Insurance undertakings and insurance distributors could have until 1 October 2018 to prepare for the Insurance Distribution Directive 2016/97 (“IDD”) under a recently published European Commission proposal. The proposal will not affect the requirement for EU member states to transpose the IDD into national law by 23 February 2018.

Background

The IDD introduces a harmonised legal framework for the distribution of (re)insurance products. Broadly, the IDD:

  • lays down the information that must be given to consumers before they sign an insurance contract;
  • imposes certain conduct of business and transparency rules on distributors;
  • clarifies procedures and rules for cross-border business; and
  • contains rules for the supervision and sanctioning of insurance distributors for breach of the IDD.

The IDD entered into force on 23 February 2016. Member states have until 23 February 2018 to transpose and apply its provisions. This means that insurance undertakings and insurance distributors have until 23 February 2018 to put in place the necessary technical and organisational measures to comply with the new rules.

On 21 September 2017 the Commission adopted two Delegated Regulations supplementing the IDD with regard to:

  • product oversight and governance requirements for insurance undertakings and insurance distributors; and
  • information requirements and conduct of business rules applicable to the distribution of insurance-based investment products.

In its decisions to raise no objections to the Delegated Regulations, the European Parliament invited the Commission to adopt a legislative proposal postponing the application date of the laws, regulations and administrative provisions necessary to comply with the IDD to 1 October 2018. The European Parliament’s request was supported by sixteen member states.

According to the European Parliament and the member states, the extended application would allow the insurance sector, which includes small operators such as one-person distribution businesses and small-scale insurance, to better prepare for a correct and effective implementation of IDD with the full knowledge of the two Delegated Regulations and the applicable national transposition measures, ensuring legal certainty for all those concerned.

New Application Date

In response to the concerns raised, the European Commission has now issued a draft Directive (here), which proposes postponing the IDD’s application date until 1 October 2018. The Commission is also preparing to postpone the application date of the Delegated Regulations which were published in the EU’s Official Journal on 20 December 2017, in order to align the application dates. However, Member states are still required to transpose the IDD into national law by 23 February 2018.

Next Steps

The Directive will now be considered by the European Parliament and the Council of the EU. It will enter into force on the day of its publication in the EU’s Official Journal.