The Insurance Distribution Directive ((EU) 2016/97, the “IDD”) came into force on 22 February 2016, and the current deadline for transposition by member states is 23 February 2018. The impact of the IDD has been previously discussed on this blog, most recently in March 2017, in light of the FCA’s first Consultation Paper. In a recent development, the European Parliament’s Economic and Monetary Affairs Committee (“ECON”) has recommended that the application date of the IDD is delayed until 1 October 2018.
ECON recommendations for the IDD and Delegated Regulations
ECON recently held a meeting on 16 October 2017, at which it voted to raise no objections to the Commission Delegated Regulations of 21 September 2017 which supplement the IDD with regard to:
- product oversight and governance requirements for insurance undertakings and insurance distributors (C(2017)06218); and
- information requirements and conduct of business rules applicable to the distribution of insurance-based investment products (C(2017)06229), (together, the “Delegated Regulations“).
Nonetheless, the recitals to ECON’s draft recommendations for a decision in relation to these Delegated Regulations “asks the Commission to assess whether the application date [of the IDD] can be extended to 1 October 2018“. The draft recommendations note that they do not recommend the IDD transposition deadline to change.
The reason that ECON provides for this request is a concern that there would not be “sufficient time for industry to implement the necessary technical and organisational changes“, particularly if the Parliament uses the full three months scrutiny period available to it.
ECON further notes that “swift publication” of the Delegated Regulations in the Official Journal would allow the industry to implement them in a timely fashion and provide legal certainty as to which of the provisions would apply to product oversight and governance, and to insurance-based investment products, respectively.
It is worth noting that the final versions of ECON’s draft recommendations have not yet been published. Proposed amendments to the recommendations call for an extension to the application date in even stronger terms, asking “the Commission to adopt a legislative proposal setting the application date at 1 October 2018” (emphasis added).
The market response
This is a welcome move for insurers, with Michaela Koller (director general of Insurance Europe) and Hugh Savill (Director of Regulation of the Association of British Insurers) supporting ECON’s recommendations.
Koller confirmed the significance of the issues recognised by ECON, emphasising the need for insurers “to be given sufficient time to implement the IDD” as they will only have legal certainty surrounding the provisions “once the final rules are known“. In particular, Koller and Savill both highlight that giving insurers an appropriate length of time to properly implement the IDD requirements will be of benefit of consumers.
FCA Consultations regarding the IDD
Regarding the UK’s transposition of the IDD, the deadline for responses regarding the FCA’s second Consultation on the IDD has recently closed on 20 October, with a Policy Statement expected in December 2017.
The FCA’s third IDD Consultation Paper was published in September (see here), which will culminate in a Policy Statement in January 2018. Firms have until 25 November 2017 to respond to this Consultation Paper via the online response form, or by email or letter to the FCA.