The European Federation of Insurance Intermediaries

Transcription

1 The European Federation of Insurance Intermediaries Annual Report

2 Annual report 06/ /2012 BIPAR BIPAR is the European Federation of Insurance Intermediaries. It 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. Besides some large multinationals, the insurance intermediation sector is composed 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 1989.

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4 Foreword Dear Reader, This BIPAR Annual Report is being produced in the seventy-fifth year of BIPAR s existence, an occasion that will be marked at the AGM, which will be held in June in Brussels, BIPAR s home for the last twenty-three years. The history and contributions by so many committed, able, individuals in the development of BIPAR and of the interests of the profession will be acknowledged. Paul Carty Chairman Much has changed over the last three quarters of a century such as the three historically seismic events, the Second World War, the creation of the European Union and the end of the division of Europe. For most of the period, to quote "the bard", "change came dropping slow". In BIPAR we have experienced much legislative change over the last twenty-five years in particular as the EU has become increasingly integrated. But the pace of that change has, quite frankly, been slow. Legislative change comes quite slowly at European level with EU Directives often having gestation periods counted in years rather than in months. However, though progress can be slow, there normally is a great deal of activity surrounding the legislative process. Over the last year, progress on the key dossiers from our perspective, MiFID II, PRIPs and IMD II, has been very slow, however, the activity surrounding their progress has been intense. BIPAR has participated in extensive communications offensive to all parties that are relevant to the development of these dossiers. That has included constant exchange with the European Commission, both officials from the Commission, the Cabinets of various EU Commissioners, officials from the new ESAs, in particular EIOPA, MEPs and their assistants, the permanent representatives of various Member States as well as with consumer and industry representatives. In addition, BIPAR has participated in many forums during the year to ensure that BIPAR communicates its message to as wide an audience as possible. That essential groundwork, only some of which is elaborated upon in this report, is vital if we are to influence the progress of events. An achievement that should not be overlooked is the robust internal communications strategy that BIPAR pursues with members. BIPAR has achieved a unity of purpose among the member associations by deploying a battery of communication tools with members such as this Annual Report, the BIPAR Update and BIPAR Press, a terrific website not to mention the constant stream of communication from the BIPAR Secretariat. However, nothing betters BIPAR Annual Report Page 3

5 personal contact and meeting with member associations. In this area, BIPAR has made extraordinary efforts over the past year. Apart from the mid-term meeting this year, members participated for the first time in a mass teleconference call to discuss developments in relation to the IMD. BIPAR has gone to meet many member associations in their own offices or at their AGMs and an ever greater number of members visited the BIPAR offices for briefing sessions and to lend assistance in the lobbying effort. This high level of contact and communication has engendered a unity of purpose within the member associations of BIPAR. Though the pace of legislative development at EU level has been slower that expected, particularly with the delay in the publication of the proposal of an IMD II, BIPAR has been active in shaping its development as it has on the other key dossiers and in particular MiFID II. BIPAR has the resources, the support, the policies and the unity of purpose to continue to communicate our message and to represent the interests of intermediaries. In conclusion, I would like to acknowledge the excellence, commitment and support of all the members that participate in the activities of BIPAR and in particular, the fantastic team of skilled and dedicated staff at the BIPAR Secretariat. Page 4 BIPAR Annual Report

6 Contents EUROPEAN AFFAIRS... 7 Revision of the Insurance Mediation Directive (IMD)... 7 Solvency II Directive - Insurance intermediaries issues EP Resolution on Insurance Guarantee Schemes Consumer Rights Directive Life & Investment issues Packaged Retail Investment Products (PRIPs) Proposal for a recast of the Markets in Financial Instruments Directive (MiFID) Pensions in the European Union Review of the Directive on the Institutions for Occupational Retirement Provision (IORP) Proposed Directive on credit agreements relating to residential property Eurobarometer on retail financial services Pools and ad-hoc co-(re)insurance agreements on the subscription market Shadow banking Taxation VAT treatment of insurance and financial services Taxation of the financial sector Towards an Optional Instrument of European Insurance Contract law? Alternative Dispute Resolution (ADR) Consumer collective redress Modernisation of the European Public Procurement Market Environmental Liability Directive Natural catastrophes BIPAR Annual Report Page 5

7 ECJ judgment and EC guidelines regarding use of gender in insurance Data protection Money laundering Review of the Professional Qualifications Directive EU Financial Supervisory Structure and new types of legal acts BIPAR's responses to EIOPA's consultations in BIPAR's participation in EIOPA's first Consumer Day Social Affairs BIPAR mid-term meetings in Brussels Next EU Presidencies BIPAR AGENTS' AND BROKERS' STANDING COMMITTEES A word from the Agents' Standing Committee's Chairman, Mr. Jean-François Mossino Reinforced cooperation of agents at European level A word from the Brokers' Standing Committee's Chairman, Mr. André Van Varenberg INTERNATIONAL AFFAIRS World Federation of Insurance Intermediaries (WFII) Glossary Attachments Member associations Steering Committee Secretariat Page 6 BIPAR Annual Report

8 EUROPEAN AFFAIRS Revision of the Insurance Mediation Directive (IMD) The Directive on Insurance Mediation (IMD) (2002/92/EC) was adopted on 9 December 2002 and EU Member States had until 15 January 2005 to implement the IMD text into national legislation. The two main objectives of the IMD are to enable insurance intermediaries to market their services in the EEA by way of freedom of services (FOS) or establishment (FOE) on the basis of their home country registration and to ensure a high level of consumer protection. The preparation of a revision Over the last months, the European Commission has conducted an Impact Assessment to analyse the consequences of its proposed and possible changes to the existing IMD and finished drafting its revised proposal for a Directive on Insurance Mediation. BIPAR has been regularly consulted over this period, meeting representatives of the DG Internal Market on a weekly basis. It is expected that this proposal will be issued by the end of June/early July 2012, with a 6 month delay. It is expected to be tabled for adoption as part of a Consumer Retail Package together with the proposals on PRIPs (product disclosures) and UCITS V. It will then be sent to the European Parliament (EP) and the Council of the EU, the two EU legislators, for negotiation and adoption. The Economic and Monetary Affairs Committee of the EP will be in charge of the proposal. Its Rapporteur is expected to be MEP Werner Langen (German - EPP). On 8 March 2012, BIPAR organised a lunch in Brussels with MEPs' assistants from the Werner Langen three key EP Committees in charge of financial services issues to introduce them to the insurance mediation issues and the revision of the IMD II in particular, explaining BIPAR's views on the issue. At Council level, it is the Cypriot and Irish EU Presidencies that will work on the first reading of the proposal. In its consultation paper on the IMD revision published two years ago, the Commission proposed a number of changes to the IMD, including extending the current information requirements to insurers, introducing a definition of "advice" and a conflict of interest framework, using the current MiFID arrangements as a benchmark. It also proposed the introduction of measures to address remuneration transparency and to improve cross-border business. It also proposed that a chapter setting out the sales requirements for Packaged Retail Investment Products, such as life with investment element insurance, be included in a revised IMD II. Because of the current strong political wish to align all new financial services regulations as much as possible with the MiFID II, full disclosure, also in non-life insurance, seemed to be the preferred option of the European Commission for the IMD II. Together with its member associations, in January and in April 2012, BIPAR therefore reminded the European Commissioner, Mr. Michel Barnier, of BIPAR key positions on the IMD revision, including its position on remuneration transparency which is commission disclosure upon request of the client for life and non-life. BIPAR Annual Report Page 7

9 BIPAR's position on the transparency of remuneration BIPAR, with the largest majority of its members, promotes that before the conclusion of the contract, insurance intermediaries should inform insurance customers about the nature of their remuneration or compensation. They should also, upon request of their customers, disclose their remuneration related to the contract. BIPAR believes that such a system would ensure that there is a fair opportunity for dialogue between the client and the intermediary about price, quality, services and solutions and, at the same time, it would offer an adequate level of transparency without creating too much administrative burden for operators. BIPAR also wonders if in private lines total premium is not the best solution for comparison. These are largely commodity products where the overall price is the key factor. Competition from many differing distribution channels is strong and ensures that the market remains competitive. Important for BIPAR is that if such a system was introduced, a comparable level of transparency from direct writers should be applicable, not only to ensure a competitive level playing field but also to ensure comparability and consumer protection. Any other system would have competitive side effects and may possibly turn into misleading and irrelevant information for the consumer. BIPAR also asked the EU consultant London Economics to write a paper for BIPAR on compulsory automatic disclosure of commission in non-life insurance. It demonstrates that there exists no evidence showing that compulsory disclosure of commission by insurance intermediaries will yield significant benefits to customers of insurance intermediaries. On 8 February 2012, together with Patrice Muller, the author of the London Economics paper, BIPAR met the Cabinet of Commissioner Michel Barnier and other key people at the Commission to discuss the London Economics paper and the BIPAR position on transparency. A draft proposal On 30 April, a draft (not official and not final) IMD II proposal (or Directive on insurance intermediaries and the sale of insurance products) went through the European Commission inter-services (all the DGs, DG Enterprise or Competition for instance) consultation. This draft was also discussed at EIOPA CCPFI in May Page 8 BIPAR Annual Report

10 Main provisions of the draft (not official and not final) IMD II Scope As requested by BIPAR in its positions, the scope of the draft IMD II is extended to include the sales of insurance contracts by insurers and reinsurers. It also covers the activities of assisting in the administration and performance of insurance or reinsurance contracts (on behalf of a customer or an insurer) including the claims management activities by and for insurers and reinsurers, loss adjusting and expert appraisal of claims. Definitions As requested by BIPAR, the definition of insurance mediation would cover some activities by comparison websites/aggregators: it covers the activities of providing information on one or more insurance or reinsurance contracts in response to criteria selected by the customer whether via a website or other means. It also covers the provision of a ranking of insurance or reinsurance products or a discount on the price of a contract, when the customer is able to directly conclude the contract at the end of the process. As requested by BIPAR, the activity of advising is included in the definition of insurance mediation. "Advice" is also defined as the provision of a personal recommendation to a customer, on request or otherwise. Declaration procedure The draft IMD II establishes a simplified procedure which exempts two groups of persons from the registration procedure mentioned above. It enables them to carry on mediation activities by way of a simple declaration to their competent authorities. There are: those who conduct insurance mediation as an activity ancillary to their principal professional activity, and who meet certain other conditions to make a declaration instead of registering. those whose activities are limited to the professional management of claims and to loss adjustment. For the former group, the intermediary must act under an agreement by which an insurance undertaking or registered insurance intermediary takes responsibility for ensuring his compliance. Information requirements In addition to some provisions of Article 12 of the IMD I, the draft IMD II sets out the following provisions: o disclosure of the basis and amount of the remuneration by insurance intermediaries; o disclosure of the amount of variable remuneration receivable by the sales employees of insurance undertakings and intermediaries; o a mandatory "full disclosure" regime is envisaged for the sale of life insurance products and an "on request" regime (i.e. on customer's request) for the sale of non-life products with a transitional period of 3 years. After the expiry of the 3-year transitional period, the full disclosure regime will automatically apply for the sale of non-life products as well. PRIPs insurance chapter (based on MIFID II requirements) This text was presented to BIPAR member associations and discussed during a telephone conference on 3 May In early May, BIPAR sent another letter to Commissioner Michel Barnier, asking for a level playing field regarding information requirements and in particular regarding transparency of remuneration requirements. BIPAR Annual Report Page 9

11 BIPAR's arguments (extracts) on the transparency of remuneration in the context of the IMD revision The MiFID regime is not the appropriate benchmark for the revision of the IMD, a view strongly shared by EIOPA. In its advice on the IMD revision, EIOPA concluded that the MiFID rules are designed for investment products and are therefore inconsistent with the insurance market. EIOPA felt that they do not reflect the different nature of insurance products and are not in line, for example, with the massive presence of natural persons and small firms operating as insurance intermediaries in the EU Member States. From a competition perspective it is essential that a level playing field with alternative forms of distribution such as direct writers is established, in particular in the area of information disclosure. It is essential that the customer is provided with the same information, irrespective of the form and distribution. For non-prips insurance, a regime requiring upfront disclosure of the nature of remuneration combined with the ability of the customer to request full details of the intermediaries' earnings or direct writers' acquisition costs is a proportionate approach. This would properly empower the customer, minimize additional costs and avoid distortions of competition. Recent studies by national regulators have confirmed that additional costs related to automatic disclosure of intermediaries remuneration significantly outweigh any benefits to the consumer. It would be very difficult in practice to enforce relevant equivalent cost disclosure by direct writers and upfront disclosure would thus result in an uneven playing field. Should the proposal include a mandatory automatic disclosure regime for insurance intermediaries without a meaningful equivalent cost disclosure for direct operators, the proposal will lead to a significant distortion of competition, greatly benefitting direct writers at the expense of the intermediary sector. Insurers distributing directly to the public (direct writers) incur significant costs of acquisition, distribution, marketing, advertisement, infrastructure and claims administration which are borne by intermediaries when the insurance is sold via them. There have already been many examples of marketing by direct writers suggesting that by cutting out the middleman and not paying commission, customers can save all of the intermediaries' costs. This is clearly not the case but customers will perceive the direct channel to be less expensive. Without a level playing field, the proposal will result in an advantageous situation for direct writers and limit customers access to a source of valuable advice and services. PWC in its impact study states, it may be difficult to find a common and verifiable method of fair calculation of the cost disclosure of direct writers. We believe that this should be no reason not to ensure a level playing field. Until such time as direct insurers are required to disclose these costs, we believe that there should be no remuneration disclosure requirements applied to insurance intermediaries for non-prips insurance and this in order to avoid the distortion of competition which would be the result of a lack of level playing field. The required cost disclosure must be meaningful and comprehensive. The disclosure of variable remuneration of employees of insurers, for example, would in no way deal with the competition issue. Equivalent cost disclosure would have to cover a much wider variety of costs. Page 10 BIPAR Annual Report

12 IMD II and Omnibus II Despite the delay of the IMD revision, the IMD could well be slightly amended by the end of the year. Indeed in his report on the Omnibus II proposed Directive adopted in Committee in March 2012, the ECON EP Rapporteur Burkhard Balz is suggesting to include the IMD in that text. The Omnibus II proposed Directive, which is currently being negotiated by the Council and the European Parliament in first reading, is particularly designed to make the Solvency II Directive consistent with the new EIOPA Regulation and with the legislative procedure introduced by the Lisbon Treaty. The Omnibus II proposed Directive did not cover the IMD. However, the Rapporteur explained in his report that, although the IMD is expected to be revised by the Commission in 2012, he proposes to already establish a role for EIOPA in this Directive. His report is expected to be voted in plenary in September The Rapporteur s proposed technical amendments to the IMD give a formal informative role to EIOPA and ensure a better exchange of information between the competent authorities in charge of implementing the IMD, in particular on registers and on national measures going beyond the IMD. The vote on the EP report is expected to take place on 9 September. TIMELINE OF THE IMD REVISION January 2010 Commission asks for CEIOPS advice 11/ /2011 Commission s public consultation May 2011 Publication of responses by the Commission November 2010 Publication of CEIOPS advice April 2011 First meeting of Member States June - September 2011 Preparation by the Commission of the impact assessment and of the proposed IMD II July 2012? Publication of the proposal for a Directive on the revised IMD (IMD II) / /16/17 IMD II implementation? (level 1) EIOPA technical standards guidelines? (level 2 and 3) Parliament (1) /Council (2) readings Adoption of the revised IMD? (1) The ECON Committee will be in charge of the IMD II. Its Rapporteur is MEP Werner Langen (German-EPP) (2) The Cypriot and Irish Presidencies of the EU will be in charge of the first and second readings of the IMD II BIPAR Annual Report Page 11

13 Solvency II Directive - Insurance intermediaries' issues The rationale for EU insurance legislation is to facilitate the development of a Single Market for insurance whilst at the same time securing an adequate level of consumer protection. The third generation of Insurance Directives established a single license for insurers based on the concept of minimum harmonisation and mutual recognition. Many Member States concluded that the EU minimum requirements were not sufficient and implemented their own reforms, thus leading to a situation where there was a patchwork of regulatory requirements across the EU. The Solvency II rules 1 replace these requirements and bring a fundamental review of solvency and risk management standards. Solvency II Directive The Solvency II Directive 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 after the Omnibus II Directive enters into force. The latter amends the Prospectus Directive and the Solvency II Directive, bringing them in line with the EU Lisbon Treaty and to take account of the EU new supervisory structure. The Omnibus II Directive still has to be adopted by the EP Plenary and then published in the Official Journal before it can enter into force (see page 11). 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. Solvency II is likely to be applicable as of 1 January Solvency II 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 more strict 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 taken part in various stakeholder consultations so far. In December 2007, the BIPAR Working Party published a guidance paper on Solvency II as well as another document entitled «Solvency II and captives» in July 2008 (both documents are available upon request at the BIPAR Secretariat). 1 Directive 2009/138/EC of the European Parliament and of the Council of 25 November 2009 on the taking-up and pursuit of the business of Insurance and Reinsurance (Solvency II) Page 12 BIPAR Annual Report

14 2010 Level 2 consultation - BIPAR's response As part of the preparation of the Level 2 implementing measures, the Commission consulted stakeholders in 2010 regarding pricing, design and availability of insurance products, the corresponding effects for consumers and the wider social or economic impacts. BIPAR welcomed the Commission s commitment to only pursue activities where there is clear evidence of concrete benefits for citizens and companies and a strong economic rationale. Whatever the option retained, BIPAR stressed that such an option should not lead to unjustifiable costs on insurers, intermediaries and ultimately, consumers. The solution retained should assure to introduce proportionate requirements both for small and specialised insurers so as to continue to guarantee diversity and a wide choice of carriers for intermediaries and consumers. Increased costs for carriers risk reducing choice through consolidation. Choice allows intermediaries to fulfil their role of customer guide and adviser, and without such choice also the role of the intermediary will decline and ultimately the number of insurance intermediaries. Also, intermediaries stimulate competition. Fewer intermediaries would make insurance products more expensive, and result in less cross-border business. Any choice which limits market offer should also be avoided for sound competition reasons ongoing Level 3 consultation - BIPAR work One of the roles of EIOPA is to develop non-binding guidelines to enhance convergent and effective application of the regulation and to facilitate cooperation between national supervisors. As such in March 2011 EIOPA started developing Level 3 non-binding guidelines aimed to ensure convergence in the application of the Level 2 implementing measures still to be adopted by the European Commission in the Solvency II framework. Before issuing these draft guidelines for a public official consultation, EIOPA organised a pre-non-official consultation phase on them with some operators in the EU insurance market. In April BIPAR consulted its member associations on these draft guidelines to check whether they could trigger some problems when applicable to situations where intermediaries are involved. One of the main issues relates 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. With its contribution, BIPAR wanted to ensure that intermediary activities falling under the IMD would not be seen as outsourcing under Solvency II. Secondly, BIPAR pointed at the 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). Finally, BIPAR recalled that the activities of intermediaries in general are already regulated and supervised. Next steps As previously mentioned, the implementation of Solvency II depends on the adoption of the Omnibus II Directive, which has been postponed on various occasions. In this respect, at the end of January 2012, EIOPA explicitly expressed its concerns about the delay to Commissioner Barnier. The Plenary vote of Omnibus II in the European Parliament is currently planned to take place on 9 September and the implementation of Solvency II is said to still go ahead as scheduled (1 January 2014). BIPAR Annual Report Page 13

15 EP Resolution on Insurance Guarantee Schemes In July 2010, the European Commission published a White Paper on Insurance Guarantee Schemes (IGS). In this Paper, the Commission set out different options for EU action on IGS protection for policyholders and beneficiaries. In particular, it proposed introducing a Directive to ensure that insurance guarantee schemes exist in all Member States and comply with a minimum set of requirements. This White Paper did not cover the failure of insurance intermediaries. BIPAR submitted its response on the White Paper after consultation with its member associations, stressing that it was important that all policyholders/beneficiaries of a failed company receive the same degree of protection and stated that it was in favour of enabling the establishment of IGS in all EU Member States. BIPAR also stated that all classes of policies should be covered and is in favour of expost funding. The Commission is currently assessing the feedback received and is expected to issue a legislative proposal by the end of 2012/beginning of 2013 (initially planned for 2011). EP resolution In the meantime, the European Parliament also decided to respond to the White Paper in the form of a resolution (i.e. a non-legislative report). Contrary to the Commission s proposals presented in its White Paper, the EP draft resolution included intermediary mis-selling or fraud in the scope of a possible European framework for IGS. Although the EP final report will not be binding, it will be an important source of inspiration for the European Commission. BIPAR therefore decided to oppose the EP proposal to include insurance intermediaries in the scope of any future European framework on IGS and prepared amendments to the EP draft resolution accordingly, explaining that the framework on IGS protection proposed by the Commission only concerns cases of insurance company bankruptcy, that all the preparatory work, studies and impact assessment were related to insurance companies only, and that no case has been made for them in the preparatory works. BIPAR also explained that it was totally inappropriate to include intermediaries in the future EU legislation on IGS as they are already subject to the Insurance Mediation Directive. On 13 October 2011 the EP resolution was voted in plenary. It took BIPAR amendments into consideration and simply calls on the Commission to clarify the role played by IGSs in relation to intermediaries. It also recognises that "insurance undertakings are responsible for their employees conduct and that intermediaries are obliged to hold professional indemnity insurance. It further notes that "fraud is covered by criminal and tort law and recognises that IGS rules covering mis-selling and fraud could make supervisors less vigilant and less willing to use supervisory powers, thus creating moral hazard. BIPAR will monitor the drafting of the Commission's proposal. Page 14 BIPAR Annual Report

16 Consumer Rights Directive Background The Consumer Rights Directive was proposed at the end of It aims at improving cross-border business and increasing consumer confidence. It pulls together four existing Directives on unfair contract terms, sales and guarantees, distance selling and doorstep selling. On 10 October 2011, the Council of the EU formally adopted the Consumer Rights Directive. It was published in the EU's Official Journal on 22 November Impact on insurance intermediaries - BIPAR's action in the European Parliament and the Council The initial provisions in the Commission s proposal covered contracts related to financial and insurance services insofar as necessary to fill regulatory gaps (standard contract terms for financial services in general, provisions on consumer information and withdrawal rights for distance and off-premises contracts for mortgage and other loans on real estate negotiated at the consumer s home). In the course of 2010 and 2011, BIPAR, together with its member associations, successfully explained to the European institutions that insurance/financial services are already regulated by specific legislations, some of which are currently under revision (MiFID, IMD, ), and that these legislations provide a high level of consumer protection. BIPAR also explained that applying the Consumer Rights Directive to financial/insurance services would lead to serious legal uncertainty. This led to a very positive outcome, namely that the final text of the Directive excludes financial services (defined as "any service of a banking, credit, insurance, personal pension, investment or payment nature") from the scope. In the Directive s recitals, it is explained that "the existing Union legislation inter alia relating to consumer financial services,... contains numerous rules on consumer protection. For this reason, this Directive should not apply to contracts in those areas. With regard to financial services, Member States should be encouraged to draw inspiration from existing Union legislation in that area when legislating in areas not regulated at Union level, in such a way that a level playing field for all consumers and all contracts relating to financial services is ensured". A specific aspect of the Directive that is still relevant for the insurance sector and for insurance intermediaries in particular, is the ban on pre-ticked boxes, which has an impact on insurance offered additionally for e.g. plane tickets: when shopping online consumers may be offered additional options during the purchase process, such as travel insurance or car rental. These additional services may be offered through so-called "pre-ticked" boxes. Consumers are currently often forced to untick those boxes if they do not want these extra services. With the new Directive, pre-ticked boxes will be banned across the European Union. Next steps Member States have to adopt and publish the necessary national rules by 13 December 2013 and will have to apply these rules as of 13 June BIPAR Annual Report Page 15

17 Life & Investment issues Packaged Retail Investment Products (PRIPs) According to the European Commission, the financial crisis has underlined the need of consumers for information about retail investment products that is clear, easy to understand and that gives a good insight in the risks of their investment. Retail investors have lost money with investments that carried risks that were not transparent or understood by them and, as a consequence, they lost their confidence in the investment market. Over the last years, the European Commission has therefore been consulting the industry, including BIPAR, on how to improve the sale of and information on the packaged retail investment products. It is expected to issue a proposal for a Regulation on PRIPs by July The Commission s choice for a Regulation aims at ensuring a true harmonization of the new rules in the EU. Contrary to a Directive that leaves to the national authorities the choice of form and methods, a Regulation is binding in its entirety and directly applicable in all Member States. BIPAR's position BIPAR promotes robust but proportionate regulation which does not destroy choice by the consumer and promotes competition. There should be room not only for proportionality but also for product differentiation and fine-tuned regulation based upon high level principles, adaptable both in terms of instruments as in terms of requirements to the specificities of the investment products. Coherence in EU law applying to different types of retail investment products -one of the aims of the Commission in order to improve the comparability of investment products- is praiseworthy but, in line with BIPAR s thinking, the Commission recognises that rules should be adapted to the different features of an investment product. According to BIPAR, pre-contractual information should be available for all products which include an investment risk. Consumers should always be informed in such a way that they fully understand the characteristics of the investment product and the risks that are involved. However, BIPAR believes that the pre-contractual information requirements should be adapted to and proportionate with the specificities of the product. This information could then be presented in a clear way to the consumer in the form of a Key Information Document (KID). This should be seen as a stand alone document with a standard look but which takes into consideration the specificities of each PRIP and which is produced by the manufacturer of the product. Next steps Once issued by the Commission, BIPAR, together with its member associations, will analyse the proposal and prepare amendments where needed. Page 16 BIPAR Annual Report

18 Proposal for a recast of the Markets in Financial Instruments Directive (MiFID) The Directive on Markets in Financial Instruments (MiFID I) was introduced in 2007 and aims at both enhancing consumer protection and at making it easier for investment firms to carry out cross-border business. Many practitioners affiliated to BIPAR via their national associations provide investment advice and must therefore comply with the MiFID conduct rules. As these practitioners are often small to medium sized investment intermediaries and they are only allowed to provide investment advice, the MiFID foresees an opt-out regime, which is a lighter set of rules. In the aftermath of the financial crisis, the European Commission launched a revision of the MiFID I with the aim, among others, to improve the protection of the investor. Commission's consultation followed by MiFID II proposal Before introducing a proposal, the Commission consulted the market in early In its response to this consultation, BIPAR highlighted the importance of maintaining the option for Member States to exempt investment firms, under certain conditions, from the full MiFID I requirements. BIPAR also pointed out the right of every intermediary to choose his own remuneration business model. Commission's proposal On 20 October 2011 the Commission published a proposal for MiFID II. The proposal introduces new conduct of business rules for financial intermediaries when providing investment advice with regard to remuneration, information, professional knowledge and adherence to an investor compensation scheme. The Commission has chosen to maintain the opt out option to exempt investment firms from the full MiFID requirements (Article 3,) but has extended the list of the opt-out requirements. The most eye catching requirements of this list are the split between "an investment advice based on an independent basis" and "other investment advice" and the ban on commission that is introduced for investment advice provided on an independent basis. Article 24.5 of the proposal for a Directive states that when independent advice is provided, the investment service provider shall not accept commissions or any monetary benefits paid directly or indirectly by a third party. Independence also implies that the investment firm must assess a sufficiently large number of financial instruments available on the market. The proposal is currently under discussion at the European Parliament and Council, for consideration and adoption. Parliament's and Council's first readings BIPAR's action BIPAR and its Working Party on MiFID studied the proposal and drafted, after consultation with BIPAR members, their views and amendments to the text. The key issue for BIPAR is the concept of independent advice and the link that is made with a ban on remuneration from third parties (see page 18). BIPAR and its member associations submitted their views and amendments both to the Council representatives in general and the EU Presidency in particular, as well as to the members of the European Parliament (MEPs). Together with the Directors Committee, BIPAR also organised a lunchmeeting on 8 March 2012 with MEP assistants to discuss the MiFID II proposal. BIPAR Annual Report Page 17

19 Key BIPAR issues Independent Advice Ban on commission BIPAR regrets the choice of the denomination "independence" in Article 24. It believes that the wording independent advice will trigger many problems due to different translations and perceptions in the Member States. BIPAR does not agree with the restriction on the remuneration when the investment firm informs the client that investment advice is provided on an independent basis. When investment advice is provided, there should be no prohibition at all to be remunerated by the product manufacturer. Reception and transmission of orders as a separate service Article 3.1 leaves no room for an opt-out investment firm to provide to its client the investment service of reception and transmission of orders, as a stand-alone service, without providing investment advice. BIPAR strongly opposes the narrowing of the scope of the investment services for opt-out firms. These firms should be allowed to receive and transmit orders without providing investment advice. Adherence to an investor compensation scheme It is appropriate for reasons of consumer protection and confidence in the financial system to oblige all investment firms, including the opt-out investment firms that only give investment advice and do not handle clients money, to contribute to a compensation scheme or to have an equivalent protection for their clients. However, this limited authorisation of opt-out firms should be reflected in the level of their contribution. The risk for the client of not getting back his money from an opt-out firm, working within its authorisation, is indeed in BIPAR view non-existent. BIPAR therefore proposes to add to Article 3.1 in fine that, if opt out firms should contribute, they should only contribute with an annual fixed contribution or have an equivalent proportional protection for their clients. Requirements which are "at least" analogous to the MiFID requirements. BIPAR believes that the word at least in Article 3.1 can create confusion. Analogous in itself expresses the intention. The words at least should be deleted. Management requirements BIPAR requests that only proportional management rules should apply on Article 3 opt-out investment firms. Ban on commission for portfolio management Article 24.6 introduces a ban on commission for portfolio management. Such a ban will increase costs for consumers. Transparency is a better alternative. At the end of March 2012, the EP Rapporteur, Mr. Markus Ferber, published his draft report, taking on board some of the BIPAR issues. Two of the changes made by Mr. Ferber concern Article and 5 on independent investment advice in combination with a ban on commission. Sharing BIPAR's point of view on these issues, he no longer uses the denomination of independent advice. He proposes instead an obligation for the investment firm to specify in advance whether the advice is provided in conjunction with the acceptance or receipt of third-party inducements and whether the advice is based on a broad or more restricted analysis of the market. In the explanatory note to his draft report, he explains that the word "independent" may mean that other forms of advice have a negative connotation. Therefore he has chosen a more neutral wording and proposes in his draft report that clients should be informed before investment advice is given if there have been third party payments and if advice is given on a broad or on a more restricted analysis of the market. Page 18 BIPAR Annual Report

20 The Rapporteur also makes important changes to the ban on commission. He replaces independentbased advice and the assessment of a sufficiently large number of financial instruments by fee-based advice and by the obligation to inform the client whether the financial instruments recommended will be limited to financial instruments issued or provided by entities having close links with the investment firm. Other changes requested by BIPAR are the deletion of the ban on commission for portfolio management (Article 24.6) and the no longer mandatory telephone conversation recording (Article 16.7). Although the draft report seems to meet some of BIPAR s main concerns, others remain unfulfilled. Especially BIPAR s request for proportional requirements has not yet been granted. BIPAR has therefore reiterated these suggested amendments to the MEPs. A discussion on the draft report and on the amendments is scheduled for 18/19 June with a vote in the ECON Committee on 9 July. The Plenary vote in the European Parliament is scheduled for 22 October. Consultation of ESMA guidelines on MiFID suitability requirements At the end of 2011, ESMA, the European Securities and Markets Authority, published draft guidelines on the MiFID I suitability requirements asking for comments from the interested parties. According to ESMA, recent studies indicate that not every investment firm complies effectively and fully with the MiFID suitability requirements. With its proposed guidelines, ESMA aims at bringing more clarity in their implementation. Some of the problems are that investment firms fail to ask the right questions to the client, do not collect the necessary and relevant information, make the wrong assessment of the client information and fail to recommend a suitable investment. BIPAR's response to ESMA consultation Under the proposal for MiFID II, Article 3 opt-out firms are obliged to carry out a suitability test when they provide investment advice. This means that these draft ESMA guidelines, which are perhaps under the current MiFID I not applicable to Article 3 opt-out firms in every Member State, could become applicable once the MiFID II is adopted and implemented in the Member States. For this reason and after consulting its member associations, BIPAR responded to the consultation on certain aspects of the MiFID suitability requirements. In its response, BIPAR pointed out to ESMA that its ongoing concern regards the proportionality of the MiFID requirements and the guidelines implementing these requirements. The members of BIPAR s associations are mostly SMEs and micro-type operators, who give investment advice and are therefore subject to a number of MiFID requirements and the translation that is given to these requirements in the process of their implementation by (national) supervisory authorities. To underpin this request for proportionality, BIPAR sent, in addition to its response to the ESMA consultation, some practical examples and comments. ESMA informed BIPAR that a number of other respondents raised the same concerns about proportionality. ESMA stressed that it is committed to incorporating the proportionality principle into the guidelines so that all firms (SMEs included) can take a pragmatic approach to their application. The guidelines should be drafted in such a way that there is sufficient room left for the proportional application of these requirements. BIPAR Annual Report Page 19

21 Pensions in the European Union High on the agenda of the European Union is the reform of the pension system in Europe. The EU wants to achieve in every EU Member State pensions systems that are safe, adequate and sustainable. A reform is necessary as Europe is facing a major demographic challenge. Its citizens are living longer and have fewer children. It has been calculated that today 16% of the Europeans are aged 65 or over and in 2060 this figure will be doubled. The debate on pensions started in July 2010 when the European Commission presented its Green Paper Towards adequate, sustainable and safe pensions. In February 2012 it was followed by a White Paper, in which ideas and proposals are set out to ensure pensions in the EU are adequate and sustainable in the long run. BIPAR's response to the Commission s Green Paper BIPAR stressed the role for intermediaries in assisting their clients to find suitable pension provision and proposed suggestions to make it easier for intermediaries to offer pension products cross-border. A majority of BIPAR members see a role for the EU in making pensions more affordable and sustainable and in facilitating their cross-border mobility. Commission's White Paper The White Paper looks at which actions the EU and the Member States should take in order to tackle the major challenges that confront the pension systems in Europe. It puts forward a range of initiatives to help create the right conditions so that those who are able can continue working and help Member States to make the pensions of their citizens adequate, secure and financially viable. The proposals are: - Creating better opportunities for older workers by calling on the social partners to adapt work place and labour market practices and by using the European Social Fund to get older workers to work; - Developing complementary private retirement schemes by encouraging social partners to develop such schemes and encouraging Member States to optimise tax and other incentives; - Enhancing the safety of supplementary pension schemes, including through a revision of the Directive on Institutions for Occupational Retirement Provision (IORP) and better information for consumers; - Making supplementary pensions compatible with mobility, through legislation protecting the pension rights of mobile workers and by promoting the establishment of pension tracking services across the EU; - Encouraging Member States to promote longer working lives, by linking retirement age with life-expectancy, restricting access to early retirement and closing the pension gap between men and women; - Continuing to monitor the adequacy, sustainability and safety of pensions and support pension reforms. Page 20 BIPAR Annual Report

22 BIPAR's first views The BIPAR Secretariat is currently studying the White Paper. A first analysis showed that some of the recommendations are more or less in line with the BIPAR comments. One of the recommendations of the Commission to the Member States is to support the development of complementary retirement savings to enhance retirement incomes. BIPAR supports this development of extra savings as an extra pillar to the pension system and stressed already in its response to the Green paper the role for intermediaries in assisting their clients to find these complementary pension savings. Another recommendation of the Commission is to link the retirement age with increases in life expectancy. BIPAR also recognizes the link between work beyond the current retirement age and the reception of "better retirement conditions". The White Paper on pensions also recognizes the need to facilitate cross-border pensions. To achieve this view, the current IORP Directive is under review. BIPAR supports initiatives tackling the hindering of cross-border activity and cross-border pensions. Next steps BIPAR will consult its member associations on the White Paper and will submit its comments to the European Commission. This paper does not yet contain legislation, but it is not unlikely that the European Parliament will also respond to the White Paper and provide the Commission with first views. Review of the Directive on the Institutions for Occupational Retirement Provision (IORP) The European Commission is currently reviewing the IORP Directive (2003/41/EC), regulating the functioning of Institutions for Occupational Retirement Provision (also called pension funds or IORPs). This Directive was in 2003 a first step towards the creation of an internal market for efficient and safe retirement products. The Directive made it possible for pension funds to develop cross-border activities, i.e. to manage and execute pension schemes for companies established in another Member State. However, several studies on the implementation of the IORP Directive in the different Member States showed that the effectiveness of the Directive in practice can be increased. The aim now of the review of the IORP Directive is to simplify the rules and to set up a proper system of solvency rules for pension funds. BIPAR's comments on EIOPA's advice to the Commission Before publishing a draft of the revised IORP Directive, probably in 2012, the European Commission asked the European Insurance and Occupational Pensions Authority (EIOPA) for advice on 23 topics on how to improve the IORP Directive. EIOPA launched in October 2011 a public consultation on its draft response to the European Commission. This draft response is an extensive paper of over 500 pages. Most of the topics do not concern directly intermediaries. However, it does not mean that this text is not of interest to intermediaries. In its comments to EIOPA draft response to the European Commission, BIPAR explained that insurance intermediaries are active in the area of privately funded individual pensions as well as in the area of occupational pension schemes. The intermediary advises the employer (and the beneficiaries/ employees), on an ongoing basis, on the pension scheme. Furthermore, BIPAR underlined that citizens in the EU deserve secure and reliable pensions, regardless the vehicle they use to obtain this. Well regulated and supervised IORPs play an important role in obtaining such safe and reliable pensions. A level playing field between all financial market players providing occupational pensions, including IORPs, contributes also to this. BIPAR Annual Report Page 21

23 EIOPA published its advice to the European Commission in February A key proposal of EIOPA is the holistic balance sheet, as a way to achieve the Commission s aim for harmonization. This approach means that the existing diversity of occupational pension systems in the EU is acknowledged and captured into a single balance sheet. EIOPA also advises the Commission to enhance the qualitative requirements for governance and risk-management of IORPs as well as to introduce a Key Information Document (KID) for all defined contribution schemes. This KID would allow members of these schemes to have confidence in the scheme irrespective of where is it is located in the EU. Next steps The publication by the European Commission of a draft revised IORP Directive is scheduled for BIPAR will follow, with the help of its Working Party on Pensions, the developments in this dossier and, where needed, bring its views to the attention of EU institutions. Proposed Directive on credit agreements relating to residential property On 31 March 2011 the European Commission published a proposal for a Directive on credit agreements relating to residential property. This text applies to creditors and to credit intermediaries and introduces inter alia prudential and supervisory requirements for intermediaries. The proposed Directive was preceded by a 2009 Commission s study (analysing the EU credit intermediation market, reviewing the regulatory framework in which credit intermediaries operate, and examining possible consumer detriment), a 2009 Commission s public consultation and public hearing on responsible lending and borrowing and - at European Parliament level - a workshop in January 2011 on responsible lending and borrowing. BIPAR actively participated in these pre-proposal events, explaining how the presence of credit intermediaries always represents an additional guarantee of consumer protection through professional services and advice and requesting that any legislation on credit intermediaries be based on an activity-based approach in order to ensure a level playing field between operators. Proposed Directive - Its impact on credit intermediaries The aim of the Commission s proposal is 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 is 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 proposed Directive covers all loans which allow the consumer to borrow money in order to buy a home as well as certain loans to consumers for renovation. It also covers all loans to consumers that are guaranteed by a mortgage or another comparable security. Page 22 BIPAR Annual Report

24 The proposed Directive contains principles for the authorisation and registration of credit intermediaries as well as the establishment of a passport regime for those intermediaries. This means that once authorised in one Member State, the intermediary would be allowed to provide its services throughout the Internal Market. Lenders and credit intermediaries will be required to make general information available at all times on the range of credit products they offer, to provide personalised information to the consumer through a European Standardised Information Sheet (ESIS), to give explanations and meet certain standards for the provision of advice and to assess the consumer's ability to repay, based on information provided by the borrower. Finally, credit intermediaries will be required to disclose certain information concerning for example, their identity, status and relationship with the creditor, to render transparent any potential conflicts of interest. BIPAR's action BIPAR, together with its Working Group on Credit Intermediaries, was closely involved in the Commission s preparatory work for this Directive. Since the publication by the Commission, it has also been actively engaged at European Parliament and Council level, meeting on various occasions the Parliamentary rapporteurs and shadow rapporteurs, the successive Council Presidencies and the drafting team from the Commission. After consultation with its member associations, BIPAR amendments have been prepared on the level playing field (to ensure that there is one between creditors and intermediaries in particular regarding the transparency on remuneration), 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 (to ensure that not only part of the IMD becomes applicable in case a credit intermediary performs ancillary services that fall under the IMD). In the amendments, BIPAR also warned against too far-reaching implementation measures (delegated acts). These activities have already led to positive changes and to a more balanced text at Council and Parliament level. EP's and Council's first readings The first readings in the European Parliament and Council are far advanced now. In Council, the Danish EU Presidency has brought forward a final compromise in a text that reflects many of BIPAR's proposed amendments on the added value of intermediaries. There are still some amendments that contain points of concern, such as the possibility for Member States to ban fees (even if only mentioned in the recitals, which are not legally binding) or the fact that host Member States can establish their own competence requirements in certain cases. Member States can also ban the use of the word advice or advisor but this is limited to creditors, tied intermediaries or appointed representatives of tied intermediaries. At European Parliament level, the process has been delayed a bit, due to the work on compromise amendments. Since there are a large number of amendments proposed by the members of the Economic and Monetary Affairs Committee (ECON) to the draft report of Rapporteur, Mr. Sanchez Presedo, the latter has decided to work on compromise amendments that bundle part of the amendments, thus reducing their number and making a vote easier. However, this work has proven to be more difficult than envisaged. BIPAR Annual Report Page 23

25 The latest compromise amendments look a lot better for intermediaries than some of the earlier drafts. There remains an issue with the level playing field between creditors and intermediaries where only intermediaries are required to provide information on their remuneration. Similar to the abovementioned Council amendment, the Parliament is also discussing the use and conditions for the use of wording as (independent) advice or (independent) advisor and the link with remuneration from creditors (see the debate in the MiFID dossier). This is one of the areas where BIPAR will continue calling for a solution without a ban on commission and providing a level playing field. The vote in the ECON Committee has been postponed several times and may take place towards the end of May The Parliament s Plenary is said to be voting on the text on 10 September 2012 but this may be postponed as well. Once the European Parliament has adopted its amended text of the Directive in Plenary, the Council will have to decide whether to accept all the European Parliament s amendments or not. It has to be said that both institutions are in constant dialogue and that many of the Council amendments are already taken over by Parliament in the process. Should the Council accept Parliament s text as it stands, the legislative process is over and the text adopted. However, in most cases, the Council will have comments, which will be brought forward in a common position. This is the start of the so-called second reading in the European Parliament (for which it has three months), where again amendments are possible. BIPAR will continue to liaise with both institutions and propose further amendments where necessary during these next steps. Cross-selling practices Interesting to point out is that at European Parliament level, the ECON Rapporteur suggests introducing a new article in the Directive, dealing with cross-selling practices. As the text stands for the moment, this article would ban tying (where the product cannot be obtained without the ancillary product) but allow bundling (where both products can still be obtained separately but where the package would be more advantageous). Exceptions are however still foreseen for a current account. BIPAR has commented, following its general position on cross-selling practices, stating that cross-selling can in certain cases be beneficial for the consumer but that the consumer has to be well informed and should have a choice. Page 24 BIPAR Annual Report

26 Eurobarometer on retail financial services Background On 17 February 2012, the European Commission s DG Internal Market and Services published a Eurobarometer on retail financial services. Eurobarometers are surveys on the evolution of public opinion in the Member States performed on behalf of the Commission since 1973 on any possible topic the Commission is interested in having information about. They are intended to help the preparation of texts, decision-making and the evaluation of the Commission s work. Content The survey looked at public opinion with regard to bank accounts, mortgage credit, consumer credit, stocks/bonds/shares, investment funds, insurance and payments. It covered 26,856 EU citizens in all 27 EU Member States and it analysed the different financial products, the cross-border purchasing by consumers of these products, consumer experience of purchasing financial products (including the channels of distribution they use such as intermediaries, showing the percentage of consumers making use of intermediaries for the different countries), problems consumers encounter and how they complain and finally how they pay for their retail financial services (cash/by card/ ). The report also looked at experience when switching financial services providers within the EU, and at what advice and information consumers receive when purchasing financial products. Part of the Eurobarometer is also dedicated to information on remuneration. The findings are that there is a "widespread lack of transparency on the payment of commissions and remuneration for all financial products". It adds that for all of the financial products included in this survey, at least 50% of those who purchased the product in the last 5 years say the person who sold them the financial product in question did not tell them whether he or she was being paid a bonus or commission or other remuneration. In general, the results show large differences in the financial products and services held by European consumers. It also showed how European consumers are extremely immobile when it comes to financial services; many fail to shop around for financial products and the majority have not switched providers for existing products. Given the level of domestic immobility, it is not surprising that levels of direct crossborder activity also remain low. The survey identifies a clear need for improving financial literacy amongst EU citizens, which could improve the "shopping around". The report further reads that: "Many respondents are still dependent on face-to-face purchasing and rely on their providers for recommendations. Encouraging the use of other purchasing channels, such as the internet, or making advice and recommendations more readily available to citizens would enable them to compare products in a way which is perhaps more limited currently. There seems to also be a need for improved regulation in the way that these products are sold with the transparency of the purchasing process a common issue, particularly when it comes to how the salesperson is being remunerated". BIPAR Annual Report Page 25

27 Pools and ad-hoc co-(re)insurance agreements on the subscription market On 10 June 2011, the European Commission s DG Competition launched a tender for a study on co-(re)insurance pools and ad-hoc co-(re)insurance agreements on the subscription market. In September 2011, the tender process was cancelled as the Commission did not receive any proposals for the study. On 8 October 2011, the Commission launched a new tender for the above-mentioned study. The subject of the contract was the provision of an overview and analysis of the co(re)insurance pools across the EU and of the ad hoc co(re)insurance agreements on the subscription market. The new study objectives included amongst others: an overview on the main changes (if any) regarding the functioning of co(re)insurance agreements on the subscription market across Member States, following its conclusions reached in the Final Report on the Business Insurance Sector Inquiry of 25 September Ernst & Young won the tender and started working in November/December Some BIPAR member associations and/or individual intermediaries and insurers have in the meantime received questionnaires or were contacted in this respect. On 1 April 2010, the new insurance block exemption regulation (BER) came into force. It automatically exempts certain types of agreements in the insurance sector from the prohibition on anticompetitive agreements set out in Article 101 of the Treaty of the European Union. The new BER replaces the current insurance block exemption and will expire on 31 March The new BER renews only two of the four categories of insurance agreements exempted by the 2003 BER. Since 1 April 2010, only agreements on the preparation and sharing of joint calculations, tables and studies and certain agreements on the co-insurance and re-insurance pools are therefore covered by the new BER. Ad-hoc co-insurance pools In addition, the BER reconfirms explicitly that it does not cover ad-hoc co-insurance involving a leader and followers on subscription markets. It is generally recognised that such insurance can be beneficial by spreading and diversifying the risk among multiple insurers, ensuring speedy decision-making and agreement processes as well as a consistent approach to claims handling and agreement. In its 2007 Business Insurance Sector Inquiry, the Commission expressed some concern about a possible distortion of competition arising from the alignment of premiums of lead and following insurers in the subscription market, resulting in the insured being charged the highest level of premium. During the months that followed, the European Commission continued to express concerns regarding the alignment of premiums despite the 2009 BIPAR high level principles. It welcomed the introduction of these principles for placement of a risk with multiple insurers. However, the Commission said that it had not yet done enough work to determine on how they were working practically and that this would be the next step in the follow-up to the sector inquiry. Page 26 BIPAR Annual Report

28 Shadow banking Background and definition Whereas the 2008 crisis led to various and ongoing reforms in the financial sector at European level, the non-banking credit activity did not get the immediate prime focus. Following initiatives at international level, the European Commission has now decided to start work at European level as well. The FSB definition of shadow banking, also used as a starting point by the European Commission, is "the system of credit intermediation that involves entities and activities that are outside the regular banking system", and thus are not regulated like banks. The FSB estimates the size of the global shadow banking system at around 46 trillion in European Commission's Green Paper 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. The project is of potential interest to intermediaries since insurance is also in scope. Indeed, at international level, insurance and reinsurance undertakings which issue or guarantee credit products are seen as possible shadow banking entities/activities. The Green Paper examines existing measures and proposed EU measures that already address shadow banking activities. The Commission already sees room for better supervision and regulation of shadow banking. This can be achieved through: indirect regulation: regulating the links between banking and non-banking systems, for example in Solvency II for the insurance sector, where the Commission plans to require originators and sponsors of securitisation products to meet risk retention requirements similar to those set out in banking legislation, extension or revision of existing regulation, for example the broader scope of MiFID II new specific regulation, for example, Solvency II which provides comprehensive regulation centred on a risk-based and economic approach, along with strict management requirements. The Solvency II implementing rules will also include authorisation and ongoing regulatory requirements relating to solvency, governance and reporting as far as insurance SPVs (special purpose vehicles) are concerned. The Commission decided to monitor whether the new Solvency II framework will be fully effective in addressing any issues raised by insurance and reinsurance undertakings performing activities similar to shadow banking activities. In the framework of the Green Paper, the European Commission organised a conference on 27 April 2012, which BIPAR attended. The conference brought together industry representatives and policymakers, from both European and international level. There was a broad consensus that one had to be careful to keep the balance and not destroy the positive characteristics of shadow banking, but at the same time guarantee a level of regulation and consumer protection also in the shadow banking area and to avoid a move from traditional activities towards shadow activities due to a lack of regulation in that field. BIPAR's action and next steps As at this stage, however, an official BIPAR position seems premature. BIPAR will in any case continue to monitor the dossier and analyse the responses to the Green Paper, as well as the discussions in the European Parliament to see if action in the future is desirable. BIPAR Annual Report Page 27

29 Taxation VAT treatment of insurance and financial services Background 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 aims 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. Contents of the proposals One of the main objectives of the revision is to redefine the scope of the VAT exempt insurance and financial services. The proposal for a Directive is accompanied by a proposal for a Regulation which expands the definitions of exempt services and will 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 non-recoverable input tax; in particular in business-to-business activities. Actions of the BIPAR Tax Working Party BIPAR has always been of the opinion that core activities of intermediation services, where an intermediary delivers services in an intermediation capacity, should continue to be exempt. In this regard, the BIPAR Tax Working Party has identified some issues that need to be clarified so as to allow our interests to be protected in the Directive: - Co- and sub-intermediation: The BIPAR Tax Working Party opposes an interpretation that excludes from the VAT exemption those intermediaries not in direct relationship with the contractual parties of the main service. - Administrative tasks: An administrative task which is inherently part of the intermediation or insurance process should be exempt from VAT. - Outsourcing: If outsourced services are exempt for insurers they should also be exempt for intermediaries so as to ensure a level playing field. - Claims handling activities: If claims handling activities are exempt for insurers they should also be exempt for intermediaries so as to ensure a level playing field. - Non-concluded contracts: The remuneration of the intermediary when the contract is not ultimately concluded should be exempt. - Option to tax: BIPAR would support such a measure, however, the modalities of the application of this option to tax must be clarified in order to achieve a workable solution. Page 28 BIPAR Annual Report

30 Over the last twelve months, the BIPAR Tax Working Party, chaired by David Jordorson, informed the Danish EU Presidency (January-July 2012) -as well as the predecessors- of its position on this issue. Moreover, in April 2012, six organisations representing the financial services sector, i.e. BIPAR, the European Association of Co-operative Banks (EACB), the European Association of Public Banks (EAPB), the European Banking Federation (EBF), Insurance Europe and the European Fund and Asset Management Association (EFAMA), sent a common letter to the Minister for Economic and Interior Affairs of Denmark urging the Danish Presidency of the Council to make positive moves on the VAT dossier and stressing the importance of continuing to work on the VAT Directive. This letter follows up a meeting between the BIPAR Secretariat and David Jordorson with the fiscal attaché of the Danish Presidency in January 2012 where it was David Jordorson indicated that the Danish Presidency would focus on the Financial Transaction Tax (FTT) Directive rather than on the VAT dossier. Recent developments are also linked to ongoing debates directly related to the FTT proposed Directive. The ECON Committee proposed a series of amendments to the proposal for a Directive. Three of these amendments suggested the introduction of an EU-wide VAT on financial services, should the FTT not be adopted. The BIPAR Working Party analysed these amendments and decided not to comment on them, notably since MEP Anni Podimata (S&D), who is the Rapporteur of this dossier in the European Parliament, declared that proposals for alternative taxation tools should be avoided because the final version of the text should remain coherent. The BIPAR Secretariat continues to carefully monitor these debates. Next steps It is unlikely that the Council will reach consensus during the Danish Presidency and the discussions may not significantly move forward in the second semester of 2012 during the Cypriot Presidency. The BIPAR Tax Working Party will continue to work on the issue with the European Commission, with the Danish Presidency and also liaise with the incoming Cypriot Presidency and the future Irish Presidency (January- June 2013). Taxation of the financial sector Background As a follow-up to the 2010 Communication on the taxation of the financial sector, the Commission issued a public consultation in February 2011 on taxation of the financial sector. The consultation was focusing on 5 headings: problem definition, taxation as a relevant measure, Financial Transaction Tax (FTT), Financial Activities Tax (FAT), cumulative effects with other measures, such as bank levies and regulatory measures. Actions of the BIPAR Working Party In April 2011, after consulting its member associations and in coordination with the BIPAR Tax Working Party chaired by David Jordorson, the BIPAR Secretariat submitted its response to the Commission s consultation. Regarding the FTT, BIPAR highlighted the fact that: A FTT may generate increased costs on the consumer rather than on the financial sector Due to the fact that the tax would be applied in Europe only, there is a risk that companies working in the financial sector would move to other areas Since the tax is levied on every transaction, BIPAR believes there is a risk for cascading effects of a FTT BIPAR Annual Report Page 29

31 Moreover, BIPAR explained that the European Commission's statement that the insurance and insurance intermediation sector is undertaxed is a misconception. Indeed various mechanisms already exist and greatly affect insurance intermediaries: the insurance premium tax, parafiscal taxes,... In September 2011, the European Commission published a proposal for an EU-wide financial transaction tax. The tax would impact exchanges of shares and bonds at a rate of 0,1% and derivative contracts at a rate of 0,01% and would raise, according to the Commission, 57 billion per year. The aim of the tax would be to ensure that the financial sector makes a fair contribution, since the Commission considers this sector is both undertaxed and responsible for the economic and financial crisis. The scope of the tax would include 85% of financial transactions but house mortgages, insurance contracts and other financial activities carried out by individuals or small businesses for instance would fall outside of the FTT scope. In January 2012, David Jordorson and the BIPAR Secretariat met with the Danish Presidency and the European Commission: the Danish Fiscal Attaché confirmed that the Danish Presidency would focus on the FTT Directive rather than on the VAT dossier but the European Commission indicated that a consensus of the 27 Member States on the FTT by the end of the Danish Presidency was unlikely to be reached. On 25 April 2012, Members of the Committee on Economic and Monetary Affairs (ECON) in the European Parliament voted in favour of the introduction of an EU-wide Financial Transactions Tax. The Parliament has no co-decision power concerning the introduction of a FTT, but this vote is still considered as a signal sent to the Member States and the European Commission. Next steps On 23 May 2012, the text was adopted by the plenary sitting of the European Parliament. The BIPAR Secretariat is currently following the proposal for an FTT and will keep its members informed of any developments. It will meet officials of the Cypriot Presidency (July-December 2012) and Irish Presidency (January-June 2013) and will continue to communicate BIPAR's position at EU level. Page 30 BIPAR Annual Report

32 Towards an Optional Instrument of European Insurance Contract law? Under the Europe 2020 strategy, the European Commission is currently tackling bottlenecks in the Internal Market to create sustainable growth. This includes its work on European Contract Law (ECL): evidence shows that differences in national contract laws could be a barrier to cross-border trade in the Internal Market. A proposal for a Regulation on an optional European sales law was published in October 2011.The EC is today considering to extend its work to insurance contract law, potentially in the form of an EU Regulation setting up an Optional Instrument (OI) of ECL. An OI 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, national and European. In June 2011 the European Parliament also called for the setting up of an Optional European Insurance Contract law, believing that such an instrument could be particularly useful for small-scale insurance contracts. In parallel work has been carried out by a group of academics on a set of Principles of European Insurance Contract Law (PEICL) to establish a European optional insurance contract law regime across the EU. Which Optional European Insurance Contract law? The objective of the European Commission s possible initiative on an optional European Insurance Contract law would be to facilitate the expansion of cross-border trade for business and provide a better choice of insurance products to consumers, while ensuring a high level of consumer protection. It will address potential contract law related obstacles to cross-border trade in insurance products for businesses and citizens. According to the EC, many businesses in the insurance sector are hindered from offering their products cross-border, as they bear high transaction costs for the requirements to adapt to a foreign law. These costs are particularly relevant for insurance policies, where the contract itself represents the product. The need to adapt to a different contract law may therefore generate costs for the adaptation of a given product potentially to each Member State's market where it would be offered. Thus, insurers and intermediaries need to acquire indepth knowledge of the contract law of the EU country where they wish to offer products, as the product characteristics and features depend on the applicable national law. Acquiring such expertise requires significant investment. As a consequence, suppliers who are willing to develop insurance products targeting other countries are likely to be hindered to expand into many EU countries at a time. Thus, they are prevented from developing economies of scale and strategies for pan-european sales. According to the Commission, consumers are disadvantaged by the restricted choice of insurance products. While the choice of products may be high in the EU Member States where the insurance sector is highly developed, consumers face a more limited choice in other EU countries. Furthermore, mobile consumers and workers within the Internal Market may be disadvantaged, if they cannot fully benefit from an insurance product (e.g. a pension product) they had acquired in a given Member State, when they move to another one. Different policy options exist for the EC initiative on an Optional European Insurance Contract law instrument. The policy options considered will include legislative measures (Directive, Regulation introducing optional instrument) and non-legislative measures (self-regulation, recommendation). The "no action" option would also be carefully assessed. BIPAR Annual Report Page 31

33 BIPAR's current position o Insurance intermediaries who operate legally in one Member State very rarely expand their business into another Member State (FOS/FOE) mainly because of requirements imposed by the host Member State for consumer protection reasons and of a lack of knowledge of its conduct of business rules and insurance contract law. o An insurance optional instrument would allow switching to a uniform EU law for cross-border contracts, and depending on the instrument's design, also for local contracts. It would thus enhance the design, distribution and calculation of insurance policies on a uniform EU-wide basis, without having to comply with 27 different legal systems. It would help insurance intermediaries willing to operate cross-border to lower their transaction costs. o This, of course, implies that product manufacturers, i.e. the insurers, be ready, interested and willing to design products for universal EU sale; products that could be distributed on the basis of a European law and whose performance and delivery would not depend vitally on local/national characteristics. These products would also have to be commercially attractive and meet a potential demand. o Insurance intermediaries will have to get a very good grasp of this European optional regime in order to advise their clients whether to opt for it or not. They will have to explain why the European regime offers a similar or better protection for their clients rather than their national one, in addition to offering a better basis for cross-border transactions or even for national transactions. Liability risks of intermediaries could be significant in this context. o BIPAR believes that more preparatory, technical and legal work is needed before considering an instrument on insurance contract law at EU level. The PEICL are a good starting point, but require, however, important changes. Moreover, the potential benefits, and also the costs, burden, and other downsides for all market participants should be analysed and quantified, in particular for intermediaries. The optional regime will have to be channel neutral. o Consideration will have to be given also to the after-sales services (claims handling, complaints). Next steps BIPAR's actions An expert group composed of practitioners and academics with a specific expertise in the field of insurance will be set up in the autumn in order to provide advice to the Commission on the substantive content of possible contract law rules in insurance. This group will provide continuous support to the Commission's services throughout the period of its work on this initiative. BIPAR will propose different candidates for the expert group. The Commission may also ask EIOPA for expert advice. BIPAR met with the EC (DG Justice) on 9 March 2012 to have an update on the Commission's possible initiative. It has also set up a Working Group to better monitor this dossier. Page 32 BIPAR Annual Report

34 Alternative Dispute Resolution (ADR) Alternative Dispute Resolution (ADR) has been developed differently across Europe to help citizens who have a consumer dispute but who have been unable to reach an agreement directly with the trader. ADR schemes for consumers usually use a third party such as an arbitrator, mediator or an ombudsman to help the consumer and the trader reach a solution. In February 2011, the European Commission launched a public consultation "On the use of Alternative Dispute Resolution (ADR) as a means to resolving disputes related to commercial transactions and practices in the European Union". In its response to this consultation, BIPAR explained that it is in principle in favour of ADR but only in cases when ADR offers a valuable alternative to court proceedings and efficient solutions adapted to the specificities of the insurance and insurance intermediation sector. It also stressed that ADR represent a cost for the industry that needs to be analysed carefully by the Commission. Commission's proposed legislation - EP's and Council's readings On 29 November 2011, the European Commission published two proposals aimed at helping consumers solve their disputes with businesses out of court: - A proposed Directive on consumer Alternative Dispute Resolution - A proposed Regulation on consumer Online Dispute Resolution (ODR) According to the European Commission, ADR is cheaper, quicker and simpler than going to Court and will save consumers 22.5 billion per year. The proposed Directive on ADR aims to implement objective criteria in order to have well-qualified impartial, transparent, effective and fair ADR entities; it introduces the fact that consumers will be informed of the existence of these ADR entities and states that disputes must be resolved by ADR entities within 90 days. The proposed Regulation on consumer ODR aims to create an EU-wide online platform with a single point of entry for both consumers and businesses, to resolve disputes within 30 days and to automatically send the consumer s complaint to the competent national ADR entity. The proposal on ADR is currently being discussed for adoption by the European Parliament and the European Council. Louis Grech (Malta-S&D) is the EP Rapporteur of the text. The proposal was discussed in December 2011 by the Council and the examination of the text was held on 30 May Furthermore and in complement to these proposals, another Directorate General of the European Commission (DG Justice) is working on the question of ADR for business-to-business activities (B2B). DG Justice is organising a study on the need for EU action and the use of B2B ADR in the European Union with a guidance and topic list for case study interviews in different Member States. BIPAR is following these developments closely, also through its membership of UEAPME. A possible concern could be the coherence of the framework with two different DGs working on a very similar topic. Next steps BIPAR will continue to monitor the follow-up of the Commission s proposal and especially ongoing debates and discussions in the Council and in the Parliament. BIPAR will also carefully analyse the work and conclusions of DG Justice on ADR for business-to-business activities. BIPAR Annual Report Page 33

35 Consumer collective redress In the EU, a trend can be identified towards an increased scaling up of mass claims. The Commission is exploring ways to ensure that such consumer mass claims are solved and believes that collective redress could be a means of handling these types of claims. Over the last 5 years it has been working on developing European standards of collective redress in the field of consumer and competition law. In Europe, collective redress procedures can take a variety of forms, such as actions in court, out-ofcourt settlements, alternative dispute resolution mechanisms, as well as entrusting representatives with the enforcement of legal claims. Commission's consultations Over the last years, the Commission published different general consultation papers (i.e. which do not only concern financial services) on the issue. In its consultation published in February 2011 on "Towards a Coherent European Approach to Collective Redress", the Commission considers that collective redress can take two different forms: o by way of injunctive relief, when claimants try to stop illegal behaviour o by way of compensatory relief, when harm is caused and they seek damages The Commission analysed the diversity of national systems in Europe and considered that a coherent European framework could facilitate strengthening collective redress. The purpose of the consultation was to identify common legal EP's report - Industry's and consumers' views principles on collective redress, to analyse how the EU legal system could include common principles and help improving the protection of the rights of victims at EU level. In its response to the consultation, BIPAR explained that the introduction of new EU-wide mechanisms of collective redress, be it judicial or out-of-court, would not lead to the effective improvement of the compensation of consumers and that the Commission should also take measures to increase the visibility and awareness of ADRs (and of FIN-NET in the financial services sector) which are also the schemes preferred by consumers. BIPAR further stated that instead of introducing an EU-wide judicial collective redress mechanism, the Commission should favour the development of non-litigious individual resolutions of disputes between consumers and companies. On February 2012, the European Parliament publicly supported the creation of a legally binding horizontal European collective redress mechanism. In a report on his own initiative, MEP Klaus-Heiner Lehne (EPP, Germany) suggested to have safeguards put in place in order to avoid a US-like litigation culture that would be both "abusive and unfounded". He also supported the introduction of a ban on punitive damages and to have a system where victims would receive damages proportional to their injuries and that these damages would be shared among them. On the industry's side, Business Europe, the Brussels-based association which represents small, medium-sized and large companies through 41 national organisations, is opposed to an initiative at EUlevel which would, according to them, be costly, long and complex. On the consumers side on the other hand, the European Consumers Organisation (BEUC) welcomed the initiative of MEP Lehne and considered that the Commission should "bridge the gap by addressing the fundamental right of victims to compensation" and help consumers to make a collective official complaint when needed. Next steps There are no indications that the Commission is willing to introduce an EU legal system on this question but initiatives coming from the Parliament and consumers associations might modify the situation. BIPAR will carefully monitor the follow-up of the consumer collective redress dossier. Page 34 BIPAR Annual Report

36 Modernisation of the European Public Procurement Market At the end of December 2011, the Commission adopted its proposals on public procurement. These proposals are part of an overall programme aimed at an in-depth modernisation of public procurement in the European Union. This programme includes the revision of Directive 2004/17/EC (procurement in the water, energy, transport and postal services sectors) and 2004/18/EC (public works, supply and service contracts), as well as the adoption of a Directive on concessions, which were until now only partially regulated at European level. 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. The Commission's proposals have been transmitted to the Council of Ministers and the European Parliament for negotiation and adoption. 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. Public procurement accounts for roughly 17% of the EU GDP. The Commission aims at putting this 17% to the best possible use for relaunching the economy and creating jobs, even more so in a period of crisis. The Commission believes that companies, especially SMEs (estimated to secure between 31% and 38% in terms of total contract value of public procurement), need better and easier access to public contracts throughout the EU so that they can reap the full benefits of a truly European procurement market. Similarly, procurers need simple and flexible procedures allowing them to contribute effectively to the achievement of the common objectives of the Europe 2020 strategy: fostering innovation, protecting the environment, fighting climate change and social exclusion. Commission s proposals The Commission proposes in particular: the possibility of increased recourse to negotiation, thus enabling the contracting authorities to purchase goods and services which are better tailored to their needs at the best price; the extension and, in the medium term, generalisation of electronic communication in public procurement, since it offers an essential means of simplifying public tendering; a drastic cut in the administrative burden, including the number of documents required from economic operators, thereby making their lives easier; measures to cut the administrative burden and strong incentives to divide tenders into lots and limit the financial capacity requirements for the submission of a tender. The proposals also include: improvements to the existing guarantees aimed at combating conflicts of interest, favouritism and corruption in order to better ensure the integrity of procedures, given the financial implications; the appointment by the Member States of a single national authority responsible for monitoring, performing and checking public contracts to ensure that the rules are properly applied in practice. BIPAR Annual Report Page 35

37 BIPAR's amendments to the proposal Together with its Working Group on Public Procurement, BIPAR studied the proposals, prepared some amendments to the texts and sent them in April 2012 to the EP Rapporteur, Marc Tarabella (Socialist, Belgium). As an introduction to its amendments, BIPAR underlined the importance of a better access for SMEs to the public procurement procedures, of a more accessible negotiated procedure (this is the standard procedure of public procurement for the insurance sector). BIPAR's main amendments focused on the thresholds amounts, on the choice of procedure and the award criteria. In its draft report issued in May, the EP Rapporteur took on board two of BIPAR's amendments. The proposed Directive seeks to facilitate the recourse to the competitive procedure with negotiation. BIPAR welcomed this provision as this procedure matches well 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 therefore suggested deleting the possibility given to the Member States in the Directive not to transpose into their national law the competitive procedure with negotiation and the competitive dialogue. This was included in the Rapporteur's draft report. In the proposed Directive, the lowest price only criterion has been eliminated and replaced for some procedures by the "lowest cost" criterion. BIPAR proposed to prescribe the most economically advantageous tender (MEAT) award approach to all procedures (considering that price is also taken into consideration in the MEAT). This proposal was accepted by the Rapporteur. Next steps Amendments can be tabled until 14 June to the draft report of the Rapporteur. Together with its Working Group, BIPAR will consider tabling some amendments to the draft report. Page 36 BIPAR Annual Report

38 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. The liability scheme applies to environmental damage and imminent threat of damage resulting from certain specified occupational high risk activities where it is possible to establish a causal link between the damage and the activity in question, which are subject to strict liability and to other activities where the operator will only be liable in case of fault or negligence. 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. Regarding mandatory financial security, a gradual approach was adopted in developing possible 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. All 27 Member States transposed the Directive into national law in March 2010 and in October 2010, a report on the effectiveness of the Environmental Liability Directive was adopted by the European Commission. Furthermore the Commission adopted in October 2011 a proposal for a regulation on safety of offshore oil and gas prospection, exploration and production activities, which aims to expand the territorial applicability of the ELD. On 8 November 2011, the European Commission organised in Brussels a stakeholder workshop on the implementation of the ELD which BIPAR attended. The workshop explored possible ways to improve the effectiveness and implementation of the ELD, in particular based on the four conclusions drawn in the ELD report (i.e. promotion of information exchange and communication between key stakeholders, raising awareness of individual operators and financial security providers, development of further guidance on the application of the ELD and establishment of records or registers of ELD cases). For the future, the Commission stated at the workshop that it aims in 2012 to create an information brochure on the Directive, to provide training material on the ELD, to analyse possible linkages between the Directive and other EU legislations such as the Habitat Directive and to determine risk levels for EUbased industries. The Commission's Communication on EU environment measures On 7 March 2012, the Commission published a Communication entitled "Improving the delivery of benefits from EU environment measures: building confidence through better knowledge and responsiveness". The purpose of this Communication is to help the EU and its Member States to improve the implementation of EU obligations in the environmental field. It highlighted the fact that there was a need to improve knowledge on implementation at EU, national, and local level of environment measures, including the ELD. Next steps The BIPAR Secretariat, in cooperation with the BIPAR Working Party, created a questionnaire on the Environmental Liability Directive and collected answers from its members regarding businesses' awareness of ELD liabilities and products offering ELD coverage. It will be used by the BIPAR Secretariat which will monitor the follow-up of the Commission s report, any new discussions on a mandatory financial security system and the Commission s report to the Parliament and Council, which is expected in April 2014 and which may lead to a modification of the Directive. BIPAR Annual Report Page 37

39 Natural catastrophes On 18 October 2011, BIPAR attended a conference on The prevention and insurance of natural catastrophes hosted by the Commission in Brussels. The conference brought together experts representing the re/insurance industry, re/insurance intermediaries, policymakers and regulators. The aim of the conference was to explore the role of insurance in tackling natural catastrophes. During the conference, the importance for the public (Government) and the insurance sector to work together was highlighted. Member States were also asked to focus on certain key issues going forward. Between 1980 and 2010, damages caused by floods in Europe were estimated at a staggering EUR 8 billion, making storms the costliest of natural hazards in Europe. 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. Catastrophic events have roughly doubled in the last decades owing mainly to socio-economic factors, in particular, an increase in human activities and economic assets in hazard prone areas. Climate change is likely to lead to additional weather extremes, hence more damage from disasters is predicted in the future. At the conference, the Commission discussed its potential role with regard to natural catastrophes. It recalled existing EU policies in this area, namely the Floods Directive, the Disaster Risk Reduction and Prevention, and the Solidarity Fund. According to the Commission, it is vital to understand the size, type and impact of natural catastrophes in Europe in order to assess whether risks arising from natural catastrophes are insurable. Insurance against natural catastrophes would not reduce the risk of events occurring in the future but would reduce the consequences of that risk. In addition, the taking out of insurance allows better planning in that it already constitutes an adaptive measure. Furthermore, the Joint Research Centre (JRC) of the European Commission published in February 2012 an interim report on risk relevance and insurance coverage in the EU. In BIPAR s view the key issues are: Disaster prevention to strengthen the resilience of our societies (building flood defences, setting building regulations); Produce more statistics research and information to ensure better measurement and understanding of the risk; States should improve education: which areas are at risk, how to access specific catastrophe insurance,... Combining incentives for prevention and mitigation of risks; Avoid underinsurance. Not every catastrophe will be insurable in every State but if the European Commission and individual States help invest in preventive measures, the majority should be insurable by using professional insurance intermediaries. Next steps Currently, no concrete proposals have been presented on the issue. The BIPAR Secretariat will monitor and report any developments in this area. Page 38 BIPAR Annual Report

40 ECJ judgment and EC guidelines regarding 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. Interpretation of the judgment: Commission's forum and guidelines The insurance industry and insurance associations were very critical of the ruling, pointing at the legal uncertainty and warning for increases in premiums chargeable to men or women who have been perceived to be of a lower risk because of their gender, and whose policies have been priced accordingly. The general feeling was that it should be allowed to treat different situations differently. Forum - questionnaire Following the judgment and the severe criticism, the Commission prepared a questionnaire regarding its implementation and, on 20 June 2011, hosted a Forum on the implementation of Article 5 of Directive 2004/113/EC - Gender equality in the access to and supply of insurance and related financial goods and services. Both questionnaire and forum focused on what stakeholders main implementation issues were that were raised by the judgment, if these issues were specific to certain insurance products/businesses/markets, where clarification was needed, etc. Guidelines As a second step, the Commission adopted interpretative guidelines on 22 December 2011 to help the insurance industry implement the ECJ judgment. In these guidelines, the Commission clarified that the Court ruling will only apply to new contracts, concluded after 21 December 2012, explaining how the term new contract must be interpreted and giving specific examples of what is considered a "new contract" and what is not. The guidelines also warn that the ruling BIPAR attended the forum and responded to the questionnaire, stressing how intermediaries protect their clients interests and are therefore interested in consumers choice, in contract certainty for existing contracts of their clients, in clarity on what is defined as a new contract and in a smooth transformation to new products. BIPAR also emphasized the importance of legal clarity and expressed its worry regarding potential premium increases and benefit reductions, together with reduced choice for consumers. will not necessarily lead to the same premiums for men and women. It is also still possible to use gender as a risk-rating factor in general, as long as it does not lead to differentiation at individual level. The collecting, storing and use of gender is still possible for: - Reserving and internal pricing - Reinsurance pricing - Marketing and advertising - Life and health underwriting BIPAR Annual Report Page 39

41 Gender specific products are also still possible to cover conditions that concern exclusively or primarily males or females (for example, prostate or uterus cancer). The use of risk factors correlated with gender also remains possible (indirect discrimination), as long as these are true risk factors in their own right (e.g. size engine for motor insurance, knowing that men drive more often cars with more powerful engines). With regard to the concern about the ruling spilling over to age or disability, the Commission stressed that the ruling does not look at such non-gender related factors. Finally, with regard to occupational pensions, the guidelines clarify that the Directive on equal treatment regarding to the access to and supply of goods and services only covers insurance and pensions that are private. Therefore only those schemes where the employee has to conclude an insurance contract directly with the insurer will fall under the above-mentioned Directive. The other types of schemes will fall under the Directive on equal treatment regarding employment and occupation. European Parliament's report In the European Parliament, MEP Zita Gurmai (Hungarian Socialist) decided to draft an own initiative report on the transposition and application of the Directive for the Committee on Women's Rights and Gender Equality. On 25 May 2011, the Committee organised a hearing, where the judgment was also discussed. So far, the Rapporteur has only published a working document but a draft report can be expected in June, which will then be discussed over summer and autumn Next steps The Commission will monitor that Member States adjust their national legislation accordingly and it encourages a competitive and innovative industry such as the insurance industry to make the necessary adjustments without an unjustified impact on the overall price levels. The Commission also added that it will, if needed, use its tools available under competition law and added that the current Block Exemption Regulation (BER) does not cover agreements on commercial premiums and that in any case, the BER will expire in 2017 and that it will review it in advance to assess whether a further extension is still justified. The Commission will report on the implementation of the Test-Achats ruling in national law and insurance practice in 2014 in the context of a more general report on the implementation of the Directive. BIPAR will also monitor the proceedings in the European Parliament. BIPAR attends insurance lunch event hosted by Commissioner Reding On 21 September 2011, BIPAR s Chairman Paul Carty was invited by European Justice Commissioner Viviane Reding to a lunch meeting with a small group of insurance industry representatives. Other invitees included Insurance Europe, AMICE (European association of mutual insurers) and CEOs of a number of insurance companies. The aim of the Commissioner was to discuss the follow-up to the Test- Achats ruling but also to discuss European contract law in the insurance sector, insurance-related implications of collective redress proceedings, and limitation periods for civil claims arising from road traffic accidents. On this occasion, BIPAR expressed its views on all these topics to the Commission. Regarding the gender ruling, the objective of the meeting was to discuss how the industry can adapt to the Court's ruling. The Commission used this feedback for its Guidelines it published afterwards. With regard to contract law, the Commission wanted to receive feedback on the possible added value of an optional European Insurance Contract Law (see page 31). The discussion on collective redress was intended to feed into a planned Commission's Communication on collective redress (see page 34). Finally, as for the road traffic accidents dossier, the Commission wanted to discuss this in preparation of a public consultation. Page 40 BIPAR Annual Report

42 Data protection As the main actors in the distribution of insurance products, operating the link between insurers and insured, intermediaries are confronted daily with problems relating to the processing and free movement of personal data. A proposal for a Regulation of the European Parliament and of the Council on the protection of individuals with regard to the processing of personal data and on the free movement of such data (General Data Protection Regulation) was published on 26 January The European Commission defined the concept of personal data as any information relating to a data subject. It can for instance be a name, a photo, an address, bank details, posts on social networking websites, medical information, or a computer IP address. The first EU legislation on data protection came into force in At the time, BIPAR approved the fact that the Directive authorised the processing of personal data when this is necessary in pursuit of the legitimate interests of the controller or of a third party to whom the data are disclosed, except where such interests are overridden by the interests of the data subject. This first Directive did not, however, give entire satisfaction because differences among the Member States remained and led to inconsistencies. In a speech delivered at the Spring Conference of European Data Protection Authorities in May 2012, Commissioner Viviane Reding stated that the Commission chose to propose a Regulation and not a Directive due to the lack of harmonisation which followed the entry into force of the 1995 Directive. She defined the proposal as a one-stop-shop system that allows the national data protection authority to act as a single contact point when businesses have their main activity in this country and indicated that the Commission will develop by summer 2013 objective guidelines for an ideal and financially independent national data protection authority. Key elements of the proposed Regulation o On the question of the transparency for data subjects: the proposal highlights the fact that the information should be given on request, in a passive way. Indeed it states that "the data subject shall have the right to obtain from the controller at any time, on request, confirmation as to whether or not personal data relating to the data subject are being processed". o On the question of the control over one s own data: in the Commission's proposal, Article 6 (a) states that processing of personal data shall be lawful if the data subject has given consent to the processing of their personal data for one or more specific purposes. o On the question of awareness raising activities: Article 52 on the duties of the national supervisory authority states that these authorities shall promote the awareness of the public of risks, rules, safeguards and rights in relation to the processing of personal data. o On the question of sanctions: the proposal makes a distinction between SMEs and larger companies and indicates that in case of a first and non-intentional non-compliance with this Regulation, a warning in writing may be given and no sanction imposed, where an enterprise or an organisation employing fewer than 250 persons is processing personal data only as an activity ancillary to its main activities. BIPAR Annual Report Page 41

43 o On the question of the data protection impact assessment: there is a specific regime for operations presenting specific risks to the rights and freedom of data subjects by virtue of their nature, scope, or their purposes. In this case, which may concern directly the insurance sector, the controller or the processor acting on the controller s behalf shall carry out an assessment of the impact of the envisaged processing operations on the protection of personal data. EP's and Council's readings In the European Parliament, the Civil Liberties, Justice and Home Affairs Committee is responsible for the proposal of the Commission and Jan Philipp Albrecht (Greens-Germany) was appointed Rapporteur of the text in April The text was also passed to the European Council for discussion and adoption. BIPAR will enter in contact with the Cypriot Presidency (July-December 2012). It is interesting to note that in its document on the proposed Regulation, the European Data Protection Supervisor (EDPS) 2 welcomes the initiative but criticised it on several grounds: - The framework is not consistent - There are too many derogations concerning data transferred to non-eu countries and the definition of the public interest is too large. - EU institutions are not included in the document. This would constitute a "regrettable precedent". Next steps The Commission s objective is to have the data protection reform agreed by summer Together with its member associations, BIPAR will study the proposed Regulation and will prepare amendments where necessary. 2 The EDPS is an independent supervisory authority that ensures that the EC institutions and bodies respect their data protection obligations. The supervisory competences of the EDPS cover the processing of personal data by the EC institutions and bodies. They do not extend to processing in the Member States falling under the national legislation which has been adopted in order to comply with Directive 95/46/EC ("Data Protection Directive") Page 42 BIPAR Annual Report

44 Money laundering In April 2012, in light of the recent adoption of revised international standards and of the Commission's own review process, a report on the application of the third Anti-Money Laundering Directive was adopted by the Commission and comments from all interested stakeholders, including BIPAR, were requested by mid June The report analyses how the different elements of the existing Directive have been applied and considers how it may need to be changed. In general it concludes that although the existing framework appears to work well and that no fundamental shortcomings have been identified which would require substantial changes, some modifications are necessary to adapt to the evolving threats posed. Commission's report The third EU Anti-Money Laundering Directive entered into force on 15 December 2005 and was implemented in This third Directive built on existing EU legislation, i.e. it extended the scope of Directive 2001/97/EC to terrorist financing and reflected recommendations of the OECD-based Financial Action Task Force against money laundering (FATF) that were adopted in response to the 11 September 2001 terrorist attacks. The Directive extended the anti-money laundering obligations to providers of services to insurance intermediaries - as defined in Article 2(5) of the IMD - when acting in respect of life insurance and other investment-related insurance. During the drafting of the Directive and its two readings with the EU legislators, BIPAR ensured that this Directive would not be applied to intermediaries when acting in non-life insurance. Under the Directive, life insurance companies and intermediaries, banks, investment firms and investment funds, amongst others, are required to: (1) carry out customer due diligence (i.e. the identification/verification of the customer/beneficial owner and the monitoring of customer transactions); (2) report suspicions on money laundering and terrorist financing to the national financial intelligence unit; and (3) 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 in relation to (1) and (2). Next steps In its report, the Commission gives further consideration to incorporating the following issues in the forthcoming revision of the current Directive: o Accommodating changes to the international standards in order to incorporate more riskbased elements which should allow a more targeted and focused approach to assessing risks and applying resources to where they are most needed; o Possible extensions of the scope of the rules, as well as the incorporation of tax crimes as a new predicate offence for money laundering; o Possible clarification of the rules on customer due diligence which require that banks and other obliged entities have in place adequate controls and procedures so that they know the customers with whom they are dealing understand the nature of their business. o Incorporating new provisions to deal with politically exposed persons (PEPs) at domestic level and those working for international organisations; o Strengthening powers and cooperation between the different national Financial Intelligence Units (FIUs) whose tasks are to receive, analyse and disseminate to competent authorities reports about suspicions of money laundering or terrorist financing in order to facilitate their cooperation o Clarifying how AML supervisory powers apply in cross-border situations; o Incorporating new provisions on data protection, in light of the Commission's proposals published in January 2012 (see page 41) The adoption of the Commission's application report will be followed by the preparation of an impact assessment and the adoption of a legislative proposal in autumn The Commission is also planning to organise a public hearing on 23 November The BIPAR Secretariat is studying the Commission's report and will submit its comments where needed. BIPAR Annual Report Page 43

45 Review of the Professional Qualifications Directive The main objective of the Professional Qualifications Directive (PQD), which entered into force in 2007, was to rationalise, simplify, and improve the rules for the recognition of professional qualifications. Thus, the Directive intended to encourage the free movement of skilled labour around the EU while acknowledging that standards and content of education differ between countries by seeking to establish some equivalence between those trained in the countries of the EU. From an EU citizen's perspective, it means that an EU citizen with a professional qualification from one Member State should be able to move and practise in another Member State with relatively little difficulty. The Directive applies to all professions, except professions for which the recognition of professional qualifications is governed by specific legal provisions at European level. However, over the past years, there have been considerable changes in the Member States' educational and training systems. There has been a further demand of professionals for mobility and also Member States, due to demographic change, have been confronted with shortages of skilled workforces. Therefore, the Commission decided, after consulting stakeholders through a consultation paper in January 2011 and a Green Paper in June 2011, that modernisation was desirable. The review was also mentioned in the Single Market Act as one of the twelve actions to improve the Single Market. Impact on intermediaries The Directive's general principles apply to insurance intermediaries when they choose to have full establishment in another Member State, this situation not being covered by the Insurance Mediation Directive. This was clarified by the CEIOPS Luxembourg Protocol relating to the cooperation of the competent authorities of the Member States of the EU in particular concerning the application of the IMD. It stipulates that natural persons fully qualified as insurance intermediaries in an EU Member State wishing to take up the same profession in another EU Member State on the basis of permanent establishment, without keeping their original license, should be able to do so under the general Directive on the recognition of professional qualifications. BIPAR has in the context of the revision of the IMD (see page 7) called for the explicit inclusion of this provision as it would facilitate the cross-border activities of insurance intermediaries and would also help to avoid unnecessary burdens on Member States to put in place systems to recognise qualifications by non-national intermediaries. Should such a clause be included in the revised IMD, the PQD would then only apply to natural persons undertaking the activities of insurance and reinsurance mediation but that are not covered by the IMD (i.e. who fall under current Article 1.2 of the IMD) both with a view to temporary provision of services and in the case of permanent establishment. Review of the Directive On 19 December 2011, the European Commission presented a legislative proposal for modernizing the Directive. The key new elements of the proposal are: introduction of a European professional card; reformed general rules for the establishment in another Member State or the temporary move to another Member State; modernised automatic recognition (applies to doctors, architects, etc.); introduction of a framework for partially qualified professionals; creation of the legal requirement for provision of user-friendly and content-driven information on the rules governing the recognition of qualifications underpinned by comprehensive e- government facilities for the whole recognition process; systematic screening and mutual evaluation for all regulated professions in the Member State. The proposal is currently under discussion in the Parliament and in the Council. In the Parliament, the Internal Market and Consumer Protection Committee is leading. A draft report can be expected sometime in July 2012 and a vote in the Committee towards the end of November. Next steps Awaiting the outcome of the proposal for review of the IMD, BIPAR will continue to monitor the discussions in Parliament and Council on the review of the PQD. Page 44 BIPAR Annual Report

46 EU Financial Supervisory Structure and new types of legal acts The new EU supervisory system became operational on 1 January It establishes a European Systemic Risk Board (ESRB) as well as a European System of Financial Supervisors (ESFS) that include national supervisory authorities and three new European Supervisory Authorities (ESAs) that replace the Level 3 Lamfalussy Committees. Despite this reform, the new structure continues to build on the Lamfalussy arrangements. The concept of the legislative process as split into different levels remains, and legislation continues to be divided between high-level framework provisions and implementing measures. Three European Supervisory Authorities (ESAs) ESAs were established through reforming the existing Committees (i.e. Lamfalussy procedure Level 3 Committees: CEBS, CEIOPS and CESR) into the European Banking Authority (EBA), European Insurance and Occupational Pensions Authority (EIOPA), and European Securities and Markets Authority (ESMA). The three new authorities work in tandem with the existing national supervisory authorities to safeguard financial soundness at the level of individual financial firms and protect consumers of financial services (micro-prudential supervision). They have the power to overrule the national supervisors decisions when the latter violate EU law, when there is disagreement between two or more national supervisors and when Member States call an emergency. Their decisions are directly applicable to individual financial institutions. The ESAs also have the power to temporarily prohibit or restrict harmful financial activities or products already covered by specific legislation, or in emergency situations. All three authorities have legal personality under EU law and have a superior legal status compared to the previous committees. They can develop proposals for technical standards that are binding and ensure consistent application of the European legislation. They may also develop implementing technical standards, subject to the same conditions as the technical standards. The new standards should contribute to developing a single European rulebook. Such technical standards have to be endorsed by the Commission and are technical, they shall not imply strategic decisions or policy choices and their content shall be delimited by the acts on which they are based. Where an authority submits a draft regulatory technical standard, the Commission shall immediately forward it to the European Parliament and the Council. The Commission shall decide within three months of receipt whether to adopt a draft regulatory technical standard. A single European rulebook composed of such harmonised technical standards should then provide a common legal basis for supervisory action in the EU - ensuring strengthened stability, equal treatment, lower compliance costs as well as removing possibilities for regulatory arbitrage. However, on account of the financial liabilities that may be involved for the Member States, decisions taken by the ESAs must not impinge in any way on the fiscal responsibilities of the Member States. Any binding decision taken by the ESAs will be subject to review by the EU courts. BIPAR Annual Report Page 45

47 The "new" Lamfalussy procedure Level 1: Framework legislation is made at level 1 using the co-decision procedure. Level 2: The Commission prepares more detailed EU rules by working with the existing sectoral committees (EIOPC for the insurance and occupational pensions sector) and taking advice from representatives of national supervisory authorities, now acting through the new ESAs. Level 3: ESAs role at the third level is enhanced to involve, inter alia, the creation of draft technical standards (to be adopted by the Commission as EU Law) and the taking of decisions binding on national supervisors and, to a lesser extent, firms. Level 4: The fourth level of compliance and enforcement will remain as such. 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. For EIOPA, two stakeholder groups were set up: the Insurance and Reinsurance Stakeholder Group and the Occupational Pensions Stakeholder Group. BIPAR is represented in the Insurance and Reinsurance Stakeholder Group by its Chairman of the EU Committee, Mr. Paul Carty. New types of legal acts, the Lamfalussy procedure and the ESAs The Lisbon Treaty that entered into force in December 2009, introduced two new articles that allow the EU Member States and the European Parliament to delegate powers to the European Commission to adopt two new different types of legal act: delegated acts and implementing acts. Delegated acts (Art. 290 of the TFEU - Treaty on the functioning of the EU) By means of a legislative act (e.g. a Directive), the Council of Ministers and the Parliament, the EU legislators, can empower the Commission to adopt delegated acts. However, this may only take place in cases when non-essential elements of a legislative act are supplemented or amended. The EU legislators have mechanisms for control of the Commission s exercise of powers. They have the right to reject Commission's delegated acts and/or revoke the delegation of powers. The scope of application of delegated acts is set out in the Treaty and the precise conditions for the delegation of powers are specified in every individual legislative act (e.g. a Directive). The main aspects of delegated acts: - No binding framework - common understanding between EU institutions; - Objectives, content, scope and duration are decided on a case-by-case basis in each legislative act; - The Commission can supplement, amend or delete non-essential elements of legislative acts; - Concern issues of general scope only; - Legislators can revoke the entire delegation of powers to the Commission. Examples of delegated acts include issues such as detailed implementing rules in financial services legislation. Implementing acts (Art. 291 of the TFEU) go one step further. In principle, Member States are responsible for the implementation of legal acts. But insofar as uniform conditions are required for the implementation of binding acts, implementing powers may be delegated to the Commission (and in exceptional cases also to the Council). Page 46 BIPAR Annual Report

48 The main aspects of implementing acts: - A binding framework: Implementing Acts Regulation; - Concern only clearly defined tasks; - Can be issues of general or individual scope; - Advisory and Examination Procedures; - Control by Comitology Committees one representative from each Member State; - Referral to an Appeals Committee. The implications of the reform are of particular interest to the financial sector. The Lamfalussy procedure in the area of financial services is maintained but in a modified version. In the case of its drafts for delegated acts, the Commission will continue to consult the three ESAs. The new supervisory authorities (EBA, ESMA and EIOPA) will assume major roles in the drafting of delegated acts and implementing acts in the financial services segment. Level 1 o EC adopts formal proposal for Directive/Regulation o Council & European Parliament adopt legislative act (with or without mandate for the Commission to adopt non-legislative acts (delegated or implementing acts) Level 2 o ESA drafts technical standards and EC adopts o EC requests ESA advice on delegated and implementing acts (EC adopts after consultation of EP/Council) Level 3 o o ESA adopts comply or explain guidelines and recommendations o ESA mediates and settles disagreements o ESA takes action in emergency situations o ESA facilitates delegation of tasks and responsibilities o ESA cooperated with ESRB o ESA monitors and assesses market developments o ESA undertakes economic analyses o ESA fosters investor protection Level 4 o Strengthened enforcement of EU law (ESA and EC) (Source: CEIOPS-CEBS-CESR training course Lisbonisation of the rule-making process 6/12/2010) BIPAR Annual Report Page 47

49 BIPAR's responses to EIOPA's consultations in 2012 In 2011, EIOPA put out for public consultation a Report on Good Practices for Disclosure and Selling of Variable Annuities and Guidelines and a Best Practices Report on Complaints-Handling by Insurance Undertakings. Together with its member associations, BIPAR prepared and submitted its answers to EIOPA consultations. In 2012, regarding consumer protection, EIOPA plans to contribute to the work on the legislative proposals from the European Commission on the revision of the Insurance Mediation Directive (IMD) and on Packaged Retail Investment Products (PRIPs). EIOPA also plans to work on industry training standards, E-commerce/on-line sales/comparison websites and on general good provisions (improving transparency). Regarding financial innovation, EIOPA will work on data collection and methodology for consumers' trends and financial innovation, on ancillary products/services (tying and bundling) and on the impact of Solvency II on insurance offerings to consumers. EIOPA's consultation on Complaints-Handling by Insurance Undertakings In December 2011, EIOPA launched a public consultation on proposed Guidelines on Complaints- Handling by Insurance Undertakings. The draft Guidelines, which are addressed to competent national supervisory authorities, are being issued to: clarify the expectations of supervisors regarding the effectiveness of insurance undertakings internal control systems for complaints-handling, including lessons learned from complaints received; and to provide guidance on adequate treatment of complaints including providing necessary information to consumers. BIPAR's answer BIPAR explained that effective complaints handling is critical for consumers and should be regarded as a high priority within insurance companies. BIPAR underlined that the draft EIOPA Guidelines on Complaints-Handling by Insurance Undertakings do not concern complaints addressed to insurance intermediaries but do cover complaints addressed to insurance undertakings about insurance intermediaries. BIPAR explained that this should be clarified in EIOPA Guidelines. These Guidelines would not be adapted to insurance intermediaries. They would create important and heavy burdens that would neither be proportionate to the risks and size of insurance intermediaries nor to the number of complaints received by intermediaries. In its draft consultation papers, EIOPA explained that these Guidelines will apply to authorities competent for supervising complaints-handling by insurance undertakings in their jurisdiction. Competent authorities will have to comply with these Guidelines. National legal or regulatory requirements can go into further details than those Guidelines as long as they do not contradict the EIOPA Guidelines. BIPAR asked that, for legal security, more clarity from EIOPA around Comply or Explain rules would be helpful in this respect. EIOPA's final Guidelines are expected published before the summer. to be Page 48 BIPAR Annual Report

50 EIOPA's consultation on variable annuities In December 2011, EIOPA published its Draft Report on Good Practices for Disclosure and Selling of Variable Annuities asking for comments from all interested parties. EIOPA's draft report aims at ensuring that clients understand what they are being sold. It also aims at preventing mis-selling by covering personal circumstances, clear product descriptions and illustrations, clear language, and an understanding of potential future outcomes. BIPAR's answer EIOPA defines variable annuities as unit-linked life insurance contracts with investment guarantees provided by the insurance undertaking which, in exchange for single or regular premiums, allow the policyholder to benefit from the upside of the unit, and be partially or totally protected when the unit loses value. BIPAR believed that this definition could cover a much broader range of products than variable annuities. BIPAR welcomed in particular the proposed good practice that aims to apply the IMD requirements (Article 12) also to the distribution of variable annuities if they are sold directly by the product provider. Indeed, from a consumer protection perspective, it is important that the same or similar minimum level of consumer protection is ensured regardless of the distribution channel through which they choose to purchase their variable annuities. Consumers should always know whom they are dealing with, and, on a case by case basis, what services they can expect, and on a case by case basis, whether or not advice is provided and what the contents and meaning of this advice is. This will improve consumer protection and guarantee comparability. From a Single Market perspective, it is also essential to avoid any discrimination and distortion of competition between persons or corporate entities carrying out the activity of insurance mediation and distribution. However, BIPAR was concerned that some of the proposed good practices may create some serious confusion on the role of insurance intermediaries and do not reflect the market reality. A combination of requirements may lead to polarisation of the market in which there will be less choice for consumers between business models and levels of service. Lastly, for BIPAR it was not clear how the EIOPA report could be developed into European industry standards or codes and how these would be monitored by competent national authorities. BIPAR therefore asked for further clarification on this aspect in EIOPA's final report. BIPAR also wondered how the supervision, policing and enforcement of certain rules would be carried out in practice. On 4 April 2012, EIOPA published its final report on Good Practices for Disclosure and Selling Practices for Variable Annuities. The main findings of the Report are that good practices: o in relation to disclosures: should provide general information on the insurance undertaking and the legal and supervisory regime it operates under to take account of the cross-border nature of this business, should also include product specific information to address product complexity o in relation to selling practices: should ensure that variable annuities are always sold on an advised basis, even when they are sold directly by the company should focus on the customer s objectives to determine his demands and needs. BIPAR Annual Report Page 49

51 BIPAR's participation in EIOPA's first Consumer Day EIOPA s first "Consumer Strategy Day" took place on 6 December 2011 in Frankfurt. A delegation of BIPAR representatives (its Directors Committee and some of the members of its Secretariat) participated in this event. BIPAR Chairman, Mr. Paul Carty, was also one of the speakers of the session on "Consumer Protection: Fostering protection of policyholders and pension fund beneficiaries". Purpose of the event One of the key EIOPA objectives under its empowering legislation is to contribute to "enhancing customer protection. EIOPA is also asked to "foster the protection of policyholders, pension scheme members and beneficiaries" and required to take a "leading role in promoting transparency, simplicity and fairness for consumer financial products and services. The purpose of this event was to provide professional stakeholders and consumer protection experts with the opportunity to hear about the work EIOPA has been carrying out and plans to carry out to fulfil these objectives, but also to express their own views on these issues in the form of a dialogue between consumer representatives, industry and supervisors and other stakeholders. Issues discussed EIOPA s approach to consumer protection, financial innovation, anti-discrimination and assessment of risk were discussed. EIOPA s Chairman, Gabriel Bernardino, said We need to question the policy tools that we traditionally used to deal with information asymmetries, conflicts of interest and market inefficiencies, possibly by exploring some unconventional approaches. We need a paradigm shift. First of all, we need to take a courageous look at conflicts of interest. Unfair practices leading to consumer detriment in the insurance and pensions market are often due to situations of conflicts of interest. Insurance is an industry where agency incentives can be the main driver of the kind of product to be sold. Sometimes these results in the sale of products which are not suitable for the consumers concerned. In pensions, conflicts can arise when for example one provider is responsible for all services to the pension fund. Ensuring advice to consumers that best suits their profile and their needs, taking into account the complexity of the contract and the risks involved is a key element of consumer protection. This necessarily entails that selling practices, whether through intermediaries or direct writers, should meet certain high standards". Referring to Article 9 of EIOPA's Regulation that requests EIOPA to take "a leading role in promoting transparency, simplicity and fairness for consumer financial products/services", BIPAR Chairman Paul Carty explained that these key concepts were also promoted for consumers by intermediaries. They are indeed the interface with consumers, guaranteeing clarity and comparability of increasingly diversified insurance and pension products. In the context of the IMD revision, Paul Carty recalled that BIPAR promotes robust but realistic regulation which does not limit consumer choice and which does promote competition, transparency and enhance consumer protection. Page 50 BIPAR Annual Report

52 Social Affairs In 1998, the European Commission decided to launch Sectoral Dialogue Committees promoting dialogue between the social partners in the sectors at European level. The Insurance Sectoral Social Dialogue Committee (ISSDC), which is an informal working group, was established in The ISSDC comprises, on the one hand, the employers of the insurance sector represented by BIPAR, Insurance Europe and AMICE (the Association of Mutual Insurers and Insurance Cooperatives in Europe) and, on the other hand, the employees represented by UNI-Europa (Union Network International Europa Finance). BIPAR has for many years played an active role in this social dialogue between the employers and the employees in the insurance sector. 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. BIPAR's activities 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 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 for an EU-funded project to give more publicity to the statement and assemble good practices from different Member States regarding the three abovementioned challenges in a booklet, to be translated in various European languages. BIPAR is represented in the booklet with the example of its Irish member IBA, the Young IBA initiative. This initiative focuses on attracting and keeping young brokers in the business and involving them in the Association, inter alia by offering training courses. It figures under the heading qualifications and life-long learning. The Commission accepted the project, which is now well under way. The final project consists of three main activities: the publication of the booklet with good practices, a conference in Brussels in June where the booklet will be introduced and which will assemble speakers on the three main topics and another conference in September in Prague with a similar aim, but focusing more on the new Member States. The finalised version of the booklet will be distributed electronically and will also be put on the BIPAR website. A final report on the project is expected by November Representativeness study In the context of the European social dialogue, the Commission is engaging in regular studies of the representativeness of the European social partners, to check whether they (still) are the most appropriate participants. In the Commission launched such a representativeness study for the ISSDC, aiming at drawing a picture of the situation regarding social dialogue in the insurance sector based on an analysis of the social partners in all EU Member States, with special emphasis on their membership, their role in collective bargaining and public policy and their national and European affiliation. The Commission outsourced most of the research and work to EUROFOUND, the European Foundation for the Improvement of Living and Working Conditions, who published its final study at the end of April 2012 (available on 028s/index.htm). As it became clear already during the preparatory phase, the remit of the study, namely the used "NACE" code (which is the statistical classification of economic activities in the EU), did not take into account intermediaries. BIPAR signalled this to the Commission and to EUROFOUND, who recognised this problem. The final representativeness study however concludes that BIPAR and the other social partners have to be regarded as "by far the most important, if not the only EU-wide representatives of the sector s employers and employees". BIPAR Annual Report Page 51

53 BIPAR 2012 mid-term meetings in Brussels BIPAR held its mid-term meetings in Brussels on 23 and 24 January More than 80 participants from 23 countries were present. The mid-term meetings were, as usual, the occasion to inform CEOs of member associations about current European dossiers that concern the profession, in particular, the latest EU developments regarding the revision of the Insurance Mediation Directive (IMD), of the MiFID and of the VAT Directive in financial services as well as the PRIPs (retail investment products) initiative and provided updates on the activities of the new European supervisory authority for the insurance sector, EIOPA. These meetings were also an opportunity to exchange information on members respective activities. In order to ensure that EIOPA delivers on its tasks, the Committee on Consumer Protection and Financial Innovation (CCPFI) was created in January Its Chairwoman, Mrs. Pauline de Chatillon, presented its main current and future activities. In 2012 the CCPFI will work on the upcoming IMD II and PRIPs proposals and on some possible related technical standards. The CCPFI will also study the E-commerce/ online sales/comparison websites and the general good provisions, improving their transparency. Mr. Karel Van Hulle, Head of Insurance and Pensions Unit at DG Internal Market and Services, informed the participants on the state of play of the IMD revision. He recalled that the results of the Commission s IMD consultation showed that the IMD information requirements were too low, that conflicts of interests were unmanaged and the IMD scope was too limited. On 24 January 2012, Mrs. Agnes Fridely and Mrs. Aglika Tzvetanova, in charge of the IMD revision at DG Internal Market and Services, gave some further details on the proposal of the IMD II and answered the participants' questions. Mr. Salvatore Gnoni, seconded national expert at the Securities Markets Unit at DG Internal Market and Services, updated the participants on the MiFID II proposal. He explained that the main objectives of the revision of the MiFID were to take into account the developments of the market structures and of the new technologies. Regarding conduct of business, the MiFID II proposal is clarifying, inter alia, the framework for independent investment advice and is introducing two main requirements: the adviser is required to assess a broad range of products and cannot receive inducements from the products provider when he informs the client that he is providing independent advice. Updating the participants on the revision of the VAT Directive on financial services, Mr. Arthur Kerrigan, Head of Sector "VAT Policy and Legislation" at DG TAXUD, explained that a breakthrough in the next 12 months was unlikely as the Danish Presidency confirmed that they did not intend to make any progress on the dossier and there was no indication that the Cypriot Presidency would work on this matter. The EU Standing Committee meeting was followed by an exchange of views on a number of member associations' initiatives in national markets. Presentations related to the Austrian legal service and arbitration board, the Spanish Insurance Brokers Association's (ADECOSE) code of good practices on claims handling between ADECOSE brokers and insurers, the British Insurance Brokers Association's (BIBA) Manifesto and the Belgian Insurance Intermediaries Association's (FVF) survey with their members on portfolio, communication with the clients and insurers, marketing etc. Page 52 BIPAR Annual Report

54 Next EU Presidencies The Council is presided 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. 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 2013: Ireland-Lithuania 2012: Denmark-Cyprus 2015: Latvia-Luxembourg 2017: Malta-UK 2016: Netherlands-Slovakia 2018: Estonia-Bulgaria 2019: Austria-Romania 2020: Finland BIPAR Annual Report Page 53

55 BIPAR AGENTS' AND BROKERS' STANDING COMMITTEES A word from the Agents' Standing Committee's Chairman The IMD II proposal is about to be published by the European Commission. It will determine the conditions under which insurance distribution will evolve in Europe during the next years. It is important to pay special attention to the insurance sector since it plays a complementary role and contributes to the harmonious economic development of a country and therefore of our continent. It also adds an essential social value. In the face of the severe crisis that is affecting the whole world today and the Jean-François Mossino need to foster economic development policies in the whole of Europe, the professional insurance intermediary's role is gaining in importance. The intermediary is the guardian of quality of insurance service and of effective consumer protection on a daily basis and in the long term. Political and legislative decisions and choices are subject today to review and to intelligent orientation shifts, in order to prevent other collapses and allow the economy to recover. I believe that the IMD II proposal deserves the same kind of attention from the European Institutions, stakeholders and decisiontakers. We all together have the duty and responsibility to check the direct and indirect impact of some provisions that will be included in this new IMD II proposal as a result of the current social and economic scenario and in view of the period that will follow. What will be the immediate consequences of certain provisions? Will consumers really and instantly benefit from them? What will be their effect of the quality of insurance distribution? What will be their direct and indirect consequences in some countries? Will these provisions effectively ensure a qualitative development of competitiveness and competition? We must be ready to submit amendments to the IMD II proposal whenever necessary. The Agents' Standing Committee, which represents the specificities of certain regions in Europe, will, in agreement and in synergy with the Brokers' Standing Committee, provide as one voice the contribution of professional and specialized insurance intermediaries. Its main objective will be to bring systemic and appropriate solutions in the interest of consumers, who are always at the heart of intermediaries' concerns. We are determined to take on our role to make the Insurance Single Market more efficient and dynamic. Page 54 BIPAR Annual Report

56 Reinforced cooperation of agents at European level In addition to the permanent information exchange between its members, BIPAR Agents Standing Committee, chaired at the time by Gérard Lebègue, 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 an observer status within this European Association. The Association held two regular meetings during 2011 and 2012 (in Lisbon in September 2011, in Marrakech in February 2012). The next meeting of the Association will be an extraordinary meeting, namely the second European conference of AXA agents and will take place in November 2012 in Granada. The current President of the European Association is Manuel Pérez Ortega from the Spanish Association of AXA agents, Club Diálogo. The Spanish presidential programme is based on 4 objectives: dynamism, cooperation and dialogue; commercial efficiency; role of the new AXA agent ; corporate services and enlargement of the Association. The European Directory for AXA insurance agents (made fully operational in November 2010) further developed. It aims at facilitating cross-border collaboration between AXA insurance agents, who are members of one of the members of the European Association. 287 Agents have already registered. The Directory exists in French, German, Spanish and Italian. 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) and Austrian (Allianz Agenturverbund Österreich) organisations of Allianz agents. In October 2012, the Association will meet in Italy. Its presidency is currently chaired by a French agent, Jean-Jacques Gadrat. The focus of the French Presidency lies on the (future) Allianz insurance distribution models and on the role the general agents can play in this context. The 2011 meeting took place in April in Paris and mainly focused on the Allianz sales strategy. 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. Mrs. Dominique Baralla, President of SNAGAN, and Mr. Pietro Melis, President of A.G.IT, are respectively the President and Vice-President of the European Association for 2 years. At this first meeting, the associations presented themselves, comparisons were made between the markets and the situations in both countries and the bylaws and budget were adopted. BIPAR Annual Report Page 55

57 A word from the Brokers' Standing Committee's Chairman Why a Brokers' Committee and an Agents' Committee, you might ask? Simply because the founders of BIPAR thought that it would be relevant to take into account both aspects of independent distribution. This is quite logical since the rules that govern the exercise of intermediation activities under the agent or broker status are very different upstream and downstream. André Van Varenberg It is true that upstream, the relations with insurers - the providers of products and capacity - imply obligations and concerns that are largely specific to brokers and agents. Downstream, with regard to clients, brokers target mainly but not exclusively companies, whereas agents are historically known for dealing with mass markets. These strategic choices have of course an impact on agents' and brokers' internal structures and, among others, on their training needs. However, these differences are fading away today as a result of the wave of regulatory initiatives taken by the European Commission. I believe that in the last 75 years, BIPAR has never been confronted with so many burning issues, that its EU Standing Committee and Secretariat have to follow and deal with. In this context, the Brokers' Committee found it more effective to put all its resources, its members' know-how and experience at the service of those of us who define BIPAR's positions as a consequence of the numerous challenges they are faced with. In addition to crucial dossiers such as the IMD or MiFID revision, the Brokers' Committee is involved in more specific and technical working groups, as the ones on VAT for financial services, modernisation of public procurement, environmental liability, harmonization of legislation on insurance contract,... without forgetting the issue of multinational placements for which the Brokers' Committee continues its cooperation - as it already did last year - with the World Federation of Insurance Intermediaries (WFII). The expertise of our members turns out to be indispensable in all these areas. BIPAR knows that it can rely here on our commitment. Page 56 BIPAR Annual Report

58 INTERNATIONAL AFFAIRS World Federation of Insurance Intermediaries (WFII) BACKGROUND BIPAR is a member of the World Federation of Insurance Intermediaries (WFII). WFII was established in 1999 and is recognised by the international institutions that have influence on our sector (OECD, IAIS, WTO, UN, World Bank, IMF) as the single voice of insurance intermediaries in international Public Affairs. WFII has observer status in the OECD and the IAIS and is regularly consulted on current issues in the market. For more general background information on WFII (membership, goals and activities), please refer to the website WFII works on the basis of principles and positions and, in its recent history, this structure has proven to be efficient and effective in the promotion and defence of the sector s interests at international institution level. The principles and positions of WFII are defined at the World Council meetings. In terms of regulatory standards and liberalisation WFII has achieved a number of impressive structural results over the last years. Over the last 12 months WFII has again shown its solidity. In effect, the World Council and Executive CSE Committee are the policymakers of WFII and consequently the guide for many national associations around the world in structural intermediaryrelated Public Affairs issues. WFII also promotes the exchange of information and the analysis of issues which are potential future drivers of change for the insurance (mediation) industry. Members of the WFII World Council and Executive CSE Committee come from all over the world and represent 5 continents. WFII has its permanent Secretariat in Brussels where the activities are coordinated. In 2011/2012 Mr. Jaap Meijers (Europe - BIPAR) was the Chairman of WFII. Mr. Jaap Meijers successor and the current Chairperson of WFII in 2012/2013 is Ms. Elizabeth Francy Demaret (CIAB North America). The WFII Secretariat is run by the BIPAR Secretariat. Mr. Nic De Maesschalck, the BIPAR Director, is also the Director of WFII. Ms. Isabelle Heuninckx is Policy Adviser for WFII Affairs. EXAMPLES OF 2011/2012 WFII ACTIVITIES The WFII Executive CSE Committee & World Council meetings of 2012 The 2012 Annual WFII World Council and Executive CSE Committee meetings took place in Cape Town on 25 and 26 March The World Council meeting gathered participants of WFII members from around the globe and provided an excellent forum for exchanging views and experiences, especially following the financial crisis which in many countries has resulted (or is in the phase of discussion) in new (stricter) legislation for the financial and insurance sectors. BIPAR Annual Report Page 57

59 Guest speakers at the World Council meeting were Mr. Jonathan Dixon, Deputy Executive Officer of the Financial Services Board of South Africa (FSB) and member of the IAIS Executive Committee and Ms. Kristel Van Der Elst, Head of Strategic Foresight of the World Economic Forum (WEF). The IAIS Annual Conference 2011 WFII attended with a small delegation the 18 th Annual Conference of the International Association of Insurance Supervisors (IAIS), which took place in September The theme of the conference was "Towards a New Horizon for Insurance Supervision Cross-Sector and Cross-Border Harmonisation and Cooperation". At its Annual Meeting, the IAIS adopted the revisions to the IAIS Insurance Core Principles, Standards, Guidance and Assessment Methodology (ICPs). The ICPs are the international reference for many governments when developing new regulation in the insurance and insurance mediation sector. ICPs 18 and 19 are of particular importance for the insurance mediation sector. Around 600 representatives of the regulators and the insurance and the insurance mediation industry, attended the meeting. Market Conduct and Intermediation Principles Still high on WFII's agenda of the past year was the revision by the IAIS of its ICPs. Two of these principles are of particular importance to WFII and its members: the ICP 18 on intermediaries and the ICP 19 on conduct of business. WFII has, over the past year, been actively involved and contributed significantly to this revision. WFII attended in this regard the meetings of the IAIS Market Conduct Subcommittee as an observer. The ICPs are, for many national jurisdictions, the benchmark for future regulatory requirements. WFII will, over the coming months, draft its own interpretative guidance on these ICPs. Multinational Placements In a global economy, many businesses have risk exposures in more than one country. Because insurance and tax rules and regulations differ from country to country, it is often difficult to place a global policy. There also may be different interpretations of the location of the risk. In the case of product liability, a country may decide that the risk is situated where the product is used or consumed even if the manufacturer is located in another country. To complicate the situation even more, triggers for tax treatment are not always synchronised with the triggers applicable to insurance placement. At the meeting of the World Council in Cape Town it was decided that WFII will continue to encourage national governments to recognise the need and existence for multinational placements and seek for governments to consider specific approved regulatory exemptions from locally admitted insurance requirements for conforming multinational placements. Liberalisation Since its creation, WFII has been promoting global liberalisation of the insurance intermediation market in the interest of all parties concerned: clients, insurers and insurance intermediaries. WFII is consistently active in monitoring and promoting liberalisation in the framework of the various deals on free trade being negotiated on a global basis. During the World Council meeting in Cape Town, members were informed that there was a significant step backwards in the liberalisation process in Brazil and Argentina. Page 58 BIPAR Annual Report

60 Activities with the Organisation for Economic Co-operation and Development (OECD) The OECD IPPC meeting 9-10 June 2011 WFII attended the 84 th OECD Insurance and Private Pensions (IPPC) meeting on 9-10 June As an observer in the OECD, WFII was asked to bring in a speaker. Mrs. Elizabeth Francy Demaret addressed in her presentation the increasingly prominent role of insurance intermediaries in today s market and explained what challenges they face. Mrs. Demaret provided an overview of the global market in terms of premium penetration and a broker's perspective on the recent CAT (catastrophic) developments in Japan, the US, Australia and New Zealand. Other issues under discussion included the following: 1. The G20 mandated a special task force on consumer protection. The task force issued drafthigh level principles which WFII was consulted on. 2. The OECD consulted its members on a set of draft good practices on policyholder guarantee schemes. The OECD IPPC meeting 1-2 December 2011 WFII participated in the OECD IPPC on 1-2 December 2011 in Paris. WFII attended a roundtable together with selected representatives from government, industry (insurance, banking, capital markets) and academia. The purpose of the roundtable was to discuss the ways in which the insurance sector helps support the financial system (and in particular financial stability) and the economy. The insurance brokerage industry was invited to contribute to the discussions, for instance, by discussing: 1) The extent to which the insurance sector is important for the economy and 2) The operations of the reinsurance and retrocession markets and whether any dysfunctioning in these markets (e.g., large price volatility, withdrawal of coverage) might have important knockon effects (even if no insolvency) for the direct insurance industry, and onwards for the economy. Activities with the Financial Action Task Force (FATF) FATF Consultative Forum - Revision of the FATF 40+9 Recommendations On 5-6 December 2011, WFII attended the FATF Consultative Forum in Milan (Italy). The purpose of the meeting was to enable members to contribute to the debate on the revision of the FATF 40 Recommendations and 9 Special Recommendations, which provide the international standards for combating money laundering and terrorist financing. WFII has followed Public Affairs policies regarding anti-money laundering over the past years. WFII has declared that Insurance intermediaries are in favour of actions which prevent money laundering. However, WFII has also advocated that anti-money laundering requirements should take into account the size and nature of the insurance entity (insurers/intermediaries) and the insurance activity (life/non-life insurance). In the context of the meeting, WFII restated that opportunities for money laundering in the insurance sector, and particularly in the non-life insurance sector, are very limited. BIPAR Annual Report Page 59

61 Glossary ADR AMICE BER CCPFI CEBS CEIOPS CESR Directive EBA ECL EDPS EIOPA ELD ESAs ESFS ESIS ESMA ESRB EUROFOUND FAT FATF FOE FOS Alternative Dispute Resolution Federation of Mutual Insurance Companies Block Exemption Regulation Committee on Consumer Protection and Financial Innovation Committee European Banking Supervisors Committee of European Insurance and Occupational Pensions Supervisors Committee of European Securities Regulators 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. 3 European Banking Authority European Contract Law European Data Protection Supervisor European Insurance and Occupational Pensions Authority Environmental Liability Directive European Supervisory Authorities European System of Financial Supervisors European Standardised Information Sheet European Securities and Markets Authority European Systemic Risk Board European Foundation for the Improvement of Living and Working Conditions Financial Activities Tax Financial Action Task Force Freedom of establishment Freedom of services 3 article 249 of the consolidated version of the Treaty establishing the European Community Official Journal of the EC of C325/33 Page 60 BIPAR Annual Report

62 FSB FTT Green Papers IAIS ICPs IGS IMD IMF IORP ISSDC MiFID ODR OECD PEICL PRIPs Regulation UEAPME UCITS VAT White Papers WTO Financial Stability Board Financial Transactions Tax Green Papers are documents published by the European 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. 4 International Association of Insurance Supervisors Insurance Core Principles Insurance Guarantee Schemes Directive on Insurance Mediation International Monetary Fund Institutions for Occupational Retirement Provision Insurance Sectoral Social Dialogue Committee Markets in Financial Instruments Directive Online Dispute Resolution Organisation for Economic Cooperation and Development Principles of European Insurance Contract Law Packaged Retail Investment Products A regulation shall have general application. It shall be binding in its entirety and directly applicable in all Member States. 3 European Association of Craft, Small and Medium-sized Enterprises Undertakings for Collective Investment in Transferable Securities Value Added Tax 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. 4 World Trade Organisation 4 «Europa», Gateway to the European Union BIPAR Annual Report Page 61

63 BIPAR 52 member associations in 32 countries EU COUNTRIES Austria Estonia Fachverband Versicherungsmakler und Berater in Versicherungsangelegenheiten Verband Österreichischer Versicherungsmakler (VÖVM) Finland Estonian Insurance Brokers Association (EKML) Finnish Insurance Brokers Association (SVAM) Professional Association of Financial Service Provider in the Austrian Federal Economic Chamber (FV FDL)* France Fédération Nationale des Syndicats d'agents Généraux d'assurances (AGEA) Belgium Fédération des Courtiers d assurances et Intermédiaires financiers de Belgique (FEPRABEL) Federatie voor Verzekerings- en Financiële tussenpersonen (FVF) Germany Chambre syndicale des courtiers d assurances (CSCA) Chambre des indépendants du patrimoine* Association Française des Intermédiaires Bancaires* Union Professionnelle de Courtiers d'assurance (UPCA) Bundesverband Deutscher Versicherungskaufleute e.v. (BVK) Bulgaria Bulgarian Association of Insurance Brokers (BAIB) Greece Verband Deutscher Versicherungsmakler e.v. (VDVM) Cyprus Pancyprian Federation of Professional Intermediaries (PSEAD) Hellenic Insurance Brokers Association (HIBA) Hellenic Federation of Insurance Agents (HEFEPI) Czech Republic Denmark Association of Czech Insurance Brokers (ACPM) Forsikringsmaeglerforeningen (FMF) Hungary Panhellenic Association of Insurance Advisors (PSAS) Association of Independent Insurance Brokers in Hungary (FBAMSZ) Page 62 BIPAR Annual Report

64 Ireland Portugal Irish Brokers Association (IBA) Professional Insurance Brokers Association (PIBA) Romania Associacao portuguesa dos produtores profissionais de seguros (APROSE) Italy Associazione di Categoria Brokers di Assicurazioni e Riassicurazioni (ACB) Slovakia Romanian National Insurance Intermediaries and Consultants Association (UNSICAR) Associazione Italiana Brokers di Assicurazioni e Riassicurazioni (AIBA) Sindacato Nazionale Agenti di Assicurazione (SNA) Slovak Association of Insurance Intermediaries (SASP) Association of Financial Intermediaries and Financial Advisors (AFISP)* Lithuania Luxembourg Chamber of Insurance Brokers of Lithuania (DBR) Association Luxembourgeoise des Intermédiaires Professionnels d'assurances (ALUPASS) Spain Sweden Asociación Española de Corredurias de Seguros (ADECOSE) Consejo General de Colegios de Mediadores de Seguros Swedish Insurance Brokers Association (Sfm) Malta Association of Insurance Brokers of Malta (AIB) United Kingdom The Netherlands British Insurance Brokers' Association (BIBA) Poland Adviseurs in Financiële Zekerheid (Adfiz ) Association of Polish Insurance and Reinsurance Brokers London & International Insurance Brokers Association (LIIBA) Association of Independent Financial Advisers (AIFA) Chambre Polonaise des Intermédiaires d'assurances et de Finance BIPAR Annual Report Page 63

65 NON-EU COUNTRIES Israel Association of Insurance Brokers and Agents in Israel Lebanon Lebanese Insurance Brokers Syndicate (LIBS) Norway Norwegian Association of Insurance Brokers Russia Association of Professional Insurance Brokers (APIB) Switzerland Fédération Suisse des Agents Généraux d'assurances (SVVG/FSAGA) Swiss Insurance Brokers Association (SIBA) Turkey Turkish Association of Insurance and Reinsurance Brokers Union of Chambers and Commodity Exchanges of Turkey (TOBB)* Ukraine Federation of Insurance Intermediaries of Ukraine (FIIU) * Associate member

66 Steering Committee Management Committee Jaap Meijers Past Chairman Paul Carty Chairman Alessandro de Besi Incoming Chairman André Lamotte Secretary General Ulrich Zander Treasurer Frank E. de Jong Honorary Secretary General Jean-François Mossino Attaché to the Management Committee Other members : Alfio Bordoli, David Hough, Hans-Georg Jenssen, Yossi Manor, André Van Varenberg, Elie Ziade Honorary members : Alain de Miomandre, David Harari, Gérard Lebègue, Manuel Vila BIPAR Annual Report Page 65

67 Secretariat Nic De Maesschalck Director Isabelle Audigier Legal Director Rebekka De Nie EU Policy Manager Christine Legrand Coordinator (Administration & Meetings) Aruna Manickam Assistant (Communication) & Translator François Lestanguet Policy Adviser Isabelle Heuninckx Policy Adviser Page 66 BIPAR Annual Report