor Compensation Directive 1998). Whilst these instruments had no direct bearing on insurance intermediaries their influence has been significant in many ways. We had the concept of cash or non-cash handling intermediaries which has worked its way into MiFID in the opt-out 5

7 clauses and as a result of this legislation, some Member States introduced investor compensatory regimes which extended beyond investment firms to also include insurance firms and, just as important, most did not. This has resulted in consumers receiving differing levels of protection in different Member States when a firm that is trading in a number of Member States fails. It is an open question whether this will ever be addressed at EU level by the adoption of a Directive on guarantee funds; all we have to date is a Green Paper that was published a few years ago. I believe this is the point where the past meets the future and where the rest of the report picks up the issues on the agenda. Paul Carty Chairman of the BIPAR EU Standing Committee 6

8 E u r o p e a n A f f a i r s IMD II recast proposal On 3 July 2012 the European Commission proposed a recast proposal of the Insurance Mediation Directive that was adopted in The overarching objectives of the recast text are undistorted competition, consumer protection and market integration. The proposal is now being discussed by the two EU legislators, the European Parliament (EP) and the Council of Ministers of the EU. Its adoption is likely to take place at the end of 2014/early Commission's IMD II recast proposal - Key provisions The proposal applies to intermediaries and also to direct writers. It covers providers of after-sales services (such as loss adjusters). Market players who sell insurance products on an ancillary basis (e.g. travel insurance policies sold by travel agents) and certain activities by insurance aggregator websites are also included in the scope. Registration/professional requirements Intermediaries must declare generically at the moment of registration whether they give advice or not and work on behalf of the insurer or the client. Requirements for continuous professional development are introduced. Information requirements Intermediaries and insurers should act honestly, fairly and professionally in the best interest of their customers. New rules mandating, prior to the conclusion of any insurance contract, the disclosure of remuneration by intermediaries and insurers, are introduced. In non-life and life, the intermediary has to disclose the nature and basis of his remuneration and whether he receives contingent commissions and their amounts. For the sale of life insurance products, the intermediary has to disclose the amount of his remuneration in relation to a contract offered or if not possible, the basis of calculation. For the sale of non-life insurance products, the intermediary has to disclose the amount of his remuneration in relation to a contract offered or if not possible, the basis of calculation, upon the request of his customers. After a transitional period of five years (starting from adoption of the Directive) the mandatory full disclosure regime will automatically apply for the sale of non-life products as well. The proposal also introduces a new requirement to disclose the nature and the basis of the calculation of any variable remuneration received by the sales employees of insurance undertakings and intermediaries, as well as of any payment made by the customer after the conclusion of the contract. Advice The proposal includes a general statement favouring the provision of advice in the sale of insurance products but does not make the provision of advice mandatory. Standards for sales where no advice is given are introduced. Cross-selling Tying is forbidden. Regarding bundling, the customer must be informed that the products may be purchased separately and be given certain information in this regard. Insurance PRIPs Extra requirements apply to life insurance products with investment elements (PRIPs), covering sales standards, conflicts of interest, and introducing a ban on commission or fees for independent advice. Repeal Once adopted, the IMD II repeals the IMD I. EIOPA Involvement of EIOPA (European Insurance and Occupational Pensions Authority) through five delegated acts (e.g. professional requirements, remuneration, PRIPs), one regulatory technical standard (level of PII cover), one implementing technical standard (information on sanctions), two guidelines (cross-selling, sanctions (types/level pecuniary sanctions)) and three reports (application 7

9 of IMD II, structure of intermediaries markets, powers/resources of competent authorities). BIPAR's point of view BIPAR has never asked for the revision of the text but welcomed the intention of the Commission to make a further step towards a better integrated Single Market for insurance intermediaries as well as for their commercial and private customers. BIPAR also welcomed the extension of the revised proposal s scope to direct and other operators. However, BIPAR has serious concerns about the lack of a level playing field of the proposed Directive and, in particular, about the lack of proportionality of some measures imposed upon insurance intermediaries. BIPAR's main concerns with the recast proposal Some information requirements would polarize the market (Articles 3.5 and 16a) Unnecessary and unlevel requirements re remuneration disclosure (Article 17) No level playing field between declared intermediaries and registered intermediaries (Article 4) Amended definition of tied intermediary adding confusion re the status and activities of insurance agents in the EU (Article 2.8) Best interest requirement will create legal uncertainty (Article 15) Lack of clarity re freedom to provide services and freedom of establishment (Articles 5, 6 and 7) Chapter VII on additional customer protection requirements in relation to insurance investment products: its ban on remuneration from providers ignores the market reality of the insurance market and will deprive the weakest consumer from any form of advice. No grandfathering clause (Recitals 1/15 deletion of IMD I Article 5) No clear definition of the geographical scope (Article 1) Scope: Lack of clarity regarding comparison websites (Article 2.3) At the Parliament and at the Council The proposal is now being discussed by the two EU legislators, the EP and the Council of the EU. BIPAR and representatives of its national associations are meeting members of the EP and of the Council regularly, defending BIPAR's views on this key dossier. European Parliament's Report On 26 February 2014 the EP adopted in plenary its Report (i.e. its own version of the text) on the Commission s proposal (Rapporteur MEP Werner Langen). Werner Langen What are the key changes made by the EP report to the IMD II proposal? - Wide and clear scope - No disclosure at the point of registration of whether intermediaries act on behalf of the insurer or the client and whether they give advice - More clarity on cross-border activities (FOS/FOE) - Requirement of 200 hours over 5 years of continuous professional development - Life/Non-life: disclosure of source and nature of intermediaries remuneration/disclosure whether there is variable remuneration of insurers employees - Life-Non life: disclosure of quantitative element regarding source of intermediaries remuneration/insurers employees variable remuneration in case of conflict of interest - Introduction of a Product information document (PID) - Ban of tying practices remains but this shall not prevent the mediation of insurance products with different levels of insurance coverage or multi insurance risk policies. - Insurance-based investment products: alignment of IMD II with MiFID II - In case of independent advice on insurancebased investment products: no ban of commission. Possibility for Member States to prohibit or restrict the offer or acceptance of fees, commissions or non-monetary benefits from third parties in relation to the provision of insurance advice. 8

10 BIPAR's position on EP report BIPAR believes that consumers should enjoy protection irrespective of the distribution channel they choose to buy their insurance products. BIPAR, therefore, supports the scope of the proposal as amended by the EP report that ensures adequate consumer protection. BIPAR also supports the clarity that the EP report introduces regarding cross-border activities by insurance intermediaries. This will increase legal certainty for intermediaries, insurers and customers. BIPAR supports the clear disclosure of meaningful information at contract level that will help consumers to make informed decisions when purchasing insurance products. BIPAR is in favour of transparency about the nature of the remuneration of the intermediary or insurer and promotes that consumers can ask for more details. BIPAR is, however, not convinced about the usefulness of the disclosure of additional quantitative elements. For non-life insurance, such as motor and household insurance, such disclosures are not relevant. They will result in distortion and weakening of competition of which ultimately consumers will be the victim. It will also lead to a distraction of consumers away from the relevant information regarding his or her insurance policy such as levels of coverage, levels of service, policy exclusions or total premium. BIPAR is not against the principle of Continuous Professional Development but believes that a European Directive should not require a set number of hours of CPD and that this detailed matter should be left to the Member States. Requiring 200 hours in a 5 year period would be much more specific than what we find in MiFID II or in the Mortgage Directive text or any other sector text at European level. BIPAR welcomes the EP significant recognition of the differences that exist between non-life/pure life insurance and insurance based investment products. BIPAR welcomes the fact that the EP recognises that the specificities of the insurance market have to be taken into account in this process of alignment. In this respect, BIPAR noted the important signal from the EP that clearly voted against the ban on commissions in case of independent advice. Council's General Approach - Next steps Before the trilogue (Commission, EP and Council) can start and agree on a final text, it is now up to the Council to decide on its own version of the IMD II proposal (so-called Council general approach ). On 19 th May the Greek Presidency of the Council organised its first meeting with representatives of the 28 EU Member States on the IMD II proposal. In preparation of this meeting, it sent its draft version of the IMD II proposal to all EU Member States. Council's draft general approach - The scope is in line with the Commission proposal - Ancillary intermediaries do not have to comply with all information requirements - The definition of freedom of services and of establishment is not mentioned in the text - The training requirements are different from the ones proposed by the Commission and the Parliament. CPD requirements: 50 hours over 5 years. An annex with indicative training subjects is included. - There is no remuneration disclosure but agreed targets need to be disclosed - Cross-selling rules are in line with the MIFID II ones - Provisions regarding insurance-based investment products are comparable to the IMD 1.5 (see page 10) and MiFID II. There is no ban of commission or fees for independent advice. Member States were invited to send their written comments on the draft Council text to the Greek Presidency. Further meetings should then be organised by the Greek Presidency by July or later by the Italian Presidency until the Council agrees on its general approach on the IMD II proposal. Together with its member associations, BIPAR informed the Council on its views on its draft general approach on the IMD II recast proposal and will continue to do so until the text is adopted. 9

11 Distribution and direct sales of insurance-based investment products- IMD I amended by MiFID II: "IMD 1.5" MiFID II was adopted in May It led to the inclusion in the EU legislation of specific rules on conflicts of interest and on assessment of suitability and appropriateness regarding sales of investment products. In order to ensure a consistent level of protection for retail clients of financial products and a level playing field for financial institutions, the EU colegislators wanted the EU legislation to also include similar provisions for the sales of insurance based investment products. The aim was also to reach a legislative solution that would preserve the legitimate specificities of each sector and ensure a consistent regulatory approach. These points were crucial for BIPAR. The IMD II proposal includes in its Chapter VII on insurance-based investment products similar provisions to the MiFID II ones. However, while waiting for the IMD II to be adopted and in order not to create any legal gaps during this period, the European co-legislators, following an EIOPA proposal, decided to amend the IMD I via the MiFID II and to include in it specific rules governing the distribution of insurance-based investment products: this is the so-called IMD 1.5 that was adopted at the same time as the MiFID II. Once adopted, the IMD II will repeal the IMD 1.5. Its specific provisions on the sale or distribution of insurance-based investment products will be introduced (amended or not) in the Chapter VII of the IMD II. IMD 1.5 Main changes Article 91 of the MiFID II amends Directive 2002/92/EC (IMD I) and introduces: - A modification of Article 2 introducing a definition of insurance-based investment products - A new Chapter III A on additional requirements for insurance-based investment products. This means that in addition to the IMD I provisions, intermediaries distributing insurance-based investment products, will have to comply with the new requirements introduced by Chapter III A on additional requirements for insurance-based investment products. The new requirements also apply to insurers when selling insurance-based investment products. What new requirements? Conflicts of interest and their prevention Member States shall require insurance intermediaries and insurance undertakings to take all appropriate steps to identify conflicts of interest between themselves that arise in the course of carrying out any insurance distribution activities. Where organisational or administrative arrangements made by the insurance intermediary or insurance undertaking to manage conflicts of interest are not sufficient to ensure that risks of damage to customer's interests will be prevented, the insurance intermediary or insurance undertaking shall clearly disclose to the customer the general nature and/or sources of conflicts of interest before undertaking business on its behalf. These rules do not include a ban on commissions or fees but the Member States may decide to go beyond the rules and to ban commissions or fees. General principles and information to customers Member States shall ensure that, when carrying out insurance mediation distribution activities, an insurance intermediary or insurance undertaking acts honestly, fairly and professionally in accordance with the best interests of its customers. Delegated acts The European Commission shall be empowered to adopt delegated acts on conflict of interest. EIOPA is consulting the relevant stakeholders on the issue (see page 33) and is expected to issue its opinion by the end of Next steps The publication of the IMD I as amended by the MiFID II (or IMD 1.5) in the Official Journal of the EU is imminent. It will enter into force 20 days after the publication. Member States will then have two years to adopt and publish their national legislation. 10

12 Markets in Financial Instruments Directive (MiFID II) Introduced in 2007, MiFID I aimed at enhancing consumer protection and making it easier for investment firms to carry out cross-border business. Many practitioners affiliated to BIPAR provide investment advice and must therefore comply with the MiFID conduct rules. As these are often SME-type investment intermediaries, only allowed to provide investment advice, MiFID introduced an opt-out regime, which is a lighter set of rules. Since MiIFD I, however, financial markets have changed and new trading venues and products have come onto the scene and technological developments such as high frequency trading have altered the landscape. Drawing lessons from the 2008 financial crisis, the G20 agreed at the 2009 Pittsburgh summit on the need to improve the transparency and oversight of less regulated markets - including derivatives markets - and to address the issue of excessive price volatility in commodity derivatives markets. In response to this, on 20 October 2011, the European Commission tabled proposals to revise MiFID, through a Directive and a Regulation, aiming to make financial markets more efficient, resilient and transparent, and to strengthen investor protection. The new framework also wants to increase the supervisory powers of regulators and provide clear operating rules for all trading activities. On 14 January 2014, the European Parliament, European Commission and the Council of the EU reached agreement on MiFID II in trilogue. The Parliament confirmed this agreement on 15 April. The Council officially adopted the text on 13 May. The publication in the Official Journal of the EU is imminent. MiFID II - Focus on intermediaries Opt-out provisions - Article 3 Firms that are regulated at national level and that do not hold clients money and only receive and transmit orders and/or provide advice, can still be exempt by Member States from the MiFID II regime. Certain MiFID II requirements however have to be applied in an analogous way to optout firms. These relate to conditions and procedures for authorisation and ongoing supervision, conduct of business requirements (parts of Articles 24 and 25, including the ban on commission for independent advice), organisational requirements (e.g. the requirement to keep records). Opt-out firms have to be covered by an investors-compensation scheme (but Member States may choose to have PII cover instead). Opt-out firms do not benefit from FOS or FOE. Article 23 conflicts of interest Firms have to take all appropriate steps to identify and to prevent or manage conflicts of interest between themselves, including their managers, employees and tied agents, or any person directly or indirectly linked to them by control and their clients or between one client and another that arise in the course of providing any investment and ancillary services, or combinations thereof, including those caused by the receipt of inducements from third parties or by the firm s own remuneration and other incentive structures. In case prevention of conflicts of interest does not ensure that risks of damage to client interests will be prevented, the firm has to clearly disclose the general nature and/or sources of conflicts of interest and the steps taken to mitigate those risks before undertaking business. Delegated acts will define the steps to identify, prevent, manage and disclose conflicts of interest and delegated acts will also establish appropriate criteria for determining the types of conflict of interest whose existence may damage the interests of clients. 11

13 Article 24 how to behave, information to give, independent advice, cross-selling Firms have to act honestly, fairly and professionally in accordance with the best interests of the clients. All information to clients has to be fair, clear and not misleading and manufacturers have to design products for an identified target market, have a compatible distribution strategy and take reasonable steps to ensure that the instrument is distributed to this target market. Firms have to understand the products they offer or recommend, assess the compatibility of the financial instruments with the needs of the clients, also taking account of the identified target market of end clients and ensure that financial instruments are only offered or recommended when this is in the interest of the client. Information has to be given about: a) the firm and its services; when investment advice is provided, the investment firm shall, in good time before investment advice is provided, inform the client: - whether the advice is provided on an independent basis or not; - whether it is based on a broad or more restricted analysis of types of instruments (close links-concept!); - whether it will provide the client with a periodic suitability assessment b) financial instruments and proposed investment strategies (including information on the risks + if the target market is professional or retail) c) execution venues d) all costs and associated charges (re. investment or ancillary services) which must include the cost of advice, where relevant, the cost of the financial instrument recommended or marketed and how the client may pay for it, also encompassing any third party payments (this info is to be aggregated and upon request itemised). Where applicable, such information shall be provided to the client on a regular basis, at least annually, during the life of the investment. The info has to be provided in a comprehensible form (Member States may allow a standardised format). Where a firm informs the client that investment advice is provided on an independent basis, the firm: - shall assess a sufficient range of instruments available on the market (diverse with regard to the type and issuers or product providers, not limited to products from the firm itself/entities with close links) - shall not accept and retain fees, commissions or any monetary or non-monetary benefits paid or provided by any third party or a person acting on behalf of a third party in relation to the provision of the service to clients (minor non-monetary benefits are allowed). In general, firms are not seen as fulfilling the conflict of interest rules or the requirement to act honestly etc. where they pay or are paid any remuneration to or by any party except the client (or a person on behalf of the client), unless this: - is designed to enhance the quality of the relevant service to the client; and - does not impair compliance with the firm's duty to act honestly/ fairly/ professionally/ in accordance with the best interest of its clients. There also has to be a clear disclosure of the existence, nature and amount of payments and benefits or, where the amount cannot be ascertained, the method of calculating, prior to the provision of the service. Where applicable, the firm shall also inform the client on mechanisms for transferring this remuneration to the client. Remuneration or the assessment of the performance of staff should not be done in a way that conflicts with the duty to act in the best interests of its clients (in particular no incentives should be given to recommend something when a different instrument that would better meet that client s needs could be offered). Regarding cross-sales, when an investment service is offered together with another service /product as part of a package or as a condition for the same agreement or package, the firm shall inform the client whether it is possible to buy the different components separately and shall provide for a separate evidence of the costs and charges of each 12

14 component. ESMA, together with EBA and EIOPA, will develop guidelines for the assessment and the supervision of cross-selling practices. Member States may, in exceptional cases, impose additional requirements on investment firms in respect of the matters covered by Article 24. Such requirements must be objectively justified and proportionate so as to address specific risks to investor protection or to market integrity which are of particular importance in the circumstances of the market structure of that Member State. Such measures have to be notified and justified to the Commission and the Commission has to give its opinion on the proportionality and justification and shall make any additional national requirements public. The text foresees delegated acts to ensure that investment firms comply with the principles set out in Article 24, including the conditions with which the information must comply in order to be fair, clear and not misleading, the details about content and format of information to clients in relation to client categorisation, investment firms and their services, financial instruments, costs and charges, the criteria for the assessment of a range of financial instruments available on the market, the criteria to assess compliance of firms receiving inducements with the obligation to act honestly, fairly and professionally in accordance with the best interest of the client. Article 25 - Knowledge and competence, suitability, appropriateness Member States have to publish the criteria used to assess knowledge and competence of firms. Firms have to ensure and -upon request- demonstrate that natural persons giving investment advice or information possess the necessary knowledge and competence. The suitability test implies that firms have to obtain the necessary information regarding the client's knowledge and experience, his financial situation including his ability to bear losses, and his investment objectives including his risk tolerance. A statement on suitability will have to be given in a durable medium. In case no advice is given, the appropriateness test is required, implying the firm asks the client to provide information regarding his knowledge and experience in the investment field relevant to the specific type of product or service offered or demanded. In case the firms considers a product not to be appropriate, it has to warn the (potential) client which may be done in a standardised format. Firms have to establish a record (i.e. document(s) agreed between the firm and the client that set out the rights and obligations of the parties, and the other terms on which the firm will provide services to the client) and have to provide the client with adequate reports on the service (in a durable medium). These reports shall include periodic communications to clients, taking into account the type/ complexity of financial instruments involved and the nature of the service provided to the client and shall include, where applicable, the costs associated with the transactions and services undertaken on behalf of the client. Insurance-based investment products (see also page 15) The European Parliament had proposed an extension of the scope of MiFID to insurance undertakings and intermediaries for insurancebased investment products. This issue was debated extensively in trilogue and the final solution is that MiFID II does not directly deal with these instruments but that it makes changes to the IMD I in order to cover the products. Unlike originally proposed by the Parliament, this does not include the ban on commission for independent advice but broadly speaking is limited to the conflict of interest rules and the requirement to act honestly, fairly, etc. and to provide fair and clear information. The text does state that Member States may ban commissions in relation to the distribution of insurance-based investment products to customers. This solution for insurance-based investment products in IMD I (also called IMD 1.5 ) will most probably still evolve during the discussions of IMD II (where Chapter VII of the Commission proposal is dedicated to insurance based investment products) and it is therefore likely to be a temporary solution. Next steps and BIPAR's action The Directive will enter into force 20 days after publication in the Official Journal of the EU and Member States then have two years to adopt and publish their national legislation, i.e. by Members States shall apply those measures from 30 months after the entry into force. 56 Months (i.e. 4 years and 8 months) after the entry into force of MiFID II, the Commission -after 13

15 consulting ESMA- has to present a report to the European Parliament and the Council on the impact of the requirement to disclose any fees, commissions and non-monetary benefits in connection with the provision of an investment service or ancillary service to the client, including its impact on the proper functioning of the internal market on cross-border investment advice. On 23 April, the Commission sent a mandate to ESMA for advice on delegated acts. These delegated acts should enter into application 30 months after the entry into force of the Directive. BIPAR will respond to the public consultations that ESMA will launch following the call for advice. ESMA guidelines on remuneration under MiFID On 17 September 2012, ESMA, the European Securities and Markets Authority, published draft guidelines and an accompanying consultation on remuneration policies and practices under the MiFID. The final guidelines were published on 11 June ESMA comments that over the past decade, there have been a number of mis-selling cases and that a key factor has been the presence of financial incentive schemes for sales staff that do not take account of the clients best interests. ESMA guidelines should tackle this and help to strengthen investor protection and to achieve the same level of protection for Europe s retail investors no matter where they invest. BIPAR stressed its concern regarding the proportionality of the guidelines and their value in court, expressing the hope that the attention and reference to proportionality would be reflected and clarified in the final guidelines. ESMA acknowledges that proportionality is to be taken into account, and that various stakeholders called for this principle to be more clearly reflected, but has not changed the wording of the final guidelines in this respect. ESMA opinion on practices for firms selling complex products On 7 February 2014, ESMA published an Opinion on practices to be observed by investment firms when selling complex financial products to investors. The Opinion aims to remind national supervisors and investment firms about the importance of requirements governing selling practices under MiFID and sets out ESMA s minimum expectations with respect to the conduct of firms when selling complex products to retail investors. Jean-Paul Servais Chairman of ESMA Investor Protection and Intermediaries Standing Committee ESMA agrees that complexity is relative. It states that products should generally be considered as complex when they are e.g. derivatives, or have a fixed investment term of a number of years with barriers to exit and ESMA also lists some examples of products (e.g. asset backed securities or the vast majority of structured products). The areas covered by the Opinion relate to: - Firms organisation and internal controls; - The assessment of the suitability or appropriateness of certain products; - Disclosures and communications in relation to products; and - Compliance monitoring of the sales functions. On the same date and related to this, ESMA also issued an investor warning in order to raise awareness about the risks arising from investing in complex products. 14

16 Regulation on key information documents for investment products (PRIIPs) On 3 July 2012, the European Commission published a proposal for a Regulation on key information documents for investment products as part of the so-called consumer package, together with IMD II and UCITS V. The Commission s aim was to create a standardised, easy to understand Key Information Document (KID) for investment products that include all types of investment funds, insurance-based investments and retail structured products, in addition to private pensions". The legal instrument of the Regulation was chosen to ensure a true harmonisation of the new rules in the EU. Contrary to a Directive that leaves the national authorities the choice of form and methods of implementation, a Regulation is binding in its entirety and directly applicable in all Member States. On 1 April 2014, the European Parliament, the Council of the EU and the Commission concluded a deal on the PRIPs proposal in trilogue. Key issues for intermediaries BIPAR has, from the outset, agreed that for all products which include an investment risk, specific, proportional and relevant pre-contractual information should be available. It could therefore support the rationale behind the European Commission s proposal, that is to say to have a key information document for the consumer, which is produced by one party (if not, there would be legal uncertainty) - the product manufacturer (who is best placed for this) - which deals with the investment product and which can be handed over to the client by the intermediary / person selling (reflected in the part of the Regulation regarding the provision of the KID to the client). BIPAR wanted clear confirmation however that only the manufacturer would be responsible for the KID and throughout the legislative process, BIPAR has opposed any additions to the KID with regard to information on the person selling the product, which is already adequately addressed in the specific regulation such as MiFID and IMD. Scope of the Regulation The final text distinguishes 3 categories of products that fall under the scope of the Regulation: Packaged retail investment products (PRIPs): products where, regardless of the legal form of the investment, the amount repayable to the investor is subject to fluctuations because of exposure to reference values or to the performance of one or more assets which are not directly purchased by the investor), Insurance-based investment products: products which offer a maturity or surrender value and where that maturity or surrender value is wholly or partially exposed, directly or indirectly, to market fluctuations, Packaged retail and insurance-based investment products (PRIIPs): a product that falls in the definitions of both a PRIP and of an insurance-based investment product. Excluded from the scope are: - non-life insurance products, - life insurance contracts where the benefits under the contract are payable only on death or in respect of incapacity due to injury, sickness or infirmity, - pensions (where the primary purpose is to provide the investor with an income in retirement and which entitle the investor to certain benefits + officially recognised occupational pension schemes + individual pension products for which a financial contribution from the employer is required by national law and where there is no choice on product or provider by employer or employee), - simple deposits, - certain securities. For pensions, within 4 years after entry into force of the Regulation, the Commission shall investigate if they should propose new legislation regarding disclosure of product information for them or whether they should fall under the scope of the PRIPs Regulation by then. The Regulation only aims at the protection of retail investors. Responsibility for drawing up and provision of the KID The product manufacturer draws up the KID as he is in the best position to know the product and therefore should be responsible for the KID. The manufacturer is defined as any entity who manufactures a PRIIP and any entity that makes 15

17 changes to an existing PRIIP including, but not limited to, altering its risk and reward profile or the costs associated with an investment in the PRIIP. The person advising or selling has to provide the KID to the investor in good time before the latter is bound (special conditions are foreseen in case of distance sales). The person selling is defined as a person offering or concluding the PRIIP contracts with a retail investor. As to the means of providing the KID, this has to be done for free and the default option is on paper but under certain conditions, it can be done via another durable medium or via a website as well. Member States can require an ex ante notification of the KID by the manufacturer or the seller to the competent authority. Content of the Key Information Document The KID is maximum 3 pages long, has to be clear and understandable/readable and is intended to provide information on the risks, costs, potential gains and losses of the product and help comparison with other products. It contains information on: - the manufacturer and supervisor; - if needed a comprehension alert warning the investor that the product is not simple; - the nature and main features of the product (type, objectives, description of the consumer type, details of insurance benefits if any, term of the PRIIP); - the risk-reward profile; - the consequences of default of the manufacturer; - the costs (summary indicators of costs and total aggregate costs) - reference to distribution costs; - conditions regarding the holding period and early takeout of money; - how to complain; - existence of additional information documents to be provided by the manufacturer. Details will be specified through regulatory technical standards (including on the methodology of calculation of costs) by the ESAs. The ESAs need to take the variety of PRIIPs into account in doing so. Annex with information on person selling During the legislative process, there were calls for involving persons selling and including information on persons selling in the KID or an annex. The final text does not introduce anything of the kind but in the part of the KID that deals with costs, the KID has to include a clear indication that persons selling/ advising/distributing will provide information detailing any cost of distribution that is not already included in the KID section on costs. This is needed to make the investor understand the cumulative effect of these aggregate costs on the return of the investment. Complaints, redress, cooperation The final text contains a reference to persons advising or selling regarding the establishment of appropriate procedures and arrangements that ensure that investors have an effective way of submitting a complaint against the manufacturer; that they receive a substantive reply in a timely and proper manner and that procedures are also available in case of cross-border disputes. Intervention powers for EIOPA The final text foresees - under cumulative conditions - intervention powers for EIOPA regarding insurance-based investment products. This includes temporary intervention powers (prohibit or restrict products or activities). Intervention can even take place before the product has been marketed or sold to clients. Similar powers as the ones for EIOPA are given to the national competent authorities. The text foresees delegated acts on the criteria and factors which EIOPA or the competent authorities have to take into account when deciding on significant investor protection concerns or threats to the markets/financial system. Next steps The Regulation will enter into force 20 days after publication in the Official Journal and applies 2 years after entry into force. Apart from the technical standards to be developed regarding the KID, the Regulation also requires the Commission to investigate if online fund calculators exist everywhere in the EU and whether they provide for reliable and accurate computations of aggregate costs and fees for all products within the scope of the Regulation. The Commission has to do such a survey on national calculators 4 years after entry into force of the Regulation. If calculators do not exist everywhere/are not for free/ are not working satisfactorily, the Commission has to assess the feasibility of having the ESAs develop regulatory technical standards to create European level tools. 16

18 Revision of the Occupational Pension Funds Directive On 27 March 2014, the European Commission published a proposal for a review of the EU Institutions for Occupational Retirement Provision (IORP) Directive. It aims at: ensuring the soundness of occupational pensions and better protect pension scheme members and beneficiaries (through e.g. new governance requirements, remuneration rules and transparency rules for pension fund managers) better informing pension scheme members and beneficiaries. The proposal introduces a Pension Benefit Statement, standardised at EU level and providing simple and clear information about the individual pension entitlements promoting cross-border activity so that occupational pension funds and employers can make full use of the benefits of the single market helping long-term investment by encouraging occupational pension funds to invest long-term in growth-, environment- and employmentenhancing economic activities and changing the existing provisions on investment restrictions. This proposal does not contain a review of the existing quantitative solvency rules for occupational pension funds. According to BIPAR, this may lead to an unlevel regulatory playing field between insurers and pension funds operating in the same markets and offering similar services, creating different levels of protection for beneficiaries. supervision should exist, taking into consideration that there must be room for the application of the principle of proportionality and adaptation to the specificities of the sector. BIPAR also stressed the need to ensure that pensions can be issued cross-border; however, pointing out that cross-border provision of pensions, especially occupational pensions, will not be achieved as long as the regulation in several Member States is fragmented. These differences extend across the likes of tax, employment law and social aspects. With regard to the introduction of a KID-like document, BIPAR supported this, when adapted to the specificities of the pension scheme, adding that participants are entitled to the information required to have a good insight into their pension rights and expected pension income at the retirement date. This requires annual pension information. Next steps The IORP proposal will now have to be discussed, amended and adopted by the co-legislators: the European Parliament and the Council. It is however unlikely that the Parliament will start its discussions before the elections in May. BIPAR will actively monitor the legislative procedure, focusing on the need for a level playing field between market players. BIPAR's action In preparation of this revision, BIPAR has provided feedback to the Commission s Green Paper Towards adequate, sustainable and safe pension systems. BIPAR focused on the need for a level playing field between market players, stating that it is important to protect all members and beneficiaries of all types of pension schemes and that it should make no difference for the members and beneficiaries as to what kind of pension schemes they are part of. An activity-based approach should be taken, where in all kinds of pension schemes the same high standards of governance are applied to the institutions that operate these schemes and the same rules of Occupational pension funds or Institutions for Occupational Retirement Provision (IORPs) are financial institutions which manage collective retirement schemes for employers, in order to provide retirement benefits to their employees (the scheme members and beneficiaries). Occupational pensions, which include an employer contribution, are known as the "second pillar" of pension systems, the "first pillar" being state-based social security pensions, and the "third pillar" being noncompulsory private pension savings by individuals. There are some 125,000 such funds operating across the EU. They hold assets worth 2.5 trillion on behalf of around 75 million Europeans, which represents 20% of the EU s working-age population. 17

19 Directive on credit agreements for consumers relating to residential immovable property On 31 March 2011, the European Commission published a proposal for a Directive on credit agreements relating to residential property. The aim of the Commission s proposal was to create a responsible, efficient, healthy and competitive pan- European market that works to the benefit of consumers. It should also promote customer mobility, cross-border activity of creditors and intermediaries, and create a level playing field for all actors involved. The focus was to ensure that all consumers purchasing a property or taking out a loan secured by their home are adequately informed about the possible risks and that all institutions engaging in these activities conduct their business in a responsible manner. The Directive was amended, the title slightly changed and adopted by the co-legislators, the European Parliament and the Council of the EU. It was published in the Official Journal of the EU of 28 February It will have to be transposed by the Member States into national law by 21 March BIPAR's action BIPAR, together with its Working Group on Credit Intermediaries, closely followed this dossier from the preparatory phase throughout the Parliamentary and Council discussions, meeting the rapporteurs and shadow rapporteurs on various occasions in Parliament, the successive Council Presidencies and the drafting team from the Commission. In its comments, BIPAR focused on the level playing field (to ensure that there is one between creditors and intermediaries), on advice (to ensure that it is clear what is meant by advice and to ensure that the related requirements to advice are not only applicable to non-tied intermediaries), on the coherence of the proposed Directive with other instruments, in particular, the IMD. BIPAR also warned against too far-reaching implementation measures (the proposal contained many delegated acts). These activities have led to positive changes and to a more balanced final text. Final text of the Directive The following parts of the Directive are of particular importance to intermediaries: Level of harmonisation and coherence with other legal instruments This is a minimum harmonisation Directive, meaning that Member States can go further in their national implementation of the text in order to protect consumers. However, two parts of the Directive are maximum harmonisation, where Member States cannot go beyond, i.e. the standard pre-contractual information through the European Standardised Information Sheet (ESIS) and the standard for the calculation of the Annual Percentage Rate of Charge (APRC). The Directive aims to be in line with the Consumer Credit Directive as well as with the IMD and MiFID. For ancillary services, such as insurance, appropriate knowledge and competence in relation to that ancillary service, shall be required. Requirements for intermediaries Credit intermediaries (and creditors) will be required to respect conduct of business rules and rules regarding knowledge and competence of staff, give general pre-contractual information as well as personalised pre-contractual information through the ESIS and give adequate explanations regarding the proposed agreement(s). Credit intermediaries have a separate set of extra information requirements to be given in good time before carrying out intermediation activities, including whether they offer advisory services, the fee (or method for its calculation), where applicable, the existence and where known, the amount of commissions or other inducements (if not yet known, reference is to be made to the ESIS). At the consumer s request, non-tied intermediaries have to give the variation in levels of commission (the consumer is to be informed of the right to ask). In case of a combination of fee and commission, they need to mention whether they are offset. The fee is communicated to the creditor for the calculation of the APRC. 18

20 Advice Creditors and intermediaries have to explicitly inform the consumer if they provide or can provide advisory services. Before the advice is provided, extra information has to be provided on the product range that is advised on and on the fee (or method of calculation) - if applicable. Moreover, in case of advice, creditors and intermediaries: - have to obtain the necessary information from the consumer regarding his personal and financial situation, preferences and objectives (suitability), based on up-to-date information and taking into account reasonable assumptions as to risks over the term of the proposed agreement; - have to act in the best interests of the consumer - have to give a record of the recommendation. Creditors and tied intermediaries have to consider a sufficiently large number of agreements in their range to recommend a suitable or several suitable agreements and non-tied intermediaries have to consider a sufficiently large number of agreements in the market to recommend a suitable or several suitable agreements Member States may prohibit the use of the word advice or advisor or similar terms for creditors and tied intermediaries and they shall make independent advice/advisor conditional on: considering a sufficiently large number of agreements available on the market and where the number of creditors considered is less than a majority of the market, not be remunerated for those advisory services by one or more creditors. Member States may impose more stringent requirements in relation to the use of the term "independent, including a ban on receiving remuneration from a creditor. Member States shall ensure that advisory services are only provided by creditors, credit intermediaries or appointed representatives, although exceptions are possible. Other rules The Directive foresees rules regarding the admission of intermediaries (subject to PI cover, good repute and appropriate knowledge and competence regarding credit agreements, according to an Annex of the Directive), crossborder activity and supervision. The Directive regulates cross-selling: Member States shall allow bundling but prohibit tying. There is however a specific provision regarding crosssales with insurance: Member States may allow creditors to require the consumer to hold a relevant insurance policy related to the credit agreement but the creditor has to accept the insurance policy from a supplier different to his preferred supplier where such policy has a level of guarantee equivalent to the one he has proposed. Review and grandfathering A review of the Directive is scheduled 5 years after entry into force (21 March 2019). This review shall consider the effectiveness and appropriateness of the provisions on consumers and the internal market and will include, inter alia, an analysis of other pre-contractual disclosures and on crossborder business by intermediaries and creditors. Credit intermediaries who are active but have not already been admitted in their Member State, may continue to carry out their activities until 21 March 2017 at the latest and they can in that case only perform their activities in their home Member State (unless they satisfy the rules of the host Member State). In general there is a 3-year transition period (until 21 March 2017) for creditors, intermediaries and appointed representatives already active, to comply with the national law transposing the Directive. EBA consultation on PI cover EBA, the European Banking Authority, launched a public consultation on a draft Regulatory Technical Standard on the minimum monetary amount of the professional indemnity insurance or comparable guarantee for mortgage credit intermediaries. In its response based on contributions of its member associations, BIPAR called for a tailored approach and flexibility for Member States. Next steps BIPAR will monitor the national implementation and level 2 measures prepared and taken in relation to this dossier. 19

21 Solvency II and Omnibus II Directives - Insurance intermediaries' issues Solvency II Directive The Solvency II Directive bundles the third generation of Insurance Directives and aims at providing a much more comprehensive framework for risk management designed around three pillars: Pillar One: Modelling of risk and capital adequacy Pillar Two: Creation of management practices that reduce risk Pillar Three: Disclosure and reporting of risk The Level 1 Framework Directive Solvency II was adopted on 10 November It sets out the overarching principles and includes implementing powers for detailed rules at Level 2, i.e. implementing measures and technical standards. The implementing measures are expected to be proposed by the Commission in the near future, now that the Omnibus II Directive has entered into force. Omnibus II Directive Omnibus II amends the Prospectus Directive and the Solvency II Directive, bringing them into line with the EU Lisbon Treaty and to take account of the EU new supervisory structure. The Omnibus II Directive was adopted by the EP Plenary on 11 March 2014 and by the Council on 14 April It was published in the Official Journal on 22 May 2014 and enters into force the day after its publication in the Official Journal (and not 20 days after publication, as in most cases). Omnibus also sets the application date for Solvency II: this is now set for 1 January 2016, in line with the Commission's proposal of 2 October 2013 postponing the application date of Solvency II. Solvency II Directive and the general impact on intermediaries Solvency II is targeted at insurance and reinsurance undertakings but will have implications for insurance intermediaries. Indeed, intermediaries will be required to provide an increased information and reporting flow to insurers (because the insurers themselves will need more accurate data for their supervisors) and insurers will have to impose new or stricter requirements to those service providers to whom they outsource certain activities and, more in particular, activities which are considered as critical and important. BIPAR and its Working Party on Solvency II have worked on this dossier and taken part in various stakeholder consultations. BIPAR also continues to monitor closely issues related to the outsourcing by insurers of critical or important functions. An intermediary who has an underwriting authority from an insurer is, for example, considered as a service provider of an outsourced important insurer s function. BIPAR wants to ensure that intermediary activities falling under the IMD are not seen as outsourcing under Solvency II. BIPAR believes that there is a need to have proportionate rules for the limited and well defined activity of intermediaries with a binding authority (that may provide limited claims settling authority). In this respect, EIOPA published guidelines on how to proceed in the interim phase leading up to Solvency II, covering the systems of governance, the forward-looking assessment of undertakings own risk (based on ORSA principles), the submission of information and the preapplication for internal models. BIPAR responded to the consultation on these guidelines. The purpose of the guidelines is to support both national supervisors and undertakings in their preparation for the Solvency II requirements and national competent authorities had to ensure that the guidelines are put in place from 1 January 2014 and by the end of February following each relevant year (the first being by 28 February 2015), they have to send EIOPA a progress report. With regard to intermediaries and outsourcing, the guidelines state that when an insurance intermediary, who is not an employee of the undertaking, is given authority to underwrite business or settle claims in the name and on account of an insurance undertaking, the undertaking ensures that the activity of this intermediary is subject to the outsourcing requirements. The explanatory text clarifies that the typical intermediation activities of an insurance intermediary, i.e. "introducing, proposing or 20

22 carrying out other preparatory work for the conclusion of insurance contracts, or concluding such contracts, or assisting in the administration and performance of such contracts", in particular in the event of a claim, as set out in the IMD, are not subject to the outsourcing requirements. Level 3 Further level 3 supervisory standards will also be issued. These are supervisory standards and guidance and interpretative communications produced by EIOPA for national supervisors to ensure that the rules are consistently implemented across Member States. Next steps BIPAR will follow up and provide feedback in the upcoming level 2 and 3 work. Pools and ad-hoc co-(re)insurance agreements on the subscription market On 8 February 2013, the consultancy firm Ernst & Young published a study on co-(re)insurance pools and ad-hoc co-(re)insurance agreements on the subscription market. The study provides an overview of co(re)insurance pools after the adoption of the latest BER 1 and ad-hoc co(re)insurance agreements on the subscription market as well as an analysis of similarities and differences between co(re)insurance pools and adhoc co(re)insurance agreements on the subscription market. The report also takes a closer look at market practices concerning ad-hoc co(re)insurance agreements following up on the Commission s Business Insurance Sector Inquiry (BISI, published in 2007). The study states that "there are uncertainties as to definition, with a risk of mismatch between industry perceptions of pools and the intentions of the BER, which may indicate a need for clarification: these affect both the identification of pools themselves and the definition of the relevant market. There are also questions as to the boundaries of the definition where pool-like arrangements are set up by parties other than insurers, particularly intermediaries, which may warrant study outside the scope of this report". In the context of ad-hoc agreements, Ernst & Young reports that "The BISI report had expressed concern that the identified alignment of premiums among co(re)insurers might arise from agreements or concerted practices between undertakings, which might fail to comply with competition law. The present study did not identify any agreements or concerted practices between undertakings, to align premiums." Finally, the report also refers to the BIPAR high level principles for placement of a risk with multiple insurers, saying that "these principles are generally reported as respected, with the majority of responses being positive as to their application. Respondents in most Member States reported that the application of BIPAR principles is already endorsed by national regulation or market selfregulation in their country commenting that they are well-known, respected and applied." Next steps The Commission sees the study as a first step in the review process of the insurance BER, which expires on 31 March It indicated that it may start consulting in 2015 in order to submit its Report to the Parliament and Council by 31 March The latest BER (Block Exemption Regulation) entered into force in 2010 and narrowed down the exemption to the application of competition rules to 2 types of agreements in the insurance sector, namely agreements on joint compilations, tables and studies and co- (re)insurance pools (common coverage of certain types of risks). 21

23 Taxation Financial Transaction Tax In February 2013, the European Commission issued a proposal for a Directive implementing enhanced cooperation in the area of Financial Transaction Tax (FTT). 11 EU Member States responded to the objective to create a subgroup of Member States willing to engage in the implementation of a FTT (Austria, Belgium, Estonia, France, Germany, Greece, Italy, Portugal, Slovakia, Slovenia and Spain). A rate between 0.01% and 0.1% of the transaction value of equity bonds and of derivative transactions would apply. Insurance contracts, bank savings plans or the issue of public bonds would not be included in the scope. The legality of this proposal has been put into question by the legal services of the Council. They stated in an opinion published in September 2013 that the proposal would exceed the EU s legislative jurisdiction and that there is a different treatment of resident and non-resident financial institutions. The European Commission stated that it is entirely confident that the financial transaction tax is lawful and is ready to answer any questions EU Member States may have. The Taxation Commissioner also declared that, regarding the implementation of the FTT, the European Commission would support a compromise with a more limited remit and that the only red line [ ] is that any loopholes which would jeopardize the main principle of the tax be avoided. The EU Court of Justice dismissed the action on 30 April 2014 because it considered that it was premature to argue against a tax that has not as yet been implemented. It will still be possible to introduce a new action after the entry into force of the tax. Initially, the FTT was supposed to enter into force in January 2014 but these legal challenges have delayed the process. On 6 May 2014, 10 of the 11 Member States which initially agreed on the process declared that the implementation phase will start no later than 1 January Slovenia did not join this declaration. Between now and 2016, the participating countries will focus on the technical aspects of the proposed FTT. VAT treatment of insurance and financial services On 27 November 2007, the European Commission adopted two proposals for a new Directive and a new Regulation with the objective of simplifying and updating the current VAT rules for financial and insurance services. These services are today exempt from VAT but the exemption dates from 1977 and the legislation has not kept abreast of developments since then, despite numerous judgments from the European Court of Justice. With its two proposals, the Commission aimed at creating more legal certainty, flexibility and efficiency for Member States and financial institutions alike by establishing clear definitions of VAT exempt insurance and financial services which correspond to today s market. Another objective of the proposed revision was also to redefine the scope of the VAT exempt insurance and financial services. The proposal for a Regulation that accompanies the Directive expands the definitions of exempt services and would be directly applicable in all Member States. The Commission s original proposal included the possibility for financial suppliers to opt for taxation of their services. The objective was to allow institutions to reduce their exposure to nonrecoverable input tax; in particular in business-tobusiness activities. However, this dossier has not evolved recently as priority was given by the EU institutions to other dossiers such as the Banking Union, the tax fraud dossier and the Financial Transaction Tax. There are no indications that this situation will change in the coming months, and in any case not before the settlement of the new European Parliament and the new European Commission. The Italian Presidency of the Council (July-December 2014) has not listed it as one of its priorities. 22

24 European Insurance Contract Law Under the Europe 2020 strategy, the European Commission is tackling bottlenecks in the Internal Market to create sustainable growth. It believes that opportunities for growth in the insurance sector can arise through cross-border trade, where the potential has not yet been fully exploited and that both the insurance business and insurance users (consumers or business) could benefit from an increase in cross-border trade. In March 2013, the European Commission set up an Expert Group of which BIPAR was a member, tasked with analysing whether differences in the insurance contract laws of the Member States create an obstacle to European cross-border trade in insurance products and which (if any) insurance areas (non-life and life) are likely to be affected by such obstacles. The Expert Group met on a monthly basis in Different classes of insurance were discussed, such as liability, travel, motor and life. Contracts formation, settlement of claims, coverage triggers and mandatory insurance were also discussed. On 27 February 2014 the Expert Group delivered its report. Main findings of the report on European Insurance Contract Law For many life, motor or liability insurance products sold to consumers, insurance companies have to adapt their contracts to the national rules where the policyholder is based. Contract law differences may impact on the supply of insurance products across borders. They increase costs for the cross-border provision of insurance, create legal uncertainty and can make it difficult for consumers and businesses to take out insurance in other Member States. Contract law obstacles are found primarily in the sector of life insurance, as well as areas such as liability and motor insurance. The report finds that problems are less likely to occur in insurance for large risks markets if linked to a trade or certain insurances for bigger companies - such as in the area of transport insurance. Other differences than the ones between national contract laws - influence cross-border insurance business. Some of them are of a factual, economic and social nature, others relate to areas of the law different from contract law, in particular to prudential regulation and taxation. BIPAR welcomed two conclusions in particular of the Expert Group that contract law is only one obstacle to cross-border insurance within the EU, among many more important ones and that insurance products for large risks are already widely distributed on a cross-border basis. Indeed, it believes that the provision of large risk insurance products on a cross-border basis is already occurring without any major obstacles arising from local insurance contract law provisions. Next steps The European Commission will follow up on the report consulting consumers, businesses and the insurance sector on possible solutions which could lead to a formal consultation (Green Paper). Once settled in, the newly elected European Parliament and its Legal Affairs Committee (JURI) could decide to produce an own initiative report to express its position regarding the matter. The European Commission may decide to propose a Regulation on a possible optional European Insurance contract law regime. The Commission said that it will only introduce a new regime if it can be proven to be more beneficial to the free movement of services than the existing national laws. A new optional regime would be conceived as a "2 nd regime" in each Member State, thus providing parties to a contract (the insurer and the consumer) with an option between two regimes of contract law, the national or the European regime. Should a second regime be developed, BIPAR believes that it is crucial that it is truly designed to be distribution channels neutral and does not lead in practice to the exclusion of insurance intermediaries. 23

25 Insurance Guarantee Schemes Insurance Guarantee Schemes (IGS) provide lastresort protection to consumers when insurance companies are unable to fulfil their contractual commitments. They protect people against the risk that claims will not be met if their insurer becomes insolvent. Only a few EU countries have insurance guarantee schemes in place, although there are specific EU Directives for the banking and securities sectors on deposit-guarantee schemes and on investor compensation schemes. To address the regulatory loopholes and inconsistencies in the EU, over the last four years, the European Commission has carried out a review of the adequacy of existing insurance guarantee schemes in order to make an appropriate legislative proposal, like a Directive that would ensure that insurance guarantee schemes exist in all EU Member States and comply with a minimum set of requirements. It consulted the industry, including BIPAR. Until now, the work of the Commission has not covered the failure of insurance intermediaries. The dossier seems to be blocked at European Commission level and the latter is not expected to issue a proposal by the end of Alternative Dispute Resolution ADR schemes, also known as "out-of-court mechanisms", exist in many countries to help consumers involved in disputes which they have been unable to resolve directly with the trader. They have been developed differently across the EU and the status of the decisions adopted by these bodies differs greatly. In May 2013, the Directive on Alternative Dispute Resolution (ADR) and a Regulation on Online Dispute Resolution (ODR) were adopted by the EU legislators. The texts are cross-sector texts and apply to the insurance sector. The Directive concerns all disputes between non-professional consumers and "traders" (for example insurance intermediaries) in the context of the sale of goods or provisions of services. It takes into account the fact that other Directives and Regulations contain rules on ADR. The text states in its recital 19 that "In order to ensure legal certainty, it should be provided that in case of conflict this Directive shall prevail, except where it explicitly provides otherwise". The ADR Directive will ensure the establishment of ADR schemes where none exist today. These will fill current gaps in coverage and ensure that consumers are able to take their disputes to an ADR. In addition, it establishes a common framework for ADR in the EU Member States by setting out common minimum quality principles in order to ensure that all ADR entities are impartial, transparent and efficient. Existing national ADR schemes should be able to continue to operate within the new framework. The ADR system will be supplemented by an ODR mechanism involving the setting up of a European online disputes resolution platform (this will be an interactive website free of charge in all languages of the European Union). As a general rule, the outcome of an ADR procedure should be made available within a period of three months from the date on which the ADR entity has received the complaint file. Regarding the nature (binding or not) of the ADR procedure, the principle is that the parties have the possibility to withdraw from the procedure at any stage if they are dissatisfied with the performance or the operation of the procedure and that they have the choice as to whether or not to agree to or follow the proposed solution (Article 9.2). Next steps Member States will have two years to incorporate the new provisions into their national legislation. BIPAR will monitor this procedure. It will also make sure that the IMD II provisions on ADR are in line with the ADR Directive. 24

26 Environmental Liability Directive The Environmental Liability Directive (ELD) was adopted in 2004 and is the first European legislative instrument built on the "polluter pays" principle. This Directive establishes a common framework for liability, holding operators whose activities have caused environmental damage financially liable for its remediation and those whose activities cause an imminent threat of environmental damage liable to take preventive actions. In the run-up to the adoption of the Directive in 2004, BIPAR's lobbying efforts in coordination with other interested federations, resulted in the final version of the ELD, although not perfect, was acceptable both for the intermediaries clients and from a technical insurance point of view. A gradual approach was adopted towards mandatory financial security. As requested by BIPAR, the Directive did not oblige operators to ensure coverage of their potential liabilities by appropriate financial security products such as insurance. In 2013, the European Parliament also adopted a non-legislative own-initiative report which invited the Commission to explore the possibility of setting up partnership implementation agreements with individual Member States and to examine whether greater participation by local authorities throughout the process of defining environmental policy would be useful. Next steps The European Commission is reviewing the effectiveness of the ELD and Member States reported to the Commission on its transposition and practical application. The publication of the Commission s report to the Parliament and to the Council has been delayed. It should be issued by the end of the year 2014 and following its publication, the revision of the ELD will be under consideration. Natural and man-made catastrophes Between 1980 and 2010, damages caused by floods in Europe were estimated at a staggering 8 billion, making storms the costliest of natural hazards in Europe. Recent floods in Central Europe and in Great Britain illustrate that this issue is more than ever on the agenda. The risk of catastrophes is heterogeneous across Member States, the UK being the most prone to floods and Italy among the Member States most hit by earthquakes. Commission s Green Paper on the insurance of natural and man-made disasters On 16 April 2013, the European Commission published a Green Paper on the insurance of natural and man-made disasters. This document follows a conference hosted by the European Commission on "the prevention and insurance of natural catastrophes" and concerns all types of natural and man-made disasters such as, for instance, industrial accidents. The European Commission's aim was to initiate a debate with relevant stakeholders on this issue and to decide whether or not there is room for action at EU level. BIPAR highlighted the following points in its answer to the consultation on the Green Paper: A mandatory insurance scheme is not the best way to minimise the problem of economic losses due to natural and man-made disasters. It could jeopardise the adaptability and flexibility required by the diversity of industrial activities in the EU. There should be a close cooperation in the sharing of data and information on catastrophe risk. For example, regarding flood maps produced by governments. There is no one size fits all approach to European disaster management solution that would address the challenges of modelling risks locally and globally. 25

27 In April 2014, the Commission also highlighted in a communication that it was preparing initiatives regarding disaster prevention that will be based on good practices and cover themes such as risk communication or data availability, accessibility, sharing and comparability. Parliament s own-initiative report on the insurance of natural and man-made disasters Following the publication of the Green Paper of the European Commission, the European Parliament decided to work on its own-initiative report on this topic and issued a final report in February It states that "natural and man-made disasters need different types of insurance and are covered by two different insurance markets" and invites the European Commission "to guarantee easy access to relevant information, including through comparative statistics, and the Member States to publish clear and precise data to support decisionmaking by consumers, communities and companies when taking out natural catastrophe insurance". This was highlighted by BIPAR in its answer to the Commission s Green Paper. The report does not consider that a "one-size-fitsall" system is workable and that different conditions in the EU Member States mean different products can be offered to customers in a non-mandatory framework. Next steps The European Commission may decide to publish a White Paper (a Commission s proposal for action which usually follows the publication of a Green Paper and may precede the publication at a later stage of a Proposal for a Directive or a Regulation). BIPAR meetings - (from left to right): Paul Carty, Nic De Maesschalck, Juan Ramon Pla, Alessandro de Besi 26

28 Use of gender in insurance On 1 March 2011, the European Court of Justice (ECJ) gave its judgment in the Test-Achats case. The Belgian consumer association, Test- Achats/Test Aankoop, and two individuals had called for the annulment of the Belgian legal provision that transposed the European Directive on equal treatment between men and women in the access to and supply of goods and services. This Directive prohibits in principle gender to be taken into account as a factor for calculating insurance premiums and for benefits for insurance contracts that have been concluded after 21 December A derogation, however, allowed Member States to permit gender differences in premiums and benefits if gender is a determining risk factor that can be substantiated by relevant and accurate actuarial and statistical data. The Court decided that the derogation of the prohibition to take into account gender for calculating premiums was not compatible with the (higher ranking) fundamental right prohibiting discrimination on grounds of sex. The Court further explained that the derogation Member States made use of in order to allow a differentiation between sexes should have been temporary and must therefore be considered to be invalid on the expiration of an appropriate transitional period. Consequently, the Court ruled that, in the insurance services sector, the derogation from the general rule of unisex premiums and benefits is invalid with effect from 21 December This also applies to life insurance. Following the judgment, the European Commission published interpretative guidelines and in the European Parliament, an own initiative report was adopted with regard to the implementation of the Directive by the Member States and the result of the Test-Achats case. Follow-up Commission's consultation The Commission is due to report on the implementation of the Test-Achats ruling in national law and insurance practice in the course of the year, in the context of a more general report on the implementation of the Directive. In preparation of this implementation report, the Commission is currently conducting an informal consultation with stakeholders and also contacted BIPAR in this respect with specific questions regarding insurance and the Test-Achats case. Based on the feedback received from its member associations, BIPAR submitted its response at the end of May to the Commission and will continue to follow up the measures taken by the Commission in the framework of this implementation check. Link to Equal Treatment Directive Similar wording such as the controversial opt-out for insurance is to be found in the Commission's proposed "Directive on implementing the principle of equal treatment between persons irrespective of religion or belief, disability, age or sexual orientation". It states that in the provision of financial services Member States may permit proportionate differences in treatment where, for the product in question, the use of age or disability is a key factor in the assessment of risk-based on relevant and accurate actuarial or statistical data. The "Equal Treatment Directive" has, however, been blocked in the Council for several years already. On 9 December 2013, under the Lithuanian Presidency, the Council took note of a progress report on the Directive. The Lithuanian Presidency brought forward the work on certain issues, including the scope of the Directive (definition of "access"), the concept of discrimination and the division of competences. Certain delegations have maintained general reservations, questioning the need for the Commission s proposal, which they see as infringing on national competence for certain issues and as conflicting with the principles of subsidiarity and proportionality. Further discussion is also needed on a number of other outstanding issues, such as the overall scope (certain Member States being opposed to the inclusion of social protection and education within the scope), anticipatory measures (usually "accessibility") aimed at ensuring equal treatment for persons with disabilities, the implementation calendar, further aspects of the division of competences and subsidiarity and legal certainty in the Directive as a whole. The Commission guidelines following the Test- Achats ruling make reference to this proposed Directive and the concern of the Court ruling spilling over to age or disability. The guidelines state that the Court ruling does not look at such non-gender related factors. Next steps BIPAR will continue to monitor this dossier, as well as developments in the linked Equal Treatment Directive dossier. 27

29 Data protection On 26 January 2012, the European Commission published a proposal for a Regulation on the protection of individuals with regard to the processing of personal data and on the free movement of such data (the so called General Data Protection Regulation). Under the co-decision procedure, the text is currently being discussed by the two EU legislators, i.e. the Council of the EU and the European Parliament. The Parliament published its report in March As the main actors in the distribution of insurance products, operating the link between insurers and policyholders, intermediaries are confronted daily with problems relating to the processing and free movement of personal data. They are therefore directly concerned by the proposed Regulation. Due to its cross-sector approach, the proposed Regulation did not take into consideration the specificities of the insurance sector. Together with its Data Protection Working Group, BIPAR identified some elements of the proposed EU text that could become a serious source of concern for insurance intermediaries, because they would generate excessive and unnecessary administrative burdens, especially for SMEs. They concern, among other things, the very short period (24 hours) to notify a data breach, the measures and controls the processor and the controller must undertake and the sanctions suggested. Clarifications regarding the right to revoke consent are also necessary. Together with its national associations, BIPAR has been informing national permanent representations, officials from the European Commission and MEPs about these issues. Some elements of the Parliament's report adopted in March 2014 Definition of third parties: the Parliament reintroduces the definition of the 1995 Directive. BIPAR highlighted the need to reintroduce it in its position papers and during meetings with EU officials as insurance intermediaries, in some EU markets, can fall into the category of third parties and such definition would add legal clarity to the text. Lawfulness of processing: Article 7.3 of the EP report states that "The data subject shall have the right to withdraw his or her consent at any time. The withdrawal of consent shall not affect the lawfulness of processing based on consent before its withdrawal." The processing is also possible when it is in the vital interests of the data subject or the legitimate interests of the processor (who can be the intermediary). BIPAR believes that this might not be workable for insurance products in some cases where the legitimate but not necessarily vital interests of a data subject might be at stake (in the context of car accidents for instance). Right to be forgotten and right to erasure: This concept, both in the Commission proposal and in the EP report, is not workable for insurance products. It would be difficult to implement and to prove. Notification of a data breach: the Parliament deleted the Commission s reference to the 24 hours delay to notify a data breach and now refers to "undue delay". This modification, requested by BIPAR and other stakeholders, is more realistic. It is also more useful to use the first 24 hours of the data breach to try to mitigate its consequences instead of immediately notifying it. Codes of conduct: the Parliament explains that Such codes should make compliance with this Regulation easier for industry. Requested by BIPAR, this clarifies the role and impact of industry s codes of conduct. The role of the Commission regarding the validity of existing and new codes at national and EU level must still be clarified. Next steps The Council is currently analysing the proposal and will continue to work on its position on the text during the Italian Presidency (July-December 2014). The process might be finalised during the Italian Presidency and the trilogue between the Parliament, the Commission and the Council could start by the end of this year or during the first semester of

30 Anti-money laundering Revision of the third Anti-Money Laundering Directive On 5 February 2013, the European Commission published a proposal for a Directive on the prevention of the use of the financial system for the purpose of money laundering and terrorist financing that aims at reviewing the third Anti- Money Laundering Directive (AMLD). Under the third AMLD that entered into force in 2005, life insurance companies and intermediaries, banks, investment firms and investment funds, amongst others, are required to carry out customer due diligence (i.e. the identification/verification of the customer/beneficial owner and the monitoring of customer transactions); report suspicions of money laundering and terrorist financing to the national financial intelligence unit and to take supporting measures, such as keeping records of transactions and business relationships, the regular training of personnel and the establishment of appropriate internal policies and procedures. According to the European Commission, the aim of the fourth Directive is to improve clarity and consistency of the rules across the Member States through for instance clear mechanisms for identification of beneficial owners. It also aims to extend the scope by including, for example, a reference to tax crimes and to improve the cooperation between national Financial Intelligence Units. BIPAR responded to a report of 2012 from the European Commission regarding the implementation of the third Directive and communicated regarding the proposal for a fourth Directive. It highlighted, among other elements, the need to apply a risk-based approach principle, to have proportionate sanction mechanisms and to have rules in line with other texts such as the current and future Directives and Regulation on Data Protection. On 11 March 2014, the European Parliament adopted its amended version of the proposal that is now being analysed by the Council. The Parliament added references to the need to have a good interaction between this proposal and other texts and, in particular, with the proposal for a General Data Protection Regulation, as both proposals contain elements that might impact each other. A compromise was reached under the Greek Presidency on 28 May Financial Action Task Force (FATF) Guidance In parallel to the publication of the Commission s proposed Directive, the FATF, an intergovernmental organisation with 36 members, decided to update its guidance on the risk-based approach for the life insurance sector of October BIPAR and other relevant stakeholders were contacted by the FATF Secretariat in order to indicate which difficulties insurance intermediaries had in applying the 2009 guidance. Together with WFII, BIPAR sent comments which, in particular, emphasised the necessity to base the new guidance on the principle of proportionality, taking into account the size and technical means of intermediaries. The FATF Secretariat, however, finally decided to postpone the update of the guidance for the insurance sector as it considered that the update of the guidance for other sectors was, in the end, more of a priority. The FATF will come back to the update of the guidance for the insurance sector once these other updates are finalised. 29

31 ecall systems On 13 June 2013, the European Commission published two proposals on ecall systems: Proposal for a Regulation of the European Parliament and of the Council concerning typeapproval requirements for the deployment of the ecall in-vehicle system and amending Directive 2007/46/EC, Proposal for a Decision of the European Parliament and of the Council on the deployment of the interoperable EU-wide ecall. Commisssionner Tajani stated: "The deployment of an interoperable EU-wide ecall system is an important progress in road safety. EU citizens can be reassured by this time and lifesaving system which will help prevent loss of lives and injuries on our roads. It is also an important step forward to make our vehicles more intelligent and enhance our competitiveness". The aim of these two texts is to ensure that all new vehicles will be equipped with adequate ecall systems connected to call response centres in case of accidents. Even when the driver is injured and unable to speak, a set of data is sent to emergency centres with the localisation of the car. The proposed Regulation states that stakeholders, including car manufacturers, can introduce additional emergency and/or added value services to the mandatory ecall service. This raises the question of additional insurance-related services which could directly be offered to customers by car manufacturers. BIPAR is monitoring this issue and is analysing its potential impact on the insurance sector. Next steps and BIPAR's actions The proposed Regulation is being discussed by the two EU legislators. On 26 February 2014, the European Parliament voted on the proposed Regulation and highlighted the fact that the platform used for the ecall system should be an interoperable, standardised, secure and open-access platform and that "further clarifications should be provided on the conditions under which third parties providing added value services can have access to data stored in the 112-based in-vehicle system". This addition would allow third-party providers to offer additional services more easily. The European Parliament and the Council are now working on an agreement on the proposal for a Regulation. In parallel, on 15 April 2014, the European Parliament approved the compromise reached by the EU institutions on the other part of the ecall package on the proposal for a Decision on the implementation of ecall reception centres by 1 October 2017 at the latest. The Council then formally approved the compromise agreed on 8 May BIPAR is monitoring the procedure. Source: European Commission 30

32 Cyber risk In February 2013, the European Commission published a Cyber-security strategy. It represents the EU's comprehensive vision on how best to prevent and respond to cyber disruptions and attacks. The Commission's proposed Directive on network and information security (NIS) as well as a Network and Information Security (NIS) Public-Private Platform (launched in June 2013) are key components of the EU Cyber-security strategy. Under the co-decision procedure, the European Parliament and the Council are analysing the proposal. The proposed NIS Directive would require all Member States, key internet enablers and critical infrastructure operators such as e-commerce platforms and social networks and operators in energy, transport, banking and healthcare services to ensure a secure and trustworthy digital environment throughout the EU. Insurance intermediaries are not under the scope of the proposed NIS Directive The Commission's proposed Directive requests market operators such as Internet companies (e.g. large cloud providers, social networks, e-commerce platforms, search engines), banking sector and stock exchange, energy (e.g. electricity and gas), transport (operators of air, rail and maritime transport and logistics) and health and public administrations to adopt risk management practices and to report significant cyber incidents. A non-exhaustive list of these market operators is set out in Annex II. Insurers and insurance intermediaries are not included in this list. In its impact assessment on the proposed NIS Directive, the Commission explained that In the financial services sector, all credit institutions, irrespective of their size, are esteemed to be a possible victim of a significant security breach and this because of the nature of their activities. Unlike credit institutions, insurance companies are not considered to be relevant for inclusion in the scope of the envisaged measures. Indeed, the activities of the insurance sector are not comparable to those of credit institutions, and this for several reasons, most importantly the lesser importance of realtime availability, and also the difference in type of information dealt with. In March 2014 the European Parliament voted on its amended version of the text. It suggests strengthening the cooperation between the Member States and the European Union Agency for Network and Information Security in order to develop national strategies. It also suggests that market operators involved in these questions, including from the insurance sector, should also be invited to participate in the cooperation networks that have been developed. The Council is currently analysing the text and amending it. The Directive is not expected to be adopted before the end of 2014/early BIPAR 2014 mid-term meetings 31

33 European Supervisory Authorities and BIPAR The new EU supervisory system became operational on 1 January It establishes three new European Supervisory Authorities (ESAs): the European Banking Authority (EBA), European Insurance and Occupational Pensions Authority (EIOPA), and European Securities and Markets Authority (ESMA). ESAs stakeholder groups All three authorities have stakeholder groups that represent the industry and consumers in order to facilitate consultation with stakeholders in areas relevant to their tasks. EIOPA Stakeholders Group EIOPA has two stakeholder groups. Paul Carty, BIPAR EU Committee Chairman, is a member of the Insurance and Reinsurance Stakeholder Group (IRSG). Charlotta Carlberg, Director of BIPAR Swedish intermediaries association, is a member of the Occupational Pensions Stakeholder Group (OPSG). ESMA Consultative Working Group Mr. Philipp Bohrn, from BIPAR s member association, the Austrian Professional Association for Financial Service Providers, is a member of ESMA s Investor Protection and Intermediaries Standing Committee (IPISC). BIPAR's responses to EIOPA's consultations and publications in 2013 and 2014 EIOPA Report on knowledge and ability requirements for distributors of insurance products In December 2013, after consultation with the industry, EIOPA published a Report on good supervisory practices regarding knowledge and ability requirements for distributors of insurance products. It focuses on (i) promoting supervisory convergence amongst competent authorities in the area of industry training standards and (ii) facilitating into any further policy work EIOPA might have to carry out on professional requirements in the future. EIOPA proposes high level principles and examples regarding knowledge and ability and continuous permanent development and suggests as an example of a minimum level of CPD, 30 hours study activities within a period of 3 years (or an equivalent amount on an annual basis). EIOPA states it could use this Report as a basis for future own-initiative work on developing training standards for the industry and any follow-up work under IMD II. BIPAR participated in the EIOPA consultation on the drafting of its report, giving as a key message that differences in systems have developed due to cultural and historical reasons and are not problematic and that a lot of flexibility has to be left to the Member States. BIPAR also requested that a new consultation be launched once the legal framework (IMD II) has become clearer. EIOPA Guidelines on complaints-handling by insurance intermediaries In December 2013, EIOPA issued its Guidelines on complaints-handling by insurance intermediaries. The Guidelines set down guidance on appropriate internal systems and control for complaintshandling, the provision of information and procedures for responding to complaints. The Guidelines, which lay down high-level principles for National Competent Authorities (NCAs), are supplemented by a Report on best supervisory practices. The Guidelines include two of BIPAR's main comments made during the EIOPA consultation on its draft Guidelines: Guideline 1 where tied insurance intermediaries are referred to as an example to be clearer about the fact that they are alleviated from most of the Guidelines unless they choose to handle the complaint on behalf of the insurer. Guideline 3 where it is made clear that identification and management of conflicts of interest are not possible for one-man bands. The Guidelines were translated into 23 languages at the end of February The Comply or Explain procedure for NCAs started in March ESMA/EBA consultation on complaintshandling for the securities and banking sectors In February 2014, after consultation with its member associations, BIPAR submitted its answer to the EBA and ESMA public consultation on their draft Guidelines on Complaints-Handling for the securities and banking sectors that was launched in November

34 EBA and ESMA draft Guidelines follow up previous EIOPA Guidelines on complaints handling by insurers and by intermediaries respectively, issued in 2012 and Using EIOPA Guidelines for insurers as a base, EBA and ESMA have adapted them - without fundamental changes - for the securities and banking sectors. With this approach, EBA and ESMA aim at ensuring a consistent approach to complaints handling across the banking, investment and insurance sectors to the benefit of firms, national authorities and consumers. ESMA and EBA draft Guidelines seek to clarify expectations relating to firms organisation with regard to complaints-handling, to provide guidance on the provision of information to complainants, on procedures for responding to complaints and to ensure the adequate protection of consumers and that firms arrangements for complaints handling are subject to a minimum level of supervisory convergence across the EU. Once adopted, the guidelines will be sent to the competent national supervisory authorities that will have to comply with them or explain why they do not do so. EIOPA report on good practices for websites that compare insurance products In February 2014, after consultation with the industry, EIOPA published a report that outlines good practices for websites that compare insurance products. The report gives guidance on the following topics: information about the comparison site itself, the market coverage of the site, how the site deals with conflicts of interest, the criteria used to make the ranking of providers and products, and the presentation and the frequency of updating the information. BIPAR participated in the EIOPA consultation on the drafting of its report, its key message being that to ensure competition and consumer protection the provisions of IMD (I and II) should apply to comparison websites. ESA s Joint Consumer Day on 25 June 2013 in Paris On 25 June 2013, BIPAR attended the first joint Consumer Protection Day, organised by the three ESAs. There were about 250 participants, including consumer representatives, academics, legal and financial consultants, national supervisors, experts from the EU institutions and financial services industry (banking, securities, insurance and pensions). EIOPA Chairman, Gabriel Bernardino stated that all three ESAs promote transparency, fairness and simplicity in the market and that they have similar tools to achieve their aims. Linked to this, he stressed the need to have cross-sectoral Gabriel Bernardino consistency, adding, however, that the sectoral specificities should also be taken into account. Ongoing EIOPA consultation On 20 May EIOPA published a discussion paper on Conflicts of interest in direct and intermediated sales of insurance-based investment products (PRIIPs)". The Discussion Paper is intended to help facilitate a public consultation that EIOPA will organize on the issue mid-july and in which BIPAR will participate. The scope and objectives of the public consultation follow the mandate from the European Commission to EIOPA for technical advice concerning amendments related to conflicts of interest made by Article 91 of MiFID II to the IMD (see page 10). The aim of the discussion paper is twofold. First, to provide stakeholders with an early orientation on issues that will need to be addressed in the technical advice of EIOPA to the Commission. Second, via 18 specific questions, to gather feedback from all stakeholders on these issues. BIPAR, has until 22 July to provide comments. A further consultation on the draft technical advice will follow following this first round of feedback. 33

35 Social Affairs In 1998, the European Commission decided to launch Sectoral Dialogue Committees promoting dialogue between the social partners in different sectors at European level. The Insurance Sectoral Social Dialogue Committee (ISSDC), which is an informal working group, was established in The BIPAR EU Social Affairs Committee, chaired by Mr. Didier Pissoort, takes an active role in participating in the European Social Dialogue in order to protect the interests of intermediaries. Activities of the social partners in the insurance sector EU-funded project on demography In 2010, the ISSDC partners signed and published a joint statement on demographic challenges in the insurance sector. The statement focuses on players in the insurance sector in their capacity as employees and employers i.e. insurance undertakings and insurance intermediaries. The joint statement deals with the challenges of maintaining a healthy work/life balance, qualifications and continuous lifelong learning and health and safety at work. As a follow-up to this statement, the ISSDC decided to apply to an EU tender and were granted an EU-funded project to give more publicity to the statement and assemble good practices from different Member States regarding the three above-mentioned challenges in a booklet, translated in various European languages. This work was carried out in An update of this booklet is currently being discussed. Draft joint statement on telework The social partners are currently working on a draft joint statement on telework. The idea is to promote telework as a tool, taking into account the specificities of the insurance industry. This draft joint statement follows an initial general crosssectoral framework agreement on telework, dated 16 July 2002 and signed by overarching European social partners ETUC (European Trade Union Confederation), UNICE (now BusinessEurope), UEAPME and ECPE (Centre of Enterprises with Public Participation) but would focus on the specificities of the insurance sector. Telework was defined in the 2002 agreement as a form of organising and/or performing work, using information technology, in the context of an employment contract/relationship, where work, which could also be performed at the employer s premises, is carried out away from those premises on a regular basis. Joint agreements in general, including this one, have a voluntary character, this is important for employers. The agreement of 2002 covers the topics of employment conditions, data protection, privacy, equipment, health and safety, organisation of work, training, and collective rights issues. The draft joint statement of the social partners in the insurance sector would cover similar points and adds specificities of the insurance sector. The question of the scope of the statement is discussed among other things. Next steps The social partners are willing to organise other conferences in particular in the new EU Member States in order to keep the subject on demography alive and to have additional feedback. DG Employment regularly organises calls for tenders to help social partners finance such initiatives, and the follow-up of previous activities, and the social partners in the insurance sector will apply to relevant calls. The social partners will continue to work on the draft joint statement on telework during the year Furthermore and as a follow-up of the booklet on the demographic challenge, they are also looking for new examples of good practices to tackle the demographic challenge and where national representatives of the employers and employees organisations are working together on sectorial agreements. Finally, they will also discuss during the next meetings on the Corporate Social Responsibility (CSR) approach of the European Commission (see separate article on this question). 34

36 Corporate Social Responsibility In April 2013, the European Commission published a proposal for a Directive on the disclosure of nonfinancial and diversity information by certain large companies and groups. This text, which will amend the Accounting Directives of 1978 and 1983, deals with the question of the Corporate Social Responsibility (CSR) of large firms. In a Communication of 2011 on this topic, the European Commission defined CSR as "the responsibility of enterprises for their impact on society". The requirements of the Directive will apply to companies and groups whose average number of employees exceeds 500 persons. It will concern approximately 6,000 companies and groups across the EU. That includes large firms active in the insurance sector such as insurance companies and large intermediaries. The main objectives of the proposed Directive are to increase the transparency of the companies concerned, to increase their accountability and performance and to increase diversity in their boards. Under the new rules established by the proposed Directive, the annual report of the companies included in its scope shall include information regarding environmental, social and employee matters and elements regarding the respect for human rights, bribery and anti-corruption issues. This is in line with the Communication of the European Commission which stated in 2011 that "enterprises should have in place a process to integrate social, environmental, ethical, human rights and consumer concerns into their business operations and core strategy in close collaboration with their stakeholders". Next steps The European Parliament voted and adopted on 15 April 2014 the proposal as amended during the trilogue process. It should be formally approved shortly by the Council and should enter into force after its publication in the Official Journal of the European Union. Shadow banking Shadow banking was defined by the Financial Stability Board (FSB), an international body established after the G20 Summit in 2009, as the system of credit intermediation that involves entities and activities that are outside the regular banking system. On 19 March 2012, the European Commission published a Green Paper on shadow banking in order to take stock of current developments and to consult stakeholders and organised a conference. There was a broad consensus that one had to be careful not to destroy the positive characteristics of shadow banking, but at the same time to also guarantee a level of regulation and consumer protection in the shadow banking area as well as to avoid a move from traditional activities towards shadow activities due to a lack of regulation in that field. In parallel, on 25 October 2012, the European Parliament adopted a non-legislative report which invited the European Commission and other relevant bodies to give an accurate definition of shadow banking activities, to collect relevant data on shadow banking transactions at EU and international level and to tackle the systemic risk of shadow banking, through accurate regulation, evaluation and auditing. In September 2013, the European Commission published a proposal on money market funds which was followed in January 2014 by a proposal on transparency of securities financing transactions. The aim of these initiatives is, according to the European Commission and in relation with the shadow banking sector, to deliver transparent and resilient market-based financing while tackling major financial risks and to prevent financial institutions from relocating some of their activities in the less-regulated shadow banking sector. 35

37 New rules for the European Public Procurement Market In December 2011 the Commission proposed the revision of Directives 2004/17/EC (procurement in the water, energy, transport and postal services sectors) and 2004/18/EC (public works, supply and service contracts). The Directives were voted by the European Parliament on 15 January 2014 and adopted by the Council on 11 February The Member States have until April 2016 to transpose the new rules into their national law The two existing EU Directives cover the provision of most services, including insurance, reinsurance, insurance brokerage services, insurance agency services and risk management insurance services. Broadly speaking, intermediaries are concerned in two ways by public procurement: o In the case where intermediaries are involved in the preparation of a public procurement call for tender (assisting and advising the authorities in their preparation) o In the case where intermediaries themselves participate as bidders in a call for tender. The new Directives introduce a number of simplified rules and procedures. They broaden the possibilities for negotiation: the competitive procedure with negotiation may be used when justified by the specific circumstances in relation to the nature, complexity or the legal and financial make-up of a given project, or by the fact that the needs of the contracting authority cannot be met by an off the shelf type of solution. The documentation required is reduced, notably through the compulsory acceptance of selfdeclarations from bidders (through a standardised European Single Procurement Document) - only the winning bidder will have to submit formal evidence (certificates and attestations). The minimum deadlines to submit tenders are shortened. Member States have to take measures to effectively prevent, identify and remedy conflicts of interest arising in the conduct of public procurement procedures. BIPAR's actions Together with its Working Group on Public Procurement, BIPAR studied the proposals, promoted some changes to the texts and sent them to the EP and Council before the adoption of the texts. Some BIPAR proposals are reflected in the final texts. BIPAR underlined the importance of a better access for SMEs to the public procurement procedures and of a more accessible negotiated procedure (this is the standard procedure of public procurement for the insurance sector). The Directives as adopted in 2014 facilitate the recourse to the competitive procedure with negotiation. BIPAR welcomed this provision as this procedure matches well with the particularities of public insurance services contracts. Indeed it corresponds best with the needs of the sector in terms of flexibility and efficiency without prejudicing the basic principles of public procurement: transparency and equality. BIPAR meetings Nic De Maesschalck, Michel Barnier (European Commissioner for Internal Market and Services), Paul Carty 36

38 Next EU Presidencies The Council is presided over for a period of six months (from January to June, and from July to December) by each Member State in turn, in accordance with a pre-established rota. Greece is currently holding the Presidency of the Council till 30 June The Presidency of the Council plays an essential role in organising the work of the institution, particularly in promoting legislative and political decisions. It is responsible for organising and chairing all meetings, including the many working groups, and for brokering compromises. 2014: Greece-Italy 2015: Latvia-Luxembourg 2016: The Netherlands-Slovakia 2017: Malta-UK 2018: Estonia-Bulgaria 2019: Austria-Romania 2020: Finland 2014 EU elections - Impact of the new rules 2014 European elections The European elections were organized between 22 and 25 May For the 8 th time, 500 million EU citizens from the 28 EU Member States were invited to vote directly for the renewal of the European Parliament and of its 751 members. This 8 th European legislative period will start on 1 st July 2014 for five years. The European Parliament plays a major role in the EU law-making process. Appointment of the new European Commission in October 2014 Based on the new rules of the Lisbon Treaty, the European Parliament also plays a key role in the nomination process of the new members of the European Commission in October The new President of the European Commission is pre-selected by the Council and the Heads of State and government but this pre-selection has, for the first time, to take into account the result of the European elections. Therefore, the new composition of the European Parliament has a decisive impact in the designation procedure of the European Commission. The Parliament will then vote for or against the pre-selected candidate. The new European Commission will be taking office on 1 st November 2014 for 5 years. J. M. Barroso (President of the European Commission), H. Van Rompuy (President of the European Council), M. Schulz (President of the European Parliament) 37

39 B I P A R A g e n t s ' a n d B r o k e r s ' S t a n d i n g C o m m i t t e e s A word from the Chairman of the Agents' Standing Committee The insurance market continues on its path of change, urged by European and national legislators. Consumers also have an important influence on this process, with a new approach to consumption, and a different way of communicating and relating, based on new tools and technologies. Yet they are still human beings, whether they are at the head of a family or a company (whatever its size). And the human needs for reassurance and confidence remain the same. It is thus only right that insurance intermediaries respond to changes, both in legislation and the market, as long as altogether we do not lose sight of the core values that constitute a guarantee for an extensive system of stakeholders, starting with the individual consumer right up to the social and economic equilibrium of an entire country. Agents and their organizations provide the first real, concrete guarantee of protection to the consumer, in daily life and over the years, in person and through new communications systems, adding to the internet and to the phone a mind, a heart and a soul that know and care about you. They are the professional face of reference over the years, dedicated to tending to human and emotional values, to paying attention both to people and assets, because this is part of their mission and because this personal service of proximity is also a de facto guarantee of quality, aimed at fostering an ongoing relationship and establishing a point of reference. It is an important value for insurance agencies to be on a human scale, to be just around the corner from where you live (because in the moments that matter, you need to talk to someone in person who you trust), and for you to know the staff, who in turn knows the area you live in. Another determining factor is that an agent, being a representative of one or more insurance companies, represents and commits the company with regard to the customer. These features deserve attention from the legislator, particularly when the primary objective of protecting the consumer needs to be combined with the urgent need to revive the economy. The reassurance of being covered against certain risks encourages investment and entrepreneurship. But an adequate response to family welfare is also an important contribution to the economy. It must be ensured, however, that insurance cover develops in a harmonious and balanced way in every country, in the interests of each individual nation and the Union as a whole. This can only take place by promoting and safeguarding our important professional activity. We need to be organized, in our respective countries and together, to spread this important message, to the benefit of the system as a whole. Jean-François Mossino Chairman of the BIPAR Agents' Standing Committee 38

40 BIPAR Agents' Standing Committee Reinforced cooperation of agents at European level In addition to the permanent information exchange between its members, BIPAR Agents Standing Committee decided a few years ago to reinforce agents cooperation and to bring together the national organisations of agents networks of various countries and of the same company in order to study the policies of the latter with regard to their agents in different European markets. Today, an increasing number of decisions are taken at national level and it is important to have a global vision of a company s strategies to avoid possible negative effects and to benefit from favourable experiences of agents colleagues in other markets. AXA agents European Association The European Association of national organisations of AXA agents was set up on 29 June 2006 in Brussels under the aegis of the BIPAR Agents Committee. Its members are the French (Réussir), German (USV), Italian (Confederazione dei Gruppi Aziendali Agenti AXA), Spanish (Club Diálogo de agentes generales AXA) and Swiss (GAV AXA Winterthur) organisations of AXA agents. These were joined in 2011/2012 by the Moroccan association AGIR and the newly created Portuguese association (Associação Portuguesa de Agentes Exclusivos Axa) of AXA agents. Belgium has observer status within this European Association. The Association organised two meetings in In October 2013, the Association held its 16 th meeting in Milan, focusing its work on national agreements on multi-access. In April 2014 the 17 th meeting was held in Brussels, focusing on multi access and the preparation of the 3 rd European Congress of AXA agents in Rome in May Mario Pedretti, Italian AXA agent, is the Chairman of the Association till May Allianz agents European Association The European Association of national organisations of Allianz agents was created in April 2008 under the aegis of the BIPAR Agents Committee. Its members are the French (MAG3***), German (IG), Italian (UIA, GALA and GNA - in February 2014, these three associations merged into the Associazione Agenti Allianz (AAA)) and Austrian (Allianz Agenturverbund Österreich) organisations of Allianz agents. On 15 and 16 May the Association met in Brussels. The Association is chaired by the Italian Allianz agent Stefano Valsetti until May Members of the European Association of national organisations of Allianz agents European Association of agents of GAN Insurance and GROUPAMA The European Association of national organisations of general agents representing GAN insurance and GROUPAMA was created in September 2011 under the aegis of the BIPAR Agents Committee chaired by Mr. Jean-Francois Mossino. Its members are the French (SNAGAN) and Italian (A.G.IT) organisations of GAN Insurance and GROUPAMA agents. Mr. Pietro Melis, President of A.G.IT, is the current President of the European Association for 2 years. Members of the European Association of national organisations of AXA agents 39

41 A word from the Chairman of the Brokers' Standing Committee I wish I had mastered the mother tongue of the Chairman of the Agents' Committee, our friend Jean-François Mossino, because Italian, more than any other language, is particularly well suited to describe Dantesque situations. What am I driving at? To understand our precious but always fragile European democracy, it is often very useful to hold a Master's in "compromise science" with a specialisation in "magic". When a text of the European Commission is proposed to the European Parliament, even if it is already tortuous at this stage, everything remains possible. After being washed, spin-dried and ironed by various specialized Parliamentary committees, the text is put to a plenary vote and the outcome is often a hybrid regulation, a kind of centaur that is neither entirely a man nor entirely a horse. Those who are disappointed should not lose confidence as there is still the trilogue, which can transform this disturbing centaur into the charming little mermaid of Copenhagen. Dear Colleagues, putting easy criticisms aside, I am well aware that today this democracy is nevertheless the ultimate in the art of living together and that everyone's sensitivity is respected as much as possible. These sophisticated operating procedures impact, however, heavily on the dynamic force of our Secretariat and of our EU Standing Committee. Always on the alert, our representatives try to avoid, in an efficient manner and whenever possible, that things getting out of control at the last minute when it comes to the chaotic progression of the dossiers (MiFID, IMD II, PRIPs, ) they are dealing with. Better than anyone else, they apply Nicolas Boileau's line "hasten slowly, and without losing heart, put your work twenty times upon the anvil". This obstination pays off and the European institutions can understand better our social role and our added value. The resources available to the Brokers' Committee through its members are at the disposal of everyone within BIPAR. The Brokers' Committee wants to make its contribution to a regulatory framework which is balanced and respectful of the legitimate interests of all stakeholders concerned (clients, intermediaries and supervisors). André Van Varenberg Chairman of the BIPAR Brokers' Standing Committee 40

42 I n t e r n a t i o n a l A f f a i r s World Federation of Insurance Intermediaries (WFII) Many international organisations such as the OECD, the IAIS, the Joint Forum, the FATF, the UN and the WTO are, on an ongoing basis, dealing with intermediation issues. Within these organisations, committees and working groups are developing high-level principles, guidelines and/or recommendations on financial consumer protection and work on codes of conducts, antifraud and anti-money laundering policies, corporate governance and in the field of liberalisation. These high- level principles, guidelines, recommendations and other policy papers, sooner or later, wholly or partly are implemented into national regulation on insurance intermediation. It is, therefore, important that the interests of the intermediaries are represented at global level as a single voice. To achieve this, the World Federation of Insurance Intermediaries (WFII), of which BIPAR is a founding member, was established in WFII is nowadays recognised by the above mentioned international institutions and has observer status in the OECD and the IAIS. By contributing to the drafting process and participation in public hearings, WFII promotes and defends continuously the interests of intermediaries in the international arena. For more general background information on WFII (structure, members, goal and activities) please consult the website In 2013/2014 (until 17 March) Mr. Seamus Casserly (FIA- South Africa) was the Chairman of WFII. As from 17 March 2014, Mr. Paul Carty (BIPAR- Europe) is the Chairman for the period 2014/15 and Mr. Stan Loar (CIAB North America) is the incoming Chairman. The WFII Secretariat is run by the BIPAR Secretariat in Brussels. Mr. Nic De Maesschalck, the BIPAR Director, is also the Director of WFII. Ms. Isabelle Heuninckx is Policy Adviser for WFII Affairs. Examples of 2013/2014 WFII activities The IAIS Teaching Notes on Insurance Core Principles 18 and 19 The IAIS elaborates Teaching Notes on Insurance Core Principles 18 (Intermediaries) and 19 (Conduct of Business). With these notes, the IAIS would like to explain to supervisors/regulators the objective and the background of these ICPs, adopted in The Teaching Notes include case studies and specific examples of implementation of the ICP in national markets. The Teaching Note on ICP 18 was drafted in the course of 2013 and will be finished in The Teaching Note on ICP 19 will be drafted in the course of For WFII, which drafted its own interpretative guidance on these ICPs, this represents a good opportunity to insert its views and examples into the Teaching Notes. A second opportunity for WFII to communicate its views on ICP 18 was offered when WFII was invited to speak directly to supervisors on intermediary issues at a seminar organised by the IAIS in May 2013 for Insurance Supervisors in Central and Eastern Europe. The contribution of WFII was highly appreciated. Liberalisation WFII is a strong advocate of fair global liberalisation of the insurance intermediation market. Its position in this regard is very clear: mediation in large risks, MAT (Marine, Aviation and Transport) and reinsurance, on a cross-border basis, should be possible; establishment in a country, under national treatment and without discrimination, should be permitted. For WFII, negotiations on trade in services between countries are a good opportunity to demonstrate this position. One of these negotiations has its particular attention, the negotiation for the Trade in Services Agreement TiSA. A large group of WTO member countries is currently negotiating this agreement which, once concluded, will offer far reaching liberalisation for services, including financial services. 41

43 WFII supports the TiSA negotiations. A strong TiSA agreement will open markets and will ease the placement of multinational insurance policies. In cooperation with its Regional Members, WFII brought the above mentioned position on liberalisation in the insurance intermediation sector to the attention of many TiSA negotiating countries. The 2014 WFII World Council & Executive CSE Committee meetings The 2014 Annual WFII World Council and Executive CSE Committee meetings took place on 16 and 17 March The objective of this Annual meeting was to discuss and set the direction WFII needs to follow in different intermediary-related Public Affairs issues. The meeting offered a good opportunity to exchange information in this field between the different regions in order to detect trends in the different markets. Many intermediary associations and their members worldwide have to deal with the same issues such as transparency, conflict of interest, changing business models, over-regulation, anti-fraud and anti-money laundering rules, level playing field, cost of insurance due to natural disasters, unjustified onesize-fits-all approach in regulation, the necessity of a cost-benefit analysis before the introduction of new regulation, the cost of service and the perception of the client and the acquisition and retention of talented employees. Part of this two-day meeting was devoted to a Joint meeting of the World Council members with representatives of the WFII Asia/Pacific Rim member CAPIBA (Council of Asia Pacific Insurance Brokers Associations). The World Council and the Executive CSE Committee exchanged information on current issues of interest to the insurance intermediaries with representatives of insurance intermediaries associations from Hong Kong, Singapore, Malaysia and New Zealand. The following issues, for example, were discussed: selfregulation versus regulation by law, capital requirements, qualification requirements, natural disasters and its impact on insurance cover and rates, Takaful insurance and equity cap for foreign intermediaries. Guest speaker at the Annual meeting was Mr. Peter Kell, Deputy Chairman of the Australian Securities and Investments Commission (ASIC). ASIC is Australia s corporate, markets and financial services regulator. The IAIS Annual Conference 2013 WFII attended with a delegation the 20th Annual Conference of the International Association of Insurance Supervisors (IAIS), which took place from 16 to 19 October The theme of the conference was Building sustainable Insurance Supervision in a changing world. Around 600 representatives of regulators and the insurance and insurance mediation industry, attended the meeting. During the Conference, the following issues, inter alia, were discussed: insurance and financial stability (the designation of global systemically important insurers), ageing of the population (a worldwide issue/concern), a Common Framework for the Supervision of Internationally Active Insurance Groups (a framework aimed at helping supervisors to efficiently and effectively supervise internationally active insurance groups), the impact of global climate change and consumer protection frameworks/guarantee funds. Activities with the Organisation for Economic Co-operation and Development (OECD) WFII participated in the meetings of the Insurance and Private Pensions Committee (IPPC) of the OECD on the 6-7 June and the 5-6 December 2013, both at the OECD Headquarters in Paris. On the agenda was, inter alia: Financial Consumer Protection The G-20 High-Level Principles on Financial Consumer Protection, adopted in 2011, need to be implemented by the countries into their national legislation. To support this implementation process, the OECD-Task Force was mandated by the G-20 to collect so-called Effective Approaches on the protection of the financial consumer (the ten High-Level Principles). The Report on a first set of Effective Approaches on three Principles was adopted in The Task Force continues to collect Effective Approaches on the remaining seven Principles. WFII is following the drafting process attentively. It participated in consultation sessions and sent comments to the drafting team which were reflected in the first report. The Services Trade Restrictiveness Index (STRI) for the financial sector The OECD started the STRI-project some years ago. The STRI is a list of trade barriers in services sectors such as computer services, transport and construction. Ultimately, all economically important services sectors must be incorporated, which is the 42

44 reason the list has expanded to the financial services sector, including the commercial banking services and the insurance (mediation) sector. For WFII this STRI-project is useful in its pursuit of global liberalisation of the insurance (mediation) market. The draft list reflects many of the restrictions which WFII summed up in its paper on Worldwide Barriers to Trade in Insurance, Reinsurance and Mediation presented to the OECD in As some restrictions were missing or could be fine-tuned, WFII sent in 2013 comments and suggestions to the drafting team. The final database will be made public in the course of Activities with the Financial Action Task Force (FATF) In 2013, the FATF started the review of its Risk- Based Approach Guidelines for the life insurance sector. This review is done in close cooperation with the insurance (mediation) sector. The Guidelines aim in particular at implementing a risk-based antimoney laundering programme at company level. WFII was in the process of analysing and updating the Risk-Based Approach Guidelines when it was informed by the FATF-Secretariat that the revision of these Guidelines was postponed. The first sector to be reviewed is the banking sector, followed by money service businesses, legal professionals and securities. The guidelines for the life insurance sector will probably be reviewed in the second half of Activities with the UN Revision of the United Nations Guidelines on Consumer Protection The United Nations Guidelines on Consumer Protection (UNGCP) are in the process of being updated and will be extended most likely to financial services. Intermediary-related issues will probably be discussed. It is, therefore, important for WFII to follow this revision closely and give its views. WFII contacted the persons in charge at the UN and was invited to contribute to this revision. WFII presented its position papers on regulation of insurance intermediation and on liberalisation as well as a paper on the role of intermediaries. WFII participated in March 2014 in the first meeting of the UN Working Group on Financial Services, charged with the drafting of a report on the new guidelines on financial services. The Working Group will base these guidelines on the work already done in the field of financial consumer protection by other international institutions. For example, it will take into account the OECD/G-20 High-Level Principles on Financial Consumer Protection. A first draft will be consulted in June 2014, WFII will take part in this consultation. A final report is expected in Worldwide consequences of FATCA On 1 July 2014 a new US tax law, the Foreign Account Tax Compliance Act (FATCA) enters into force preventing the evasion of US tax by US taxpayers through the use of offshore accounts and companies. FATCA is generally focused on banks, trust companies, asset management firms and life insurance policies related to the US. However, FATCA also affects the sale by insurance intermediaries worldwide of non-life insurance and reinsurance covering US sourced premiums. Unless the non-us intermediary can provide evidence of its FATCA status (meaning that it is certified that he complies with the US tax laws), the last US broker in the chain will be required to withhold 30% on the gross premium. The Act will apply to worldwide risks with an US exposure with effect from 1st January WFII sent a letter in December 2013 to the US Treasury and the Internal Revenue Service with the request to exempt non-life insurance and reinsurance products from FATCA. At the 2014 WFII Annual meeting, participants discussed what measures could be taken by intermediaries to be compliant with FATCA and thus avoiding the 30% withholding tax. 43

45 Glossary ADR AMLD APRC BER BISI CPD CSR Directive EBA EIOPA ELD ESAs ESIS ESMA FATCA FATF FOE / FOS FTT Green Papers IAIS ICPs IGS IMD IORP IPISC IRSG ISSDC KID MiFID NIS ODR OECD OPSG PID PRIIPs PRIPs Regulation STRI TiSA Trilogue UCITS White Papers WTO Alternative Dispute Resolution Anti-Money Laundering Directive Annual Percentage Rate of Charge Block Exemption Regulation Business Insurance Sector Inquiry Continuous Professional Development Corporate Social Responsibility A Directive shall be binding, as to the result to be achieved, upon each Member State to which it is addressed, but shall leave to the national authorities the choice of form and methods. 1 European Banking Authority European Insurance and Occupational Pensions Authority Environmental Liability Directive European Supervisory Authorities European Standardised Information Sheet European Securities and Markets Authority Foreign Account Tax Compliance Act Financial Action Task Force Freedom of establishment / Freedom of services Financial Transactions Tax Green Papers are documents published by the Commission to stimulate discussion on given topics at European level. They invite the relevant parties (bodies or individuals) to participate in a consultation process and debate on the basis of the proposals they put forward. Green Papers may give rise to legislative developments that are then outlined in White Papers. 2 International Association of Insurance Supervisors Insurance Core Principles Insurance Guarantee Schemes Insurance Mediation Directive Institutions for Occupational Retirement Provision Investor Protection and Intermediaries Standing Committee Insurance and Reinsurance Stakeholder Group Insurance Sectoral Social Dialogue Committee Key Information Document Markets in Financial Instruments Directive Network and Information Security Online Dispute Resolution Organisation for Economic Cooperation and Development Occupational Pensions Stakeholder Group Product information document Packaged retail and insurance-based investment products Packaged Retail Investment Products A Regulation shall have general application. It shall be binding in its entirety and directly applicable in all Member States. 1 Services Trade Restrictiveness Index Trade in Services Agreement Step in the legislative process during which the three EU institutions (Commission, Parliament, Council) work on a compromise text which reflects most of their common views Undertakings for Collective Investment in Transferable Securities The Commission s White Papers are documents containing proposals for Community action in a specific area. In some cases they follow a Green Paper published to launch a consultation process at European level. When a White Paper is favourably received by the Council, it can lead to an action programme for the Union in the area concerned. 2 World Trade Organisation 1 article 249 of the consolidated version of the Treaty establishing the European Community OJ of the EC of C325/33 2 «Europa», Gateway to the European Union 44

46 BIPAR member associations 52 member associations in 32 countries Austria Fachverband Versicherungsmakler und Berater in Versicherungsangelegenheiten Verband Österreichischer Versicherungsmakler (VÖVM) Professional Association of Financial Service Provider in the Austrian Federal Economic Chamber (FV FDL)* Belgium Fédération des Courtiers d assurances et Intermédiaires financiers de Belgique (FEPRABEL) Federatie voor Verzekerings- en Financiële tussenpersonen (FVF) Union Professionnelle de Courtiers d'assurance (UPCA) Bulgaria Bulgarian Association of Insurance Brokers (BAIB) Cyprus Pancyprian Federation of Professional Intermediaries (PSEAD) Czech Republic Association of Czech Insurance Brokers (ACPM) Ceská asociace mezinárodních pojištovacích makléru (CAMPM)* Denmark Association of Financial Intermediaries and Financial Advisers of Czech Rep. (AFIZ)* Forsikringsmaeglerforeningen (FMF) Estonia Estonian Insurance Brokers Association (EKML) Finland Finnish Insurance Brokers Association (SVAM) France Fédération Nationale des Syndicats d'agents Généraux d'assurances (AGEA) Chambre syndicale des courtiers d assurances (CSCA) Chambre des indépendants du patrimoine* Association Française des Intermédiaires Bancaires* 45

47 Germany Bundesverband Deutscher Versicherungskaufleute e.v. (BVK) Verband Deutscher Versicherungsmakler e.v. (VDVM) Greece Hellenic Union of Insurance Intermediaries (HUII) Hungary Association of Independent Insurance Brokers in Hungary (FBAMSZ) Ireland Irish Brokers Association (IBA) Professional Insurance Brokers Association (PIBA) Israel Association of Insurance Brokers and Agents in Israel Italy Associazione di Categoria Brokers di Assicurazioni e Riassicurazioni (ACB) Associazione Italiana Brokers di Assicurazioni e Riassicurazioni (AIBA) Sindacato Nazionale Agenti di Assicurazione (SNA) Lebanon Lebanese Insurance Brokers Syndicate (LIBS) Lithuania Chamber of Insurance Brokers of Lithuania (DBR) Luxembourg Malta Association Luxembourgeoise des Intermédiaires Professionnels d'assurances (ALUPASS) Association of Insurance Brokers of Malta (AIB) Norway Norwegian Association of Insurance Brokers Poland Association of Polish Insurance and Reinsurance Brokers Chambre Polonaise des Intermédiaires d'assurances et de Finance Portugal Romania Associacao portuguesa dos produtores profissionais de seguros (APROSE) Romanian National Insurance Intermediaries and Consultants Association (UNSICAR) 46