EUROPEAN PARLIAMENT COMMENTS ON TRANSPOSITION OF INSURANCE DISTRIBUTION DIRECTIVE (IDD)

On 16 January, the European Parliament's Committee on Economic and Monetary Affairs (ECON) published a letter (dated 9 January 2018) on its website relating to the legislative proposal adopted by the European Commission in December 2017 to postpone the application date (the date by which affected undertakings must comply) of the IDD and related Delegated Regulation to 1 October 2018.

The letter notes that, in addition to postponing the date of application, 15 Member States have requested the European Commission to postpone the date of transposition (the date by which Member States must transpose the Directive into national legislation). The European Parliament is considering positively the postponement of the date of transposition of the IDD by a few months, for example to 1 July 2018.

The letter confirms that the European Parliament intends to adopt the amending directive in an expedited manner.

ECON’s letter is here.

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EIOPA PUBLISHES INSURANCE-BASED INVESTMENT PRODUCTS (IBIPs) GUIDELINES

On 19 January, EIOPA published the translations of the Guidelines under the Insurance Distribution Directive for IBIPs that incorporate a structure that makes it difficult for the customer to understand the risks involved. The Guidelines are now available in all official languages of the European Union. As previously reported, the Guidelines relate to “execution-only” sales. These tend to be IBIPs that are sold online or over the phone where the insurance distributor neither provides advice nor verifies the customer’s knowledge of the product and the risks involved. The Guidelines aim to mitigate the risk of detriment to consumers due to mis-selling of IBIPs. The guidelines have two sections: the first part deals with requirements that apply to contracts that only provide investment exposure to financial instruments deemed non-complex; and the second part deals with requirements that apply to other non-complex insurance-based investment products.

The translation of the Guidelines commences a two month period in which EU competent authorities need to confirm whether they comply or intend to comply with the Guidelines.

A link to the Guidelines is here.

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THE FCA AND HM TREASURY AND THE BANK OF ENGLAND PUBLISH STATEMENTS ON EU WITHDRAWAL

On 20 December 2017, the Financial Conduct Authority (FCA), the HM Treasury and the Bank of England published statements detailing the progress of Brexit negotiations between the UK and the European Union. These statements highlighted their proposed approaches, including in the event of there being no deal with the EU. Interesting takeaways include:

  • the UK Government plans to legislate for a "temporary permission" regime to allow EEA firms and funds to continue operating in the UK for a limited time, without requiring new authorization to be given, the UK government also plans to legislate for longer term issues such as insurance contracts;

  • they assure that UK authorities will be able to take responsibility for situations that will no longer be covered by EU authorities;

  • the key focus will be to avoid disruption to the financial sector by ensuring the necessary technical arrangements are in place, and provide firms with up to date information on the arrangements, as negotiations take place, to ensure a smooth transition; and

  • ensuring that, regardless of the outcome of the negotiations, there is a continued engagement between European and UK regulators to protect the stability of the financial market.

The FCA statement may be found here.

The Bank of England statement may be found here.

The HM Treasury statement may be found here.

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THE BANK OF ENGLAND PUBLISH STATEMENT ON ITS FUTURE APPROACH TO AUTHORISATION AND SUPERVISION

On 20 December 2017, the Bank of England (the Bank) opened a consultation on its approach to authorisation and supervision of insurers, in the context of Brexit. The Statement contains some interesting observations by the Bank on the UK’s future relationship with the EU and its proposed approach to supervising EEA insurers in the UK, post Brexit:

  • it expects a continued high degree of supervisory cooperation between the UK and the EU post-Brexit;

  • EEA insurers that do not conduct “material retail business” may apply for authorisation as a branch in the UK (the Bank is writing to relevant firms in this regard);

  • depending on the scale of a relevant EEA’s insurer’s liabilities protected by the UK Financial Services Compensation Scheme, it may be required to operate through a UK authorised subsidiary; and

  • if the Bank is unable to gain a sufficient degree of cooperation from the home state supervisor regarding its oversight of the branch of an EEA insurer, the Bank may impose specific regulatory requirements on the branch or if this proves ineffective, the Bank may require the firm to be authorised as a UK subsidiary.

The consultation on the proposed policy is open for public comment until the end of February 2018.

The Bank’s statement may be found here.

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EUROPEAN COMMISSION RELEASES NOTICE TO STAKEHOLDERS REGARDING EU RULES IN THE FIELD OF DATA PROTECTION IN LIGHT OF BREXIT

On 9 January, the European Commission released a notice reminding stakeholders that in the absence of a ratified agreement to the contrary, all primary and secondary EU law will cease to apply to the UK from 30 March 2019, after which date the UK will become a 'third country'. Therefore, subject to any transitional measures being put in place, the EU rules for the transfer of personal data to third countries apply.

Aside from an ‘adequacy decision’, which allows the free flow of personal data from the EU without the EU data exporter having to implement any additional safeguards or being subject to further conditions, the EU’s data protection rules (under the new General Data Protection Regulation 2016/679, “GDPR” - which will apply as from 25 May 2018) allow a transfer to a third country data controller or processor if they have provided ‘appropriate safeguards’. These safeguards may be provided for by:

  • approved Codes of Conduct together with binding and enforceable commitments of the controller or processor in the third country; and

  • approved certification mechanisms together with binding and enforceable commitments of the controller or processor in the third country.

In the absence of an adequacy decision or of appropriate safeguards a transfer or a set of transfers may take place on the basis of so-called ‘derogations’. Derogations allow transfers in specific cases, such as for the performance of a contract or other cases based on consent, for the exercise of legal claims or for important reasons of public interest. The European Commission has confirmed that it is working with interested parties and data protection authorities to make the best use of the new tools for data transfers to third countries that are to be implemented under the GDPR.

The European Commission’s notice to stakeholders is here.

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EIOPA PUBLISHES RISK DASHBOARD

On 25 January, EIOPA published its quarterly risk dashboard summarising the main risks and vulnerabilities in the insurance sector based on third-quarter 2017 data. Overall, the risk exposure remained stable. Potential credit risk mispricing and the risks linked to the low interest rates are still major concerns. Increases in the eligible own funds were mainly responsible for the improvements in solvency ratios. Some profitability and underwriting indicators deteriorated due to the impact of the recent natural catastrophes. Market perception remained stable with some improvements in the rating outlooks.

EIOPA's risk dashboard is here.

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INSURANCE EUROPE RESPONDS TO THE EUROPEAN COMMISSION’S CONSULTATION ON COOPERATIVE INTELLIGENT TRANSPORT SYSTEMS (C-ITS) SPECIFICATIONS

C-ITS, sometimes referred to as ‘connected driving’ is the technology that allows vehicles to communicate with other vehicles and infrastructure, such as traffic signals, that are fitted with the same system. On 9 January, Insurance Europe published a response to the European Commission's consultation on C-ITS specifications, which agrees with the need for a clear EU legal framework and identifies access to in-vehicle data as being a major issue that requires immediate attention. According to Insurance Europe, regulation in this area would allow all stakeholders to be on an equal footing when it comes to accessing in-vehicle data that is free from any interference by vehicle manufacturers and is based solely on the consent of drivers/consumers. Insurance Europe also urges the Commission to give due consideration to the conclusions of the Transport Research Laboratory study on access to in-vehicle data and resources, which was published in August 2017.

Insurance Europe’s press release is here.