The European Federation of Insurance Intermediaries

Transcription

1 The European Federation of Insurance Intermediaries Annual Report

2 Annual report 06/ /2013 BIPAR BIPAR is the European Federation of Insurance Intermediaries. It groups 51 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, Paul Carty Chairman I am pleased to advise that BIPAR has just concluded its 76 th year of operations stronger and more relevant than ever before. BIPAR marked its 75 th birthday at the AGM last June in Brussels. The year since then has been a year of unrelenting activity in representing the membership at EU and worldwide level. This time last year we were aware that the single most important piece of EU legislation, the recast of the IMD Directive, was about to be published. It was finally published in July 2012 and commenced what is proving to be a long and detailed legislative process with three Committees of the EU Parliament being directly involved, JURI, IMCO and ECON. Each Committee appointed a Rapporteur who in turn produced reports which frequently adopted radically differing positions. It was not until relatively recently that it was decided that ECON would act as the lead Committee in respect of the recast IMD. The three Committees have produced more than a thousand amendments to the Directive and the lead Committee ECON is not scheduled to hold its vote until 8 July if it is not postponed until the autumn. In any event, IMD II, as the recast is more commonly known, (together with the other related proposed Directives such as MiFID), is without doubt the most significant piece of legalisation that BIPAR is currently addressing. It will have huge ramifications for intermediaries for decades to come and that is why it is the focus of attention. The effort required to track in detail the progress of the Directive and to work closely with all the individuals who may have influence over the final shape of the legislation has been nothing short of herculean. However, thus far, BIPAR has risen to the challenge and will continue to do so until the legislation has been adopted and beyond. Over the last year, BIPAR has been able to attract the participation of leading MEPs, senior officials from the European Commission and from EIOPA to our meetings. I like to see this level of participation as testimony to the level of respect and influence that BIPAR has established within the EU and indeed beyond. I believe that a number of factors have contributed to that, our ability to speak with one voice, the fact that the positions we adopt are well reasoned and not self-serving and, most of all, by the sheer hard work of member associations, dedicated individuals and a fantastic, skilled and hard working staff. BIPAR Annual Report Page 3

5 Over the years, we have, through careful husbandry, built a robust organisation with the financial and human resources to represent the interests of our member associations. Great emphasis has been placed on communications via our regular meetings with a terrific level of participation by the member associations. BIPAR has also used BIPAR Press and Updates to keep members informed. Since the beginning of this year, BIPAR, in addition to the above, has issued more than 50 communications, many of which have been very detailed regarding the constant stream of EU developments that impact or may impact on insurance intermediaries. I recommend this annual report as a terrific reference document for member associations to keep abreast of EU developments and upon the activities of BIPAR itself. On a personal note I would like to thank and acknowledge the encouragement, support and friendship that I have received from the members and the staff of BIPAR during my term in office and to say what an honour and privilege it has been for me to serve as Chairman for the last two years. Page 4 BIPAR Annual Report

6 Contents EUROPEAN AFFAIRS... 7 Recast proposal of the Insurance Mediation Directive (IMD)... 7 Solvency II Directive - Insurance intermediaries' issues Insurance Guarantee Schemes Life & Investment issues Packaged Retail Investment Products (PRIPs) Proposed Markets in Financial Instruments Directive II (MiFID II) Review of the Directive on the Institutions for Occupational Retirement Provision (IORP) Proposed Directive on credit agreements relating to residential property Pools and ad-hoc co-(re)insurance agreements on the subscription market Shadow banking Taxation of the financial sector 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) Modernisation of the European Public Procurement Market Environmental Liability Directive Natural and man-made catastrophes Use of gender in insurance Data protection Money laundering BIPAR Annual Report Page 5

7 European Supervisory Authorities (ESAs) and BIPAR ESAs stakeholder groups BIPAR's responses to EIOPA's consultations and publications in 2012 and BIPAR's participation in EIOPA's second Consumer Day Social Affairs Next EU Presidencies A new EU Member State 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 Permanent Secretariat Page 6 BIPAR Annual Report

8 EUROPEAN AFFAIRS Recast proposal 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 need to review the IMD was acknowledged during the implementation checks carried out by the European Commission in It appeared that, as a result of the minimum harmonisation introduced by the IMD, the practical application of its provisions varied quite significantly between the Member States (scope, definitions, information requirements,...) and there was a need for improved legal clarity. In addition, gold-plating practices as well as the use of general good requirements at national level created some obstacles to the functioning of the Single Market for insurance intermediaries. The Commission also wanted to take into consideration the final report of DG Competition on business insurance, which identified potential conflicts of interest and a certain lack of transparency in the way that insurance intermediaries are typically remunerated. A recast proposal On 3 July 2012 the European Commission proposed a recast proposal of the Insurance Mediation Directive, together with two other legislative proposals on PRIPs and UCITS aiming "at raising standards and removing loopholes for the benefit of consumers". As explained in the explanatory memorandum of the proposal, the overarching objectives of the recast text are undistorted competition, consumer protection and market integration. In more concrete terms the recast proposal aims at achieving the following improvements: to expand the scope of application of IMD I to all distribution channels (e.g. direct writers, car rentals,...); to identify, manage and mitigate conflicts of interest; to raise the level of harmonisation of administrative sanctions and measures for breach of key provisions of the current Directive; to enhance the suitability and objectiveness of advice; ensure sellers professional qualifications match the complexity of products sold; to simplify and approximate the procedure for cross-border entry to insurance markets across the EU. EU legislative procedure: Where are we? The IMD II proposal is now being considered and discussed by the two EU legislators, the European Parliament (EP) and the Council of Ministers of the EU. Its adoption is likely to take place in European Parliament At European Parliament level, the Economic and Monetary Affairs Committee (ECON) is the Committee responsible for the EU recast proposal and one of its members, the German Christian Democrat MEP Dr. Werner Langen has been appointed Rapporteur for the text. The Rapporteur's draft report (EP amendments to the Commission's proposal) was published in early January. ECON members could table amendments to his draft report until 7 February. His report is expected to be voted in ECON on 8 July It is expected to be voted in EP Plenary in December BIPAR Annual Report Page 7

9 Main amendments of ECON Rapporteur s draft report on the IMD recast proposal o o o o o Scope - The sideline sales of travel insurance and car-hire insurance should be excluded; insurance undertakings and their employees are not required to register again under the Directive. Conflicts of interest and transparency - Compulsory disclosure is likely only to cause spiralling competition rather than give greater consumer protection, however Member States should be free to introduce disclosure requirements over and above those of the Directive. Cross-selling - As the IMD recast proposal goes beyond the MiFID II requirements and may actually disadvantage the consumer with regards to packaged deals, Article 21 should be amended to specify that consumers should simply be informed if parts of the package can be purchased separately. Insurance investment products - Account must be taken of the distinction between insurance and purely investment products, and Member States should be given the freedom to adopt divergent provisions in accordance with their perceived market requirements to take account of the different solutions Member States are adopting on commission based services and advice. Delegated acts/level of harmonisation No delegated acts but instead detailed arrangements determined by the Member States themselves or through a codecision procedure in Council and Parliament in cases where a real need for harmonisation exists. Two other EP Committees also gave their opinions on the IMD II proposal, i.e. the IMCO (Committee on Internal Market and Consumer Protection) and JURI (Committee on Legal Affairs) Committees with the following respective Rapporteurs: the UK Socialist MEP Catherine Stihler and the German Christian Democrat MEP Klaus-Heiner Lehne. The IMCO opinion was adopted at the end of April Main amendments of IMCO opinion to the IMD recast proposal o Deletion of the activities of professional management of claims, loss adjusting and expert appraisal of claims from the scope of the recast IMD o The activities of comparison website fall under the scope of the IMD recast proposal o Amended definition of advice (personal recommendation to an actual or potential customer in relation to an insurance product) o Deletion of Article 4 regarding simplified registration procedure/declaration of activities o Introduction of FOS and FOE definitions o Deletion of automatic disclosure requirement after 5 years of the coming into force of the recast IMD and introduction of disclosure of commission upon request for life and non-life. The consumer must be informed that he/she has the right to request the information. o Introduction of a KID for non-life products o Tying practices are allowed o Regarding insurance PRIPs, deletion of Article 24.5 (ban of remuneration paid by third party) replaced by the disclosure of whether a fee is payable by the customer for the advice. The JURI opinion was adopted in March Main amendments of JURI opinion to the IMD recast proposal o o o o o o o o o Deletion of the activities of professional management of claims, loss adjusting and expert appraisal of claims from the scope of the recast IMD Amended definition of advice (personal recommendation to an actual or potential customer in relation to an insurance product) Deletion of Article 4 regarding simplified registration procedure/declaration of activities Deletion of delegated acts regarding knowledge and ability and transparency Introduction of a clause of mutual recognition of adequate knowledge and ability Reinforced powers of the competent authorities to ensure implementation of the recast IMD Deletion of automatic disclosure requirement after 5 years of the coming into force of the recast IMD and introduction of disclosure of commission upon request for life and non-life Regarding insurance PRIPs, deletion of the ban of remuneration from the provider when insurance advice is given on an independent basis Introduction of stricter requirements when no advice is given Page 8 BIPAR Annual Report

10 IMCO and JURI opinions include key changes, in particular regarding the scope and the transparency requirements, which are in line with the BIPAR position. On 8 July, while voting on its tabled amendments, ECON will also vote on the amendments adopted by JURI and IMCO. All voted amendments will be sent to EP plenary vote, now scheduled in December Council of EU Ministers In parallel, the recast has also been discussed by the Council of the EU under the Cypriot Presidency. Two meetings already took place in September and October last year and the first 17 Articles were discussed and redrafting was proposed for the first four. No meetings have taken place under the Irish Presidency for which the dossier is not a priority. It is expected that the Lithuanian Presidency will work on the recast proposal although it seems to be a low priority for them as well. BIPAR views and actions BIPAR main concerns with the recast proposal o Some information requirements would polarize the market (Articles 3.5 and 16a) o Unnecessary and unlevel requirements re remuneration disclosure (Article 17) o No level playing field between declared intermediaries and registered intermediaries (Article 4) o Amended definition of tied intermediary adding confusion re the status and activities of insurance agents in the EU (Article 2.8) o Best interest requirement will create legal uncertainty (Article 15) o Lack of clarity re freedom to provide services and freedom of establishment (Articles 5, 6 and 7) o Chapter VII on additional customer protection requirements in relation to insurance investment products: its ban on remuneration from providers ignores the market reality of the insurance market and will deprive the weakest consumer from any form of advice. o No grandfathering clause (Recitals 1/15 deletion of IMD I Article 5) o No clear definition of the geographical scope (Article 1) o Scope: Lack of clarity regarding comparison websites (Article 2.3) BIPAR and representatives of its national associations have been meeting members of the European Parliament and of the Council regularly, defending our views on this key dossier. BIPAR endeavours to achieve that the final text will contribute to the essential protection of consumers, whilst ensuring that the revised regulatory requirements are drafted in such a way as to fit in with the reality of a dynamic market place. On 2 October 2012, BIPAR organised a special meeting on the IMD recast proposal for its member associations with speakers from EIOPA, the Commission and the EP Rapporteur Werner Langen. From January until the end of May, together with its member associations, BIPAR sent its views and amendments to the Commission s proposal to the different EP Rapporteurs of the text and met them regularly before they published and adopted their respective opinions (see above). Paul Carty, Werner Langen (special BIPAR IMD II meeting, 2 October 2012) On 30 and 31 January 2013 BIPAR held its midterm meetings focused on the recast IMD proposal. Three key MEPs were invited as speakers to these meetings, i.e. Mrs. Catherine Stihler, Rapporteur for the IMCO Committee on BIPAR Annual Report Page 9

11 the IMD II, Mr. Olle Schmidt, Shadow Rapporteur for ECON on the IMD II, as well as Mr. Othmar Karas, Vice-President of the European Parliament, Shadow Rapporteur for IMCO on the IMD II. Mr. Karel Van Hulle, Head of Unit Insurance and Pensions, DG Internal Market and Services, European Commission, Mr. David Cowan, EIOPA, Principal Expert, Consumer Protection and Mrs. Pauline de Chatillon, EIOPA, CCPFI Chair (Committee on Consumer Protection and Financial Innovation), also took part in the BIPAR mid-term meetings, focusing on the work of their respective institutions on the recast IMD proposal. Next steps The Council is expected to agree on a position in autumn After the trialogue - the step in the legislative process during which the three EU institutions (Commission, EP, Council) work on a compromise text which reflects most of their common views - if the Council approves all the EP amendments and does not change the original proposal, the act is adopted by the Council by qualified majority and then signed and published. If the Council does not approve all the amendments or rejects them, it adopts its position by qualified majority, which is then forwarded to Parliament for its second reading. Although there is no sharing of competence between IMCO and ECON, there will be an enhanced informal cooperation between the Rapporteurs and participation of the IMCO Rapporteur in the future trialogues. EIOPA work The European Commission's proposal envisages the involvement of EIOPA through five delegated acts (e.g. professional requirements, remuneration, PRIPs), one regulatory technical standard (level of PII cover), one implementing technical standard (information on sanctions), two guidelines (cross-selling, sanctions (types/level pecuniary sanctions)) and three reports (application of IMD II, structure of intermediaries markets, powers/resources of competent authorities). Pauline de Chatillon, David Cowan (BIPAR 2013 mid-term meetings) The EP and the Council are opposed to delegated acts, standards and guidelines since they are in favour of minimum harmonisation. However, in case of the absence of an empowerment in the recast IMD, EIOPA may decide to issue its own initiative work on the above issues. Page 10 BIPAR Annual Report

12 Main provisions of the Commission's recast proposal of the IMD Scope The IMD II proposal not only applies to insurance intermediaries but also to direct sellers (insurance undertakings) and will cover providers of after-sales services (such as loss adjusters). Other market players who sell insurance products on an ancillary basis (e.g. the case of travel insurance policies sold by travel agents, general insurance policies sold by car rental companies and leasing companies), are now included in a proportionate manner in the scope of the proposed IMD II). The "de minimis" exclusion from the scope in IMD I remains nearly unchanged (seller of insurance policies ancillary to sale of goods -and not of products or services any more, the premium limit on an annualised basis is increased to 600 pro rata was previously 500). In one of its recitals, the proposal also specifies that certain activities by insurance aggregator websites constitute insurance mediation. Registration/professional requirements The IMD II proposal leaves the registration/ professional requirements of IMD I largely unchanged (appropriate knowledge and ability, PI cover, financial guarantee,...). Amongst the new requirements are the obligations for intermediaries to disclose links/arrangements with other persons such as shareholders or members and to declare generically at the moment of registration whether they give advice or not and work on behalf of the insurer or the client. Information requirements The IMD II proposal restates the IMD I disclosure requirements as well as the large risks exemption (adding one for professional customers as defined in the annex of the proposal). The IMD II proposal introduces a new general principle for intermediaries and insurers that they should act honestly, fairly and professionally in the best interest of their customers. They have to address all information, including marketing communications in a fair, clear and not misleading way. It also introduces new rules mandating, prior to the conclusion of any insurance contract, the disclosure of remuneration by intermediaries and insurers. Regarding the disclosure of the amount of his remuneration, the Commission makes a distinction between life and non-life products. For the sale of life insurance products, a mandatory "full disclosure" regime is envisaged, i.e. the intermediary will have to disclose the amount of his remuneration in relation to a contract offered or if not possible, the basis of calculation. This regime will start its application from the adoption of the IMD II. For the sale of non-life insurance products, an "on request" regime (i.e. on customer's request) is envisaged for the remuneration of non-life products. That is to say that the intermediary will have to disclose the amount of his remuneration in relation to a contract offered or if not possible, the basis of calculation, upon the request of his customers. After a transitional period of five years (starting from adoption of the Directive) the mandatory full disclosure regime will automatically apply for the sale of non-life products as well. This 5-year transition period will coincide with the revision of the Directive. The IMD II proposal also introduces a new requirement to disclose the nature and the basis of the calculation of any variable remuneration received by the sales employees of insurance undertakings and intermediaries, as well as of any payment made by the customer after the conclusion of the contract. The proposal includes a general statement strongly favouring the provision of advice in the sale of insurance products but does not make the provision of advice mandatory. Standards for sales where no advice is given are introduced, i.e. relevant information must be given in a comprehensible form to allow an informed decision by the customer. The proposal introduces a new provision on bundling products together and requires that the customer be informed that the products may be purchased separately and be given certain information in this regard. Extra requirements apply to life insurance products with investment elements (PRIPs), covering sales standards, conflicts of interest, and a ban on commission for independent advice. In non-life and life, the Commission proposes that the intermediary discloses the nature and basis of his remuneration and whether he receives contingent commissions and their amounts. 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. This Plenary adoption has been postponed various times already. 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. Due to the delays in Omnibus II, the implementation of Solvency II is also likely to be delayed. 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 worked on this dossier and 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). In 2010, BIPAR responded to a consultation regarding level 2 implementing measures, more in particular 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. BIPAR stressed that the chosen option should not lead to unjustifiable costs on insurers, intermediaries and ultimately, consumers. 1 Directive 2009/138/EC of 25/11/2009 on the taking-up and pursuit of the business of insurance and reinsurance Page 12 BIPAR Annual Report

14 BIPAR also continues to monitor closely issues related to the outsourcing by insurers of critical or important functions. An intermediary who has an underwriting authority from an insurer is, for example, considered as a service provider of an outsourced important insurer s function. BIPAR wants to ensure that intermediary activities falling under the IMD are not seen as outsourcing under Solvency II. BIPAR believes that there is a need to have proportionate rules for the limited and well defined activity of intermediaries with a binding authority (that may provide limited claims settling authority). Solvency II and Omnibus II The Omnibus II Directive will set the date of entry into force of the Solvency II regime as well as the scope of the technical standards to be drafted by EIOPA. Omnibus II reflects the implementing measures introduced in the Lisbon Treaty and the new financial supervision measures introduced by EIOPA s founding Regulation. However, Omnibus II is still in negotiations between Parliament and Council with the Parliament s plenary vote currently expected for 22 October The technical standards and guidelines are expected to cover areas such as internal models, solvency capital requirements, own funds, group supervision, supervisory transparency and accountability, reporting and disclosure, governance, Own Risk and Solvency Assessment (ORSA), supervisory review process... With regard to the delays in Omnibus II and thus in Solvency II, the EIOPA Chairman, Gabriel Bernardino, sent a letter to EU Commissioner for the Internal Market, Michel Michel Barnier Barnier, on 4 October 2012, and voiced his and the EIOPA Board of Supervisors concerns. If we have to continue supervision on this basis, there is a huge danger that supervisors will not be able to identify and analyse risks correctly and will not be able to take the necessary supervisory actions in time, which may have serious consequences for policyholder protection, Mr. Bernardino warned. He added that in the absence of new rules, European supervisors would be forced to come up with their own procedures for monitoring insurers and conflicting national solutions would emerge. The letter was followed by an EIOPA Opinion on 20 December 2012 on interim measures regarding Solvency II. In this opinion to the national competent authorities represented in EIOPA s Board of Supervisors, EIOPA sets out the expectations for the national authorities. This includes ensuring that undertakings have in place an effective system of governance which provides for sound and prudent management of the undertaking and an effective risk management system. As a follow-up to this opinion, EIOPA is now in the process of developing guidelines on how to proceed in the interim phase leading up to Solvency II. On 27 March 2013, EIOPA launched a public consultation on Guidelines related to the preparation for Solvency II. The Guidelines cover the systems of governance, the forward-looking assessment of undertakings own risk (based on ORSA principles), the submission of information and the pre-application for internal models. The purpose of the Guidelines is to support both national supervisors and undertakings in their preparations for the Solvency II requirements. In its response, BIPAR will focus on governance, more in particular on the Consultation Paper on the Proposal for Guidelines on the System of Governance" as well as on the chapter on "Outsourcing" of this consultation paper. Next steps As previously mentioned, the implementation of Solvency II depends on the adoption of the Omnibus II Directive. The Plenary vote of Omnibus II in the European Parliament is currently planned to take place on 22 October 2013 and the implementation of Solvency II might thus be pushed back to BIPAR Annual Report Page 13

15 Insurance Guarantee Schemes Insurance Guarantee Schemes (IGS) provide last-resort protection to consumers when insurance companies are unable to fulfil their contractual commitments. They protect people against the risk that claims will not be met if their insurer becomes insolvent. Only a few EU countries have insurance guarantee schemes in place, although there are specific EU directives for the banking and securities sectors on deposit-guarantee schemes and on investor compensation schemes. To address the regulatory loopholes and inconsistencies in the EU, the Commission has carried out over the last three years a review of the adequacy of existing insurance guarantee schemes in order to make an appropriate legislative proposal (Directive). Commission's 2010 White Paper BIPAR response In July 2010, the European Commission published a White Paper on 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. EP 2011 Resolution and BIPAR action In October 2011, a resolution (non-binding report) from the European Parliament was adopted (Rapporteur: Mr. Skinner) that calls the European Commission to rapidly put forward the proposal for a Directive on IGS to complement Deposit Guarantee Schemes, Investor Compensation Schemes and Solvency II. 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 opposed 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. The adopted EP resolution took BIPAR views into consideration and calls on the Commission to clarify the role played by IGS in relation to intermediaries. EIOPA 2012 Report on the Role of IGSs in the Winding-Up Procedures of Insolvent Undertakings At the end of July 2012, EIOPA published a report on IGS in the Winding-Up Procedures of Insolvent Undertakings. It highlights the diversity of regimes across Member States and the importance of crossborder communication between Member States. The report also illustrates how Member States have exercised their discretion in implementing Directive 2001/17/EC on the reorganisation and winding-up of insurance undertakings to fit with their legal and institutional framework. This points to the potential need for any future Directive on IGS to provide Member States with sufficient flexibility to adapt the Directive s requirements to fit with their national framework. BIPAR will continue to monitor the drafting of a possible Commission's proposal for a Directive on IGS. Page 14 BIPAR Annual Report

16 Life & Investment issues Packaged Retail Investment Products (PRIPs) On 3 July 2012, the European Commission published a proposal for a Regulation on key information documents for investment products as part of the so-called consumer package, together with IMD II and UCITS V. According to the Commission, there is a need for a standardised, easy to understand Key Information Document (KID) that gives a good insight into the risks of the 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. The Commission s choice for a Regulation aims at ensuring a true harmonisation of the new rules in the EU. Contrary to a Directive that leaves the national authorities the choice of form and methods of implementation, a Regulation is binding in its entirety and directly applicable in all Member States. The text as it is proposed by the Commission is limited to investment products and would mean in practice for intermediaries that when they sell investment products, they will have to use a KID and pass it on to their clients. The KID is produced by the investment product manufacturer, who may be held liable if the KID does not comply with the requirements of the Regulation. The proposed KID gives the name of the product and the identity of the manufacturer and contains the nature and main features of the product such as: The type of product Its objectives and the means of achieving them An indication of specific environmental, social or governance outcomes that are targeted Details of insurance benefits in case the product offers them The term of the product, if known Performance scenarios, if relevant The KID should also offer answers to questions such as: could I lose money?, what is it for?, what are the costs?",... BIPAR's position 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 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. EU legislative procedure: Where are we? The Council of the EU and the European Parliament are currently working on amendments to the proposal of the European Commission. Mrs. Pervenche Berès (France-Socialist) was appointed Rapporteur in the Committee on Economic and Monetary Affairs (ECON), which is the Committee responsible for the text, and issued her draft report on 20 December Mr. Pier-Antonio Panzeri (Italy-Socialist) was appointed Rapporteur for opinion for the Committee on Internal Market and Consumer Protection (IMCO) and Petru Constantin Luhan (Romania-Christian Democrat) Rapporteur for opinion for the Committee on Civil Liberties, Justice and Home Affairs (LIBE). BIPAR Annual Report Page 15

17 Key modifications in the ECON, IMCO and LIBE texts and BIPAR views An important change that both the ECON and the IMCO Rapporteurs propose is that the scope of the proposed Regulation is enlarged in two ways: both draft texts make the Regulation applicable to more products (certain deposits and securities that were excluded in the Commission's proposal and Mr. Panzeri even removes the Commission s exemption for "insurance products which do not offer a surrender value or where that surrender value is not wholly or partially exposed, directly or indirectly, to market fluctuations") but more importantly, both draft reports extended the responsibility for the KID to distributors of investment products (defined in the Berès report as "persons selling investment products"). Thus, persons selling would be in charge of drawing up the KID, jointly with the product manufacturer. The liability for the content of the KID would be shared between the producer and the distributor. The tabled amendments in the IMCO and ECON Committees, including those of Mrs. Berès herself, deviate from this initial approach however, and suggest a separate annex to the KID with information on the person selling. The LIBE opinion was adopted on 8 April and focuses on legal and fundamental rights related issues. However, it includes a clarifying amendment by the Rapporteur that it is the product manufacturer who is responsible for the KID. The IMCO opinion was adopted on 25 April. The following parts are of particular interest to intermediaries: In case of advice, a KID has to be provided. Intermediaries are co- responsible for drawing up the KID. Further in the text, it is said that the KID is completed by the distributor where relevant, adding that the KID contains potential fees paid to your intermediaries. However, the specific KID heading on costs, includes a reference to an annex, which details any additional costs charged by the distributor not shown in the costs section of the KID, including any fees paid to your intermediaries. A definition of a person selling is added When developing level 2 detail, the Commission shall take into account disclosures to investors made by persons selling related to costs in MiFID and IMD to ensure consistency in information on costs in the KID with these other disclosures. Persons selling have to keep a record of the provision of the KID the burden of proof, however, lies with the manufacturer. The person selling has to prove he has provided the KID in accordance with the Regulation. The person selling is also responsible for setting up procedures to submit complaints against the manufacturer. In the ECON Committee, many similar amendments have been tabled. These go in different directions, also with regard to intermediary involvement. In all Parliamentary Committees, BIPAR has focused on explaining why it is not possible to ask intermediaries to be responsible for the content of the KID. Intermediaries have to rely on the product manufacturer for this. Representatives from the European Commission who attended the Parliamentary activities questioned an extension of the scope, since this would dilute the purpose of the Commission proposal. Also if too many different products fall under the scope, this would no longer make the KID comparable. They called for details of the KID to be provided at level 2 instead of level 1 (i.e. by Parliament and Council). With regard to intermediaries, the Commission said it was also looking into the division of responsibility between product manufacturer and intermediary but that the most important point was to ensure that the consumer does not become the victim of a fight between the producer and the intermediary. There should be a simple way for the consumer to address the one or the other party. Page 16 BIPAR Annual Report

18 Key modifications in Council and BIPAR views The published compromise text from end November 2012 seems to indicate that the Council supports the exemptions of products as suggested by the European Commission but allows Member States to set their own rules or extend the scope of the Regulation to other products. The Council also seems to want to insert a definition of a person advising on or selling a PRIP, stating this can be an intermediary or the manufacturer selling directly. The Council, however, does not appear to extend the responsibility for the KID to the person selling or advising. Next steps The ECON Committee is expected to vote on Mrs. Berès' draft report and the other tabled amendments on 8 July. The Parliamentary Plenary vote is currently scheduled to take place on 23 October BIPAR will continue to follow the discussions in both institutions and to promote its views. Proposed Markets in Financial Instruments Directive II (MiFID II) 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 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, on 20 October 2011, the Commission published a proposal for MiFID II with the aim, among others, of improving the protection of the investor. This proposal introduced 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 kept 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 European Parliament adopted ECON's report at the end of October The dossier is still under discussion at Council level but it will be discussed in the near future in trialogue in order to find a compromise text that can then be adopted, published and transposed into national law. BIPAR Annual Report Page 17

19 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. 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). Key BIPAR issues with the Commission's proposal 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's view nonexistent. 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. EP Rapporteur's report On 26 October 2012, the Parliament adopted the Rapporteur Markus Ferber's draft report and amendments of other MEPs. After long debates in the responsible ECON Committee on the need for the concept of independent advice and a ban on commission, the Parliament in the end reintroduced the concept of a ban on remuneration in case someone informs the client that investment advice is given on an independent basis for all MiFID products. There were strong calls to introduce a ban on commission for any type of advice, but this did not obtain a majority vote. The Parliament s text states that fees or commissions from third parties are acceptable when: the payment is designed to enhance the quality of the service and does not impair compliance with the firm s duty to act honestly, fairly, professionally and in the best interest of the client and is transferred to the client; the payment enables or is necessary for the provision of the services or the existence, nature and amount are clearly disclosed to the client (unless Member States provide that transfer to the client is the only way). Page 18 BIPAR Annual Report

20 The text adds that Member States may additionally prohibit or further restrict the acceptance of fees, commissions, non-monetary benefits including for such remunerations to be returned to the client or offset against fees paid by the client. The European Parliament also introduced an article which requires that insurance intermediaries and insurers selling or advising insurance based investments must comply with a defined set of conduct rules in MiFID II. In essence, these conduct rules are similar to the ones which would be introduced through chapter VII of the IMD II. In this respect, the Parliament also adds a definition of insurancebased investment 2. With regard to the opt-out, the Parliament has added that when applying analogous rules to optedout firms, Member States should take into account the size, risk profile and legal form. To the list of analogous requirements it also adds the provisions on conflict of interest and organisational requirements (organisational and administrative arrangements to take steps designed to prevent conflicts of interest). With regard to the investor compensation scheme for opted out firms, the Parliament has added that this can also be a PI insurance. The text continues that firms that fall out of the scope of MiFID but provide advice or portfolio management to retail clients should obey the rules for investor protection that are equivalent to the obligation to keep records of all services/transactions, equivalent to the obligation to keep recordings of telephone conversations (can be waived) or electronic communications and to articles 24 (general principles and information to clients) and 25 (assessment of suitability and appropriateness and reporting to clients). With regard to cross-selling, the Parliament has added responsibility for EIOPA and EBA as well, next to ESMA. The Parliament also requires that in case of cross-sales, each component has to be suitable for the client, as well as the overall package. Council's text In the Council, the latest published draft text from mid-april also keeps the notion of independent advice and links to this the ban on commissions. It adds the possibility for Member States to go beyond, but if they do so, this has to be justified and proportionate and they need to inform the Commission about such measures. The Commission has to give its opinion on the justification and proportionality and will then publish these additional requirements on its website. In respect to the opt-out, the Council has added 2 other requirements that the analogous systems have to comply with, namely: - article 24.6 a), which states that a firm should not remunerate or assess the performance of its staff in a way that conflicts with its duty to act in the best interests of its clients. - article 29 Obligations of investment firms when appointing tied agents With regard to conflicts of interest, there is a new part regarding the disclosure of such conflicts, which must be made in a durable medium and include sufficient detail, taking into account the nature of the client. Next steps As soon as the Council finalises its text, the 3 European institutions should start their discussions in trialogue. BIPAR will continue to follow up the developments of the above-mentioned issues. 2 An insurance contract where the amount payable to the client is exposed to the market value of an asset or payout from an asset or reference value, and where the client does not directly hold the asset BIPAR Annual Report Page 19

21 Consultation of ESMA guidelines on remuneration under MiFID On 17 September 2012, ESMA, the European Securities and Markets Authority, published draft guidelines and an accompanying consultation on remuneration policies and practices under the MiFID. ESMA commented that over the past decade, there had been a number of mis-selling cases and that a key factor had been the presence of financial incentive schemes for sales staff that do not take account of the clients best interests. ESMA guidelines should tackle this and help to strengthen investor protection and to achieve the same level of protection for Europe s retail investors no matter where they invest. BIPAR s response In its response, BIPAR stressed its concern regarding the proportionality of the guidelines and their value in court, expressing the hope that the attention and reference to proportionality would be reflected and clarified in the final guidelines. BIPAR stated that broadly speaking, from a moral perspective, and within the framework of large institutions, it could agree with many concepts in the paper. From a legal perspective however, BIPAR believes that remuneration must remain an issue between parties and that the responsibility of the management of remuneration should remain within the firm. Firms should have a wide spectrum of choices, within the legal limits, in their management decisions regarding remuneration. BIPAR wonders whether some of the issues covered in the consulted guidelines related to remuneration do not need a broad democratic debate rather than guidelines. Finally, the response also stressed the importance of mitigating and managing conflicts, and not necessarily looking at banning certain remuneration practices in the first place, which may have unintended side effects. The final guidelines are not as yet available. Consultation of ESMA guidelines on suitability At the end of 2011, ESMA 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 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 its ongoing concern regarding 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. Page 20 BIPAR Annual Report

22 Final guidelines The 9 final guidelines were published on 6 July They largely mirror the draft guidelines. 1. Firms have to inform clients that the reason for the suitability test is to enable them to act in the client s best interest. 2. Firms must have policies and procedures to enable them to understand essential facts about clients and characteristics of the products available for those clients. 3. Staff involved in the material aspects of the suitability process should have adequate knowledge and expertise. 4. Firms should determine the extent of information to be collected from clients in light of all the features of the advice/portfolio management services to be provided. The supporting guidelines state that if the firm does not obtain sufficient information to provide a suitable advice, it must not provide the service to the client. 5. Firms should take reasonable steps to ensure the collected information is reliable. 6. Where the firm has an ongoing relationship with the client, it should establish appropriate procedures to maintain adequate and updated information. 7. In case the client is a legal person or several natural persons, the firm should rely on the applicable legal framework to identify who should be subject to the suitability assessment. If this is insufficient, the firm has to agree with the client(s) who will be subject to the test. 8. To match clients with suitable investments, firms need to establish policies and procedures to ensure they consistently take into account all available information and all material characteristics of the investment. 9. Firms should at least maintain adequate recording and retention arrangements; ensure that recordkeeping arrangements are designed to enable failures re the suitability assessment; ensure records are kept accessible for the relevant persons in the firm and, finally, to have adequate processes to mitigate any shortcomings or limitations of the record-keeping arrangements. National competent authorities have to comply or explain why they do not comply with the guidelines. Review of the Directive on the Institutions for Occupational Retirement Provision (IORP) On 23 May 2013, the European Commission announced plans to present, in autumn 2013, a legislative proposal addressing weaknesses in Directive 2003/41/EC on the Institutions for Occupational Retirement Provision (IORP). The proposal will not cover the issue of Solvency II rules for pension funds as the Commission needs more comprehensive data. At present, pension systems in Europe are based on three elements, known as the 3 pillars: 1) Basic state pensions which are part of national social security systems (an exclusive competence of Member States); 2) Occupational or company pensions (managed by pension funds, insurance companies or other systems, financed or co-financed by employers, who choose the fund manager); 3) Personal pension products which are non-compulsory and aimed at individuals. The existing European Directive on occupational pension funds aimed to create a Single Market for occupational pension funds and to improve their functioning. However, those objectives have only been partially achieved. BIPAR Annual Report Page 21

23 According to the Commission, there are three areas where improvements can be envisaged: solvency, governance and transparency. On solvency, it is apparent that some funds, especially defined benefit funds, show significant deficits. Moreover, the future application of Solvency II to insurers will affect insurers who provide occupational pensions. This raises issues of fair competition. EIOPA (the European Insurance and Occupational Pensions Authority) study on the solvency of certain pension funds highlights the need to deepen knowledge before taking decisions on any European initiative on solvency of pension funds. On governance, the current Directive has gaps. For example, it does not oblige occupational pension funds to have an effective system of governance which guarantees a sound and prudent management of the fund. It does not impose minimal requirements for fund managers and lacks detail on internal risk management and control systems. On transparency and reporting, the existing monitoring and supervision systems vary between Member States, which increases costs for funds operating cross-border, hinders cooperation between supervisors and restricts the circulation of information. The competences of home and host Member State supervisors also need to be clarified. Next steps The publication by the European Commission of a draft revised IORP Directive is scheduled for autumn BIPAR will follow the developments in this dossier with the help of its Working Party on Pensions, 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. The aim of the Commission s proposal was to create a responsible, efficient, healthy and competitive pan-european market that works to the benefit of consumers. It should also promote customer mobility, cross-border activity of creditors and intermediaries, and create a level playing field for all actors involved. The focus 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. BIPAR's action BIPAR, together with its Working Group on Credit Intermediaries, has closely followed this dossier from the preparatory phase throughout the Parliamentary and Council discussions, meeting on various occasions the rapporteurs and shadow rapporteurs in the European Parliament, the successive Council Presidencies and the drafting team from the Commission. In its comments on the proposed text, BIPAR focused on the level playing field (to ensure that there is one between creditors and intermediaries), on advice (to ensure that it is clear what is meant by advice and to ensure that the related requirements to advice are not only applicable to non-tied intermediaries), on the coherence of the proposed Directive with other instruments, in particular the IMD. BIPAR also warned against too far-reaching implementation measures (the proposal contained many delegated acts). These activities have led to positive changes and to a more balanced text at Council and Parliament level. Page 22 BIPAR Annual Report

24 EP and Council readings - Final text On 22 April 2013, the European Parliament, Council and European Commission found provisional agreement on the text in trialogue. On 8 May 2013, the Council's Permanent Representatives Committee approved this compromise text. The following parts of this public but not yet finally rubberstamped text are of particular importance to intermediaries 3 : Level of harmonisation and coherence with other legal instruments This is a minimum harmonisation Directive, meaning that Member States can go further in their national implementation of the text, with the exception of the standard pre-contractual information through the European Standardised Information Sheet (ESIS) and the standard for calculation of the Annual Percentage Rate of Charge (APRC), which are maximum harmonisation. The draft Directive aims to be in line with the Consumer Credit Directive, as well as with the IMD and MiFID. For ancillary services, such as insurance, appropriate knowledge and competence in relation to that ancillary service shall be required. Intermediaries The Directive provides the following definition of a credit intermediary : a natural or legal person who is not acting as a creditor or notary and not merely introducing, either directly or indirectly, a consumer to a creditor or credit intermediary, and who, in the course of his/her trade, business or profession, for remuneration, which may take a pecuniary form or any other agreed form of financial consideration: (i) presents or offers credit agreements to consumers; (ii) assists consumers by undertaking preparatory work or other pre-contractual administration in respect of credit agreements other than as referred to in point (i); or (iii) concludes credit agreements with consumers on behalf of the creditor. The Directive also provides a definition of tied intermediary and of appointed representative. Information and competence requirements Credit intermediaries (and creditors) will be required to respect: conduct of business rules - in this respect, the Directive adds that remuneration structures need to be in line with the conduct of business rules and that Member States may additionally ban commissions and can decide that tied intermediaries should not receive fees from the consumer. appropriate and up-to-date level of knowledge and competence of staff. Member States shall create minimum requirements, in accordance with basic principles that are set out in an Annex. general pre-contractual information by creditors and tied intermediaries (Member States may decide to also apply this to non-tied intermediaries) personalised pre-contractual information through the ESIS: the model ESIS is annexed to the draft Directive and contains a chapter on intermediaries, which includes disclosure of commission. adequate explanations regarding the proposed agreement(s) to enable the consumer to assess whether the agreement(s) is/are adapted to his needs and financial situation. Credit intermediaries have a separate set of extra information requirements, to be given on paper (or another durable medium), such as their status (whether they are tied), whether they offer advisory services, the fee (or method for calculation), the existence and amount of commissions or other inducements (if not yet known, reference is made to the ESIS). Upon request, non-tied intermediaries have to give information on the variation in levels of commission (the consumer is to be informed of his right to ask). In case fee and commission are combined, they need to mention whether they are offset. The fee is communicated to the creditor for the calculation of the APRC. There is no level playing field regarding these disclosures of remuneration on the side of creditors. 3 A more detailed analysis was sent to BIPAR members in May. BIPAR Annual Report Page 23

25 Advice Creditors and intermediaries have to explicitly inform the consumer if in a given transaction they provide/ can provide advisory services (there is no mandatory advice). Before the advice is provided, information is to be given on paper/durable medium on the product range that is advised on and on the potential fee (or method of calculation) and creditors and intermediaries have to comply with extra requirements in case of advice. Member States may prohibit the use of the word "advice" or "advisor" for creditors and tied intermediaries. They shall make independent advice/advisor conditional on: considering a sufficiently large number of agreements in the market and where the number of creditors considered is less than a majority of the market, not be remunerated for those advisory services by one or more creditors. Member States may impose stricter requirements on the use of the term "independent. Advisory services can only be provided by creditors, credit intermediaries or appointed representatives. Admission of intermediaries, cross-border activity and supervision The Directive foresees admission rules (authorisation and/or registration) of intermediaries. Apart from knowledge requirements, the Directive requires PI cover and good repute. The Directive foresees a passport regime and supervision, including cooperation between the authorities of the different Member States. Cross-sales The Directive foresees a ban on tying (credit agreement in a package with other distinct financial products or services and the credit agreement is not made available to the consumer separately) but allows bundling (credit agreement is also made available to the consumer separately but not necessarily on the same terms or conditions as when offered bundled). There is, however, a conditional exemption for payment or savings accounts, investment products or private pension products and for insurance: Member States may allow creditors to require the consumer to hold a relevant insurance policy related to the credit agreement but the creditor has to accept the insurance policy from a supplier different to his preferred supplier where such policy has a level of guarantee equivalent to the one he has proposed. Member States may also allow tying practices when this results in a clear benefit to the consumers taking due account of the availability and the prices of the relevant products offered on the market. Other issues The Directive also regulates e.g. advertising, creditworthiness assessment, property valuation, foreign currency loans, variable interest rates, early repayment, a reflection or withdrawal period, sanctions, dispute resolution. Next steps If the European Parliament adopts the compromise text at first reading without change (the plenary vote is scheduled for 9 September), Council will approve this position and thus the Directive is adopted and will be published in the Official Journal. The Directive will enter into force 20 days after publication and Member States then have 2 years to adopt and publish their national legislation. Credit intermediaries who have not already been admitted in their country (BIPAR remark: e.g. because the system of registration did not exist) may continue to carry out their activities until at the latest 3 years after the entry into force. A review of the Directive is scheduled 5 years after entry into force. This will include inter alia an analysis on other pre-contractual disclosures and on cross-border business by intermediaries and creditors. Page 24 BIPAR Annual Report

26 Pools and ad-hoc co-(re)insurance agreements on the subscription market On 8 February 2013, the consultancy firm Ernst & Young published a study on co-(re)insurance pools and ad-hoc co-(re)insurance agreements on the subscription market. This study followed a first tender process that was launched by the European Commission on 10 June 2011 (which had to be cancelled in September 2011 as it did not receive any proposals for the study) and a second tender process that was launched on 8 October The 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 started working in November/December Some BIPAR members were contacted in this respect. The study has to be seen in the context of the Insurance Block Exemption Regulation (BER). The new BER entered into force in 2010 and narrowed down the exemption to the application of competition rules to 2 types of agreements in the insurance sector, namely agreements on joint compilations, tables and studies and co- (re)insurance pools (common coverage of certain types of risks). In order to monitor the BER (which expires in 2017), the Commission wanted to collect more information on co-(re)insurance pools and adhoc co-(re)insurance agreements and therefore the study was commissioned. Study and workshop The study provides an overview of co(re)insurance pools after the adoption of the new BER and ad-hoc co(re)insurance agreements on the subscription market as well as an analysis of similarities and differences between co(re)insurance pools and ad-hoc co(re)insurance agreements on the subscription market. The report also takes a closer look at market practices concerning ad-hoc co(re)insurance agreements following up on the Commission s Business Insurance Sector Inquiry (BISI, published in 2007). Joaquín Almunia, EU Commissioner for Competition The study states that "there are uncertainties as to definition, with a risk of mismatch between industry perceptions of pools and the intentions of the BER, which may indicate a need for clarification: these affect both the identification of pools themselves and the definition of the relevant market. There are also questions as to the boundaries of the definition where pool-like arrangements are set up by parties other than insurers, particularly intermediaries, which may warrant study outside the scope of this report". In the context of ad-hoc agreements, E&Y reports that "The BISI report had expressed concern that the identified alignment of premiums among co(re)insurers might arise from agreements or concerted practices between undertakings, which might fail to comply with competition law. The present study did not identify any agreements or concerted practices between undertakings, to align premiums." Finally, the report also refers to the BIPAR high level principles for placement of a risk with multiple insurers, saying that "these principles are generally reported as respected, with the majority of responses being positive as to their application. Respondents in most Member States reported that the application of BIPAR principles is already endorsed by national regulation or market self-regulation in their country commenting that they are well-known, respected and applied." BIPAR Annual Report Page 25

27 On 12 March 2013, the Commission organised a workshop related to the study, which BIPAR attended. Ernst & Young presented the key findings of the study. This was followed by two parallel sessions where the Commission asked for possible further comments regarding both pools and ad-hoc agreements. Next steps The Commission sees the study and workshop as a first step in the review process of the insurance BER, which expires on 31 March It indicated that it may start consulting in 2015 in order to submit its Report to the Parliament and Council by 31 March On 1 April 2010, the new insurance BER came into force. The Regulation grants an exemption to the application of competition rules to certain types of agreements in the insurance sector. It replaced the previous insurance block exemption and will expire on 31 March It renewed only 2 of the 4 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 coinsurance 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 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 The Financial Stability Board (FSB), an international body established after the G20 Summit in London in 2009, defined shadow banking as the system of credit intermediation that involves entities and activities that are outside the regular banking system 4. Both the European Commission in its Green Paper of 19 March 2012 and the European Parliament in August 2012 welcomed this definition. The FSB estimated the size of the global shadow banking system at around 67 trillion in 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 institutions have now decided to start work at European level as well. 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 followed by 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 not to destroy the positive characteristics of shadow banking, but at the same time to 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. 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. European Parliament s report On 14 August 2012, Said El Khadraouï (Belgium, Socialist), the Rapporteur in the ECON Committee on shadow banking, presented his non-legislative report. This report was adopted by the ECON Committee on 25 October 2012 and by the European Parliament during a plenary session one month later. The report invites the European Commission and other relevant bodies to: Give an accurate definition of shadow banking activities. The European Parliament agrees with the FSB on the fact that shadow banking is a system of intermediaries, instruments, entities or financial contracts generating a combination of bank-like functions but outside the regulatory perimeter or under a regulatory regime which is either light or addresses issues other than systemic risks, and without guaranteed access to central bank liquidity facility or public sector credit guarantees but emphasises that it is not necessarily an unregulated or illegal activity. Collect relevant data on shadow banking transactions at EU and international level. Tackle the systemic risk of shadow banking, through accurate regulation, evaluation and auditing. BIPAR's action and next steps The European Commission is due to present its draft initiative on shadow banking in the coming months. The BIPAR Secretariat will continue to monitor this dossier and will analyse it once it is published. 4 FSB publication 12 April 2011: BIPAR Annual Report Page 27

29 Taxation of the financial services sector Over the last year, BIPAR working group on taxation has been monitoring two main issues: - VAT treatment of insurance and financial services - Taxation of the financial sector VAT treatment of insurance and financial services On 27 November 2007, the European Commission adopted two proposals for a new Directive and a new Regulation with the objective of simplifying and updating the current VAT rules for financial and insurance services. These services are today exempt from VAT but the exemption dates from 1977 and the legislation has not kept abreast of developments since then despite numerous judgments from the European Court of Justice. With its two proposals, the Commission aimed at creating more legal certainty, flexibility and efficiency for Member States and financial institutions alike by establishing clear definitions of VAT exempt insurance and financial services which correspond to today s market. Another objective of the proposed revision was also to redefine the scope of the VAT exempt insurance and financial services. The proposal for a Directive is accompanied by a proposal for a Regulation which expands the definitions of exempt services and would be directly applicable in all Member States. The Commission s original proposal included the possibility for financial suppliers to opt for taxation of their services. The objective was to allow institutions to reduce their exposure to non-recoverable input tax; in particular in business-to-business activities. Evolution of the dossier and actions of the BIPAR Working Party 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 followed up a meeting between the BIPAR Secretariat and David Jordorson with the fiscal attaché of the Danish Presidency in January 2012 where it was indicated that the Danish Presidency would focus on the Financial Transaction Tax (FTT) Directive and not on the VAT dossier. During a meeting on 17 April 2013, the Lithuanian fiscal attaché (Lithuania will hold the Presidency of the Council from 1 July) confirmed to the Chairman of the BIPAR Tax Working Party and to the BIPAR Secretariat that it was unlikely that there would be any move on the introduction of a VAT on financial services. Priority will be given to the tax fraud dossier and to the banking union. The Council will also work on the implementation of a FTT in some EU Member States. Next steps On the question of the possible introduction of a VAT on financial services, the Irish Presidency contacted the 27 Member States in order to know if they were willing to negotiate on this dossier but did not receive satisfactory feedback. Page 28 BIPAR Annual Report

30 Taxation of the financial sector 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. In February 2013, the European Commission issued a proposal for a Directive implementing enhanced cooperation in the area of FTT. This proposal follows a meeting on 22 January 2013 during which the 27 Finance Ministers of the European Union agreed to initiate an enhanced cooperation of 11 Member States on the FTT: Austria, Belgium, Estonia, France, Germany, Greece, Italy, Portugal, Slovakia, Slovenia and Spain. Based on its September 2011 proposal, the new proposal of the European Commission however differs through the enhanced cooperation system which allows a limited number of Member States to work more closely on this initiative. Evolution of the tax-related dossiers at EU level and actions of the BIPAR Tax Working Party On 17 April 2013, the Chairman of the BIPAR Tax Working Party and the BIPAR Secretariat had a meeting with Arthur Kerrigan, the VAT team leader in the European Commission followed by a meeting with the fiscal attaché of the Permanent Representation of Lithuania to the European Union. The Lithuanian Presidency (1 July-31 December 2013) aims to work on several tax-related dossiers but this will depend on several factors such as the state of affairs at the end of the Irish Presidency, the ambitions of the other Member States and other external factors such as the German federal election in September. During the meetings, BIPAR highlighted the fact that a FTT may generate increased costs on the consumer rather than on the financial sector, and that there might be a risk of cascading effects of a FTT, the final user being the one who will pay the cost of the implementation. In May 2013 David Jordorson stepped down as Chair of the Tax Working Group. We thank David for his commitment over the last years and wish him well in his future activities. A new Chair will be appointed soon. Since the priority of the Lithuanian Presidency will be to address the problem of tax fraud and tax evasion, within a coordinated EU framework, it does not aim to focus on the FTT. However, the Council under the Lithuanian Presidency will continue to work on the FTT, following the meetings organised during the Irish Presidency on this dossier. In the European Parliament, Anni Podimata (Greek Socialist) has been appointed Rapporteur in the ECON Committee. ECON is the Committee responsible for the FTT in the European Parliament. Its members work on the proposal of the European Commission in parallel with the Council. Anni Podimata The FTT which should be introduced in 11 EU Member States would also affect other countries as well, depending on how the negotiations go regarding the question on the territoriality principle of the tax. BIPAR Annual Report Page 29

31 Next steps The ECON Committee voted on the FTT text on 6 June and the plenary session is scheduled for 2 July. In the Council, 11 EU Member States expressed an interest in implementing a FTT. Lithuania is not one of them, and its position on this dossier is currently still hesitant. Therefore it will not push for an acceleration of the negotiations but will not try to stop them either. The BIPAR Tax Working Party will continue to work on this dossier and to analyse the debates with great attention in both the European Parliament and the Council. Eurobarometer 2012 In December 2012, the European Commission published a general Eurobarometer that touched upon a number of measures to reform the economic and financial system. 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 in the preparation of texts, decision-making and the evaluation of the Commission s work. The five measures to be taken by the EU on which the Eurobarometer questioned citizens were: 1. Tougher rules on tax avoidance and tax havens; 2. The introduction of a tax on profits made by banks; 3. The introduction of a tax on financial transactions (FTT); 4. The introduction of Eurobonds (European Bonds); 5. Tighter rules for credit rating agencies The majority of respondents supported these five measures. With regard to FTT, respondents in Germany and Austria (both 81%) and France and Portugal (both 77%) were the most likely to support the introduction of a tax on financial transactions (EU27 63%). Support for this measure has risen most in Hungary (39%, +6), while it has lost the most ground in Slovenia (56%, -10). Respondents within the euro area are more likely than those outside it to support the five measures, particularly in the case of the introduction of a tax on financial transactions (71% and 48% respectively). Page 30 BIPAR Annual Report

32 Towards an Optional Instrument of European Insurance Contract law? Under the Europe 2020 strategy, the European Commission is tackling bottlenecks in the Internal Market to create sustainable growth. It believes that opportunities for growth in the insurance sector can arise through cross-border trade, where the potential has not yet been fully exploited and that both the insurance business and insurance users consumers or business - could benefit from an increase in cross-border trade. Therefore the Commission intends to explore possibilities for potential growth stemming from an increased cross-border offer in insurance products. European Commission's Expert Group on European Insurance Contract law In February 2013 the European Commission launched a call for applications with a view to selecting members of its Expert Group in European Insurance Contract law, tasked with analysing whether differences in the insurance contract laws of the Member States create an obstacle to European crossborder trade in insurance products and which (if any) insurance areas (non-life and life) are likely to be affected by such obstacles. BIPAR participation in the Expert Group The Commission's Expert Group was set up at the end of March. It consists of 20 members, including representatives of insurance intermediaries. The Commission wants, in particular, to have intermediaries views on, for example, the insurance contract law-related problems that are currently encountered by insurance intermediaries when undertaking cross-border activities, the products which have potential for higher cross-border trade or are currently already being sold to Euromobile clients (life insurance products with investment functions, motor and property insurance,) the possible use of an Optional European Insurance Contract law by intermediaries (drawbacks, advantages). BIPAR (i.e. its 5 experts 5 ) has been selected to be a member of the Commission's group of experts. The experts chosen to represent BIPAR and its member associations are assisted by the BIPAR Secretariat and the BIPAR Working Party on insurance contract law, in the preparation of the meetings of the Commission's Expert Group. Outcome of the first two meetings The first two meetings of the Commission's Expert Group took place in Brussels on 17 and 18 April and on 15 and 16 May From a user's perspective, two scenarios for cross-border demand were considered of particular importance, i.e. consumers wishing to use the same insurance product in another Member State in case of long-term residence and consumers asking for more sophisticated products which are not available in all countries. From the provider's perspective a scenario of particular importance was when an insurer wanted to offer his/her products in a new market, thus generating new demand. Next steps Depending on the result of the Expert Group work that will be published in December 2013, the European Commission may decide to propose a Regulation on a possible optional European Insurance contract law regime. It would be conceived as a "2 nd regime" in each Member State, thus providing parties to a contract (the insurer and the consumer) with an option between two regimes of contract law, the national or the European regime. 5 Mrs. Svenja Richartz (VDVM) is BIPAR permanent expert. Mrs. Anne Desous (CSCA), Mr. Peter Franklin (BIBA), Mr. Carlo Galantini (ACB) and Mrs. Helen Gryparis (HAII) are BIPAR alternate experts, they will participate in the Commission's expert group meetings on a case by case basis depending on the issues discussed. BIPAR Annual Report Page 31

33 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 to reach a solution. In early 2011 the Commission organised a public consultation on "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 answer to the Commission s 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 represents a cost for the industry that needs to be analysed carefully by the Institutions. On 29 November 2011, the Commission published two proposals that aimed at helping consumers solve their disputes with businesses out of court: - A proposed Directive on consumer ADR - A proposed Regulation on consumer Online Dispute Resolution (ODR) On 12 March 2013, the European Parliament adopted, after discussion with the Council of the EU, its compromise position on the European Commission's proposals. The Council has now to formally approve the texts which will then be transposed by the EU Member States by 1 January The proposed Directive on ADR aims to implement objective criteria in order to have wellqualified 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. Key aspects of the proposed Directive on ADR and interaction with other European texts (MiFID II, IMD II,...) The proposed Directive is a cross-sector text and concerns all disputes between non-professional consumers and traders in the context of the sale of goods or provisions of services. Intermediaries will be considered as traders according to the definition proposed. The proposed ADR Directive takes into account the fact that other Directives and Regulations contain rules on ADR. The compromise text states in its recital 9 that In order to ensure legal certainty, it should be provided that in case of conflict this Directive shall prevail, except where it explicitly provides otherwise. Due to its minimum harmonisation approach, the ADR text does not go beyond what is strictly necessary to achieve its objectives. It does not regulate all aspects of ADR but focuses on some key aspects of out-ofcourt dispute resolution. The ADR Directive will build on ADR entities that already exist and will leave the choice of form and methods to achieve the results expected to Member States. Next steps Regarding the nature (binding or not) of the ADR procedure, the principle is that the parties have the possibility to withdraw from the procedure at any stage if they are dissatisfied with the performance or the operation of the procedure and that they have the choice as to whether or not to agree to or follow the proposed solution (Article 9.2). However, if national ADR procedures foresee that the outcome will be binding on the trader, then the non-binding nature of the article will only apply to consumers. On the interaction with the IMD II proposal, the text of the European Commission lists in its Article 13 a series of conditions which would apply to the procedures intermediaries will have to participate in, for instance, the non-binding nature of the process, the cost (moderate or free of charge). However, in the IMCO report and in the draft report of ECON Rapporteur, Mr. Langen, conditions are deleted and a general reference to the ADR Directive is made. It is coherent with Recital 9 of this Directive. Furthermore and complementary to these texts, DG Justice of the European Commission is working on the question of ADR for business-to-business activities (B2B). It organised a study on the need for EU action and the use of business-to-business ADR in the EU with a guidance and topic list for case study interviews in different Member States. BIPAR is following these developments closely. Page 32 BIPAR Annual Report

34 Modernisation of the European Public Procurement Market At the end of December 2011, the European 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 sent 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. At European Parliament level BIPAR's actions Together with its Working Group on Public Procurement, BIPAR studied the proposals, promoted some changes to the texts and sent them in April 2012 to the EP Rapporteur, Marc Tarabella (Socialist, Belgium), for IMCO, the Committee in charge of the dossier. BIPAR proposals were reflected in the IMCO Report adopted in Committee in January BIPAR underlined the importance of a better access for SMEs to the public procurement procedures and of a more accessible negotiated procedure (this is the standard procedure of public procurement for the insurance sector). The proposed Directive seeks to facilitate the recourse to the competitive procedure with negotiation. BIPAR welcomed this provision as this procedure matches well with the particularities of public insurance services contracts. Indeed it corresponds best with the needs of the sector in terms of flexibility and efficiency without prejudicing the basic principles of public procurement: transparency and equality. BIPAR 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. At Council level In December 2012 the Council reached an agreement on a general approach on the three proposals in the package aiming to modernise public procurement policy. The Council provided guidance on four important issues: the degree of flexibility that should apply in the use of competitive procedures with negotiation, the application of a lighter regime for certain categories of services (social, cultural, health,...), the wide use of e-procurement and the supervision and monitoring of procurement procedures. Next step The EP plenary vote should take place on 10 September BIPAR will continue to monitor this dossier actively. BIPAR Annual Report Page 33

35 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. A gradual approach was adopted towards mandatory financial security. As requested by BIPAR, the Directive did not oblige operators to ensure coverage of their potential liabilities by appropriate financial security products such as insurance. All 27 Member States transposed the Directive into national law in March In October 2010, a report on the effectiveness of the Environmental Liability Directive was adopted by the European Commission. Its conclusions were that there is a lack of ELD awareness of operators and stakeholders, and also insufficient information exchanges. In October 2011, the Commission also adopted 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 and organised in November 2011 a stakeholder workshop on the implementation of the ELD which BIPAR attended. It also published a Communication on 7 March 2012 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. European Parliament Report on the delivery of benefits from EU environment measures On 12 th March 2013, the European Parliament adopted the non-legislative own-initiative report of MEP Oreste Rossi which was a response to the communication of the Commission of 7 March It invited the Commission to explore the possibility of setting up partnership implementation agreements with individual Member States and to examine whether greater participation by local authorities throughout the process of defining environmental policy would be useful. Next steps The European Commission is reviewing the effectiveness of the ELD and Member States had until 30 April to report to the Commission on its transposition and practical application. The Commission will, by 30 April 2014 at the latest, present a report to the Parliament and the Council based on the answers collected and may issue a proposal which would lead to a modification of the Directive. Page 34 BIPAR Annual Report

36 Natural and man-made catastrophes Between 1980 and 2010, damages caused by floods in Europe were estimated at a staggering 8 billion, making storms the costliest of natural hazards in Europe. Recent floods in Central Europe illustrate that this issue is more than ever on the agenda. The risk of catastrophes is heterogeneous across Member States, the UK being the most prone to floods and Italy among the Member States most hit by earthquakes. Catastrophic events have roughly doubled in the last decades owing mainly to socioeconomic 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. 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. In BIPAR s view the key issues are: Disaster prevention to strengthen the resilience of our societies (building flood defences, setting building regulations); To 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,... To combine incentives for prevention and mitigation of risks; To avoid underinsurance. The Commission s Green Paper on the insurance of natural and man-made disasters On 16 April 2013, the European Commission published a Green Paper on the insurance of natural and man-made disasters. This document concerns all types of natural and man-made disasters such as, for instance, industrial accidents. The European Commission aims to initiate a debate with relevant stakeholders on this issue and to decide whether or not there is room for action at EU level. Interested parties have until Monday 15 July to answer the questions of the Green Paper. BIPAR communicated this Green Paper to all its member associations and is collecting answers in order to prepare an official position by 15 July. The Green Paper broaches four main topics: Market penetration of natural disaster insurance Disaster risk awareness, prevention and mitigation Man-made disasters Loss adjusting Next steps The European Commission will, once it has collected the responses from the stakeholders, decide on its approach. It could adopt either a legislative or a non-legislative approach. BIPAR will communicate its position to the Commission, based on the answers received from its national associations, and will continue to monitor this dossier. BIPAR Annual Report Page 35

37 Use of gender in insurance On 1 March 2011, the European Court of Justice (ECJ) gave its judgment in the Test-Achats case. The Belgian consumer association, Test-Achats/Test Aankoop, and two individuals had called for the annulment of the Belgian legal provision that transposed the European Directive on equal treatment between men and women in the access to and supply of goods and services. This Directive prohibits in principle gender to be taken into account as a factor for calculating insurance premiums and for benefits for insurance contracts that have been concluded after 21 December A derogation, however, allowed Member States to permit gender differences in premiums and benefits if gender is a determining risk factor that can be substantiated by relevant and accurate actuarial and statistical data. The Court decided that the derogation of the prohibition to take into account gender for calculating premiums was not compatible with the (higher ranking) fundamental right prohibiting discrimination on grounds of sex. The Court further explained that the derogation Member States made use of in order to allow a differentiation between sexes should have been temporary and must therefore be considered to be invalid on the expiration of an appropriate transitional period. Consequently, the Court ruled that, in the insurance services sector, the derogation from the general rule of unisex premiums and benefits is invalid with effect from 21 December This also applies to life insurance. Following the judgment, the European Commission published interpretative guidelines and in the European Parliament, an own initiative report was adopted with regard to the implementation of the Directive by the Member States and the result of the Test-Achats case. Interpretation of the judgment: Commission 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. The Commission prepared a questionnaire and guidelines to assist industry in applying the Court Ruling. In the guidelines, the Commission inter alia: clarified that the Court ruling will only apply to new contracts, concluded after 21 December 2012; warned that the ruling will not necessarily lead to the same premiums for men and women, confirmed that it is still possible to use gender as a risk-rating factor in general, as long as it does not lead to differentiation at individual level; confirmed that the collecting, storing and use of gender is still possible for reserving and internal pricing; reinsurance pricing; marketing and advertising; life and health underwriting; confirmed that 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 more often drive cars with more powerful engines); clarified, with regard to occupational pensions, that the Directive 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. Page 36 BIPAR Annual Report

38 European Parliament's report On 16 April 2013 the EP adopted MEP Zita Gurmai's (Hungarian Socialist) own initiative report, thus turning it into a (non-binding) Parliamentary Resolution which in casu gives recommendations to the Commission, to the Member States and to the insurance industry. With regard to the insurance aspects of the Directive, the final Resolution states that: the opt-out in the Directive (allowing gender discrimination in the insurance sector) had created legal uncertainty and potential legal challenges in the long term. The resolution welcomes the Test- Achats ruling but adds that it created ongoing uncertainty, which was only partly tackled by the Commission s interpretative guidelines; it regrets that the Commission has postponed the publication of its application report on the Directive and calls on the Commission to publish it; the Commission and Member States should take concrete measures to explain the Directive and its impact; the Commission should propose a new legislative text; the insurance industry should keep making an effort to rearrange premiums in line with unisex criteria; the Commission should open informal dialogue with the insurance industry on risk assessment; the Commission should analyse the issue with a focus on consumer protection policy as well; the Commission and Member States should follow developments on the insurance market closely and take measures if there are any signs of de facto indirect discrimination. Link to Equal Treatment Directive Similar wording such as the controversial opt-out for insurance is to be found in the Commission's proposed "Directive on implementing the principle of equal treatment between persons irrespective of religion or belief, disability, age or sexual orientation". It states that in the provision of financial services Member States may permit proportionate differences in treatment where, for the product in question, the use of age or disability is a key factor in the assessment of risk-based on relevant and accurate actuarial or statistical data. The "Equal Treatment Directive" has however been blocked in the Council for several years already. The Council held an exchange of views under the Cypriot Presidency, early December Member States remain divided in supporting the proposal, with some believing this infringes Member States' competences. Under the Cypriot Presidency, progress has been made in the attempt to clarify the scope of the Directive, in particular as regards access to social protection and to education. Outstanding issues are: the overall scope of the Directive, the division of competences and the issue of subsidiarity; the disability provisions, including accessibility and reasonable accommodation for persons with disabilities; the implementation calendar; the need to ensure legal certainty; the overall impact of the proposal, including on SMEs. The Commission guidelines following the Test-Achats ruling make reference to this proposed Directive and the concern of the Court ruling spilling over to age or disability. The guidelines state that the Court ruling does not look at such non-gender related factors. Next steps 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 continue to monitor this and the possible follow-up given to the Parliamentary Resolution, as well as developments in the linked Equal Treatment Directive dossier. Gender balance in the financial sector Also linked to gender equality, a Resolution was adopted on 7 May 2013 by the Parliament s ECON Committee, with regard to gender balance in the financial services sector. The initiative of this Resolution came from the ECON Chair, Mrs. Bowles (UK, Liberal). The report states that gender imbalance is not adequately addressed and remains alarming, despite the Commission's efforts, and awareness among EU leaders. BIPAR Annual Report Page 37

39 Data protection 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 As the main actors in the distribution of insurance products, operating the link between insurers and insureds, intermediaries are confronted daily with problems relating to the processing and free movement of personal data. They are therefore directly concerned by the proposed Regulation. Under the co-decision procedure, the text is currently being discussed by the two EU legislators, the Council of the European Union under the Irish and then Lithuanian (July- December 2013) Presidencies and by the European Parliament where Jan Philipp Albrecht (Greens-Germany) was appointed Rapporteur for the Civil Liberties, Justice and Home Affairs Committee (LIBE) which is responsible for the text. Due to its cross-sector approach, the proposed Regulation did not take into consideration the specificities of the insurance sector. Together with its Data Protection Working Group, BIPAR identified some elements of the proposed EU text that could become a serious source of concern for insurance intermediaries, prepared some proposals for change to the proposed Regulation, met with officials from the European Commission, the Council and the European Parliament and communicated its main points of concern to them. The Commission s choice for a Regulation aims at ensuring a true harmonisation of the new rules in the EU. Contrary to a Directive that leaves the national authorities the choice of form and methods, a Regulation is binding in its entirety and directly applicable in all Member States. Key elements of the proposed Regulation and BIPAR s views The proposal will replace the current Directive which was adopted in It is expected to offer additional protection for data subjects. Several articles of the proposed Regulation may generate unintended administrative and a heavy burden on intermediaries, who are mainly small- and mediumsized firms (SMEs). Rules regarding the information to be given to the data subject, the right to be forgotten, the right to data portability and the notification of a personal data breach to the supervisory authority are, for instance, too burdensome and do not take into account the limited technical and financial capacity of SMEs. The right to revoke consent, as it is defined in the proposed Regulation would also seriously jeopardize the necessary stability of insurance contracts. However, regarding 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. Debates in the European Parliament and in the Council In both the Parliament and the Council, the positions are not settled yet. 3,000 amendments have been tabled in the LIBE Committee, in addition to the four other Committees opinions issued over the last months. Page 38 BIPAR Annual Report

40 Rapporteur Albrecht s draft report contains several clarifications that BIPAR welcomed. However, he proposes amendments that are a serious concern for intermediaries and in particular for SMEs. He suggests for example deleting the exemption on sanctions for enterprises employing less than 250 employees and that every single entity processing data should also appoint a data protection officer. These amendments would disproportionately affect SMEs. This would also in the end affect consumers, who would have to face higher prices to cover the costs generated. Other political groups and other Committees have positions which sometimes differ widely from Rapporteur Albrecht s draft report and they are still negotiating on a possible compromise position reflecting the different positions expressed in the European Parliament. BIPAR s actions On 2 October 2012, BIPAR met the person in charge of this dossier for the Council of the European Union, then presided over by Cyprus, to discuss these issues and later with the person in charge during the Irish Presidency. BIPAR also participated in several financial services stakeholders' meetings organised in the European Parliament by the EP Rapporteur Albrecht, by the Rapporteur for opinion Sean Kelly (Ireland- EPP) and by the EPP shadow Rapporteur for LIBE, Axel Voss. These meetings were the occasion for BIPAR to highlight its key points of concern. The same points were also discussed with various MEPs, including the parliamentary assistant of MEP Lara Comi, who is Rapporteur for opinion for another Committee in the European Parliament, and the assistant of Timothy Kirkhope, the shadow Rapporteur for the Conservatives in the LIBE Committee. BIPAR and its working party on data protection analysed the proposal of the European Commission and the amendments tabled in the LIBE Committee of the European Parliament, as well as the different opinions given by other Committees. BIPAR issued a position paper which has been communicated to MEPs members of the different Committees and to relevant officers in charge of the dossier in the Council. Several of our points of concern, which are sometimes also those of other stakeholders, have already been taken into account: regarding the lawfulness of processing, both MEP Lara Comi in IMCO and the EPP shadow Rapporteur in the LIBE Committee added a specific reference to the financial services sector and to the necessity to take into account specific measures necessary for fraud detection. The Liberal shadow Rapporteur tabled an amendment taking into account the consequences of the withdrawal of the consent on the contractual relation and most political groups understand that the 24-hour delay for notifying a data breach is both unrealistic and counterproductive, the data processor s priority in this case being to try to mitigate the consequences of this data breach. BIPAR will continue to communicate its views to members of the Parliament and of the other EU institutions. Next steps The Rapporteur in the LIBE Committee of the European Parliament aims to have a vote in the Committee before the summer break. The vote is currently scheduled for the end of June but might be postponed due to the very large number of amendments tabled and to the political disagreement between the different political groups in the Parliament. In the Council, the Lithuanian Presidency plans to make important progress in its analysis of the proposal. The Irish Presidency (January-June 2013) worked actively as well. BIPAR is monitoring this dossier actively and keeps its member associations informed on new developments regularly. BIPAR Annual Report Page 39

41 Money laundering In April 2012, the European Commission adopted a report on the application of the third Anti Money- Laundering Directive (AMLD). The report focused on different issues (e.g. including application of a riskbased approach, extending the scope of the existing framework, adjusting the approach to customer due diligence, clarifying reporting obligations and supervisory powers, enhancing Financial Intelligence Units co-operation...), which were identified as essential for the review of the third AMLD. On 5 February 2013, the Commission published a proposal for a Directive on the prevention of the use of the financial system for the purpose of money laundering and terrorist financing, and a proposal for a Regulation on information accompanying transfers of funds to secure "due traceability" of these transfers as a package. The proposal for a Directive is being discussed by the Parliament and the Council. In the Parliament, the Civil Liberties, Justice and Home Affairs (LIBE) Committee is responsible for the text and Judith Sargentini (Greens-Netherlands) was appointed Rapporteur on 20 February 2013 but has not as yet given her opinion on the dossier. Third EU AMLD and 2013 Commission s proposal The third EU AMLD 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. Under the third AMLD, 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). The 2013 Commission s proposed Directive mainly aims at clarifying the rules in the different Member States regarding in particular the question of customer due diligence and ensures that the simplified procedures are not perceived as full exemptions. The update of the FATF Risk-based Approach guidance of 2009 In parallel to the publication of the Commission s proposed Directives, the FATF, an intergovernmental organisation with 36 members, decided to update its guidance on the risk-based approach for the life insurance sector of October BIPAR and other relevant stakeholders were contacted by the FATF Secretariat in order to indicate which difficulties insurance intermediaries had in applying the 2009 guidance. Together with WFII, BIPAR sent initial comments in November 2012 which, in particular, emphasized the necessity to base the new guidance on the principle of proportionality, taking into account the size and technical means of intermediaries. Next steps Together with WFII, BIPAR will continue to communicate with the FATF Secretariat in order to ensure that the positions of insurance intermediaries are taken into account during the drafting of the update of the 2009 guidance on the risk-based approach in the life insurance sector. Furthermore, the BIPAR Secretariat will follow the debate on the Commission s proposal in the Parliament and in the Council and will communicate its opinion to members of the LIBE Committee if necessary. Page 40 BIPAR Annual Report

42 European Supervisory Authorities (ESAs) and BIPAR 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): the European Banking Authority (EBA), European Insurance and Occupational Pensions Authority (EIOPA), and European Securities and Markets Authority (ESMA). ESAs stakeholder groups All three authorities have stakeholder groups that represent the industry and consumers in order to facilitate consultation with stakeholders in areas relevant to their tasks. EIOPA Stakeholders Group For EIOPA, two stakeholder groups were set up: the Insurance and Reinsurance Stakeholder Group (IRSG) and the Occupational Pensions Stakeholder Group. Mr. Paul Carty, BIPAR Chairman, is a member of the IRSG. Gabriel Bernardino, EIOPA President ESMA Consultative Working Group Early August 2012, ESMA launched a call for expressions of interest to renew the composition of its Consultative Working Group (CWG) for ESMA s Investor Protection and Intermediaries Standing Committee (IPISC). This Working Group provides technical assistance to the ESMA Standing Committee, e.g. when the Standing Committee prepares draft technical standards or when the Standing Committee gives advice to the European Commission on delegated and implementing acts required under MiFID. In a letter of 7 August 2012, BIPAR invited its member associations to identify investment services specialists for this ESMA Working Group. Thanks to this procedure, five BIPAR-related persons applied for this function (members of this ESMA Working Group are appointed and participate in their personal capacity). Mr. Philipp Bohrn, from BIPAR s Austrian member association Austrian Professional Association for Financial Service Providers, has been selected as a member of the Working Group. EBA Stakeholders group In May 2013, EBA launched a call for expression of interest to prepare the renewal of its Banking Stakeholder Group (BSG). The BSG has been established to help facilitate the EBA s consultation with stakeholders. Over the past years, BIPAR has followed the work of EBA with interest. For insurance and financial intermediaries, there are various issues that will come on the agenda of EBA, such as the legislative proposal on responsible lending and borrowing. After consultations with its members, BIPAR will send applications. BIPAR Annual Report Page 41

43 BIPAR's responses to EIOPA's consultations and publications in 2012 and 2013 In 2012 EIOPA published two reports of direct interest to insurance and financial intermediaries, one on the Role of Insurance Guarantee Schemes in the Winding-Up Procedures of Insolvent Undertakings (see page 14) and one on a mapping exercise on the different requirements as regards knowledge and ability for insurance intermediaries, set down by national competent authorities (October 2012) (see below). In 2013, EIOPA put out for public consultation different discussion papers or draft guidelines of interest to insurance and financial intermediaries: - Different guidelines on preparing for Solvency II (consultation open until June 2013) (see page 13), - Consultation Paper on the Proposal for Guidelines on Complaints Handling by Insurance, Intermediaries and Draft Report on Best Practices by Insurance Intermediaries in handling complaints (consultation open until 28 June 2013), - Discussion Paper on Standard Formula Design and Calibration for Certain Long-Term Investments (consultation open until 28 May 2013), - Discussion Paper on a possible EU Single Market for personal pension products (consultation open until 16 August 2013). Together with its member associations, BIPAR is preparing its answers to most of EIOPA consultations and will submit them at the requested dates (see below). In 2013 EIOPA also plans to contribute to the work on the legislative proposals from the European Commission on the revision of the IMD and on PRIPs. During BIPAR's mid-term meetings in January 2013, EIOPA representatives announced that in 2013 EIOPA plans to issue some other reports, such as one on Industry Training Standards, which is a report on good supervisory practices regarding knowledge and ability of distributors focusing on three areas: "Knowledge and ability linked to complexity of products", "Criteria for level of qualifications, skills, experience" and "Updating process - Continuous Professional Development (CPD)". EIOPA will also issue a Good Practices Report on comparison websites (considering the different categorisation of websites, the frequency of updating information, the criteria used to make rankings, the presentation of price information and the dealing with potential conflicts of interest). BIPAR will monitor the drafting of these reports. EIOPA report on the different requirements as regards knowledge and ability for insurance intermediaries, set down by national competent authorities The EIOPA report provides an overview of: - national requirements regarding appropriate knowledge and ability (as currently referred to under Article 4(1) of the IMD) for insurance intermediaries, including structures in place for assessing knowledge and ability; - experience of dealing with applications for mutual recognition of knowledge and ability; and - sanctions for failure to possess the appropriate knowledge and ability or to update those requirements. Apart from EIOPA own initiative task to develop training standards for the industry, the areas targeted in this report are also broadly in line with the areas which EIOPA currently expects the Commission to request EIOPA to work on in the future in terms of preparing delegated acts on professional requirements and guidelines on sanctions under the proposal for a recast version of the IMD. As a follow-up to this report, it is envisaged that EIOPA will work on a report on best supervisory practices applicable to industry training standards, with a view to publishing the report for public Page 42 BIPAR Annual Report

44 consultation in This report on best practices may in turn be used to feed into work envisaged by the Commission under the IMD recast. BIPAR member associations were asked to check whether the information for their respective countries were correct and comprehensive. Comments were sent to EIOPA for information. Proposal for Guidelines on Complaints-Handling by Insurance Intermediaries and Draft Report on Best Practices by Insurance Intermediaries in handling complaints On 5 April EIOPA launched a public consultation on Guidelines on Complaints-Handling by insurance intermediaries. They follow up previous EIOPA Guidelines on complaints-handling by insurers (on which BIPAR commented) and thereby aim to ensure a complete circle of protection for consumers. The draft Guidelines cover similar issues to the Guidelines relating to insurers, setting down guidance on appropriate internal systems and control for complaints-handling, the provision of information and procedures for responding to complaints. The Guidelines are addressed to national competent authorities and aimed at: - setting down high-level principles regarding the arrangements under which insurance intermediaries handle complaints that they receive, - creating a level playing field for insurance intermediaries across the EU and ensuring fair treatment of complainants by insurance intermediaries. As the Guidelines lay down high-level principles for competent authorities, they are supplemented by more detailed examples of best practices by insurance intermediaries in handling complaints. EIOPA asked for comments from all interested parties, including BIPAR, on its draft Guidelines and on its draft Report on best practices. Once adopted, they will be sent to the competent national supervisory authorities that will have to comply with them or explain why they do not do so (comply or explain procedure). BIPAR will prepare its response to the consultation based on the comments received from its member associations. From the comments received to date, it appears that most of the existing national requirements for the complaints process are aligned with the EIOPA proposed Guidelines. With respect to the scope of the Guidelines, most BIPAR member associations agree that it should cover and promote internal complaints-handling procedures for insurance intermediaries. Internal procedures are more efficient and ensure better consumer protection. It is essential that each intermediary firm has the ability to deal with a complaint before it is referred to ADR, this is an important principle that reflects current practice. BIPAR member associations agree that: - It is important to take into consideration that the IMD, of which articles 10 and 11 are referred to, is currently being revised; - It is essential that the EIOPA Guidelines take into consideration the diverse nature and size of the insurance intermediation market in the EU as well as the nature and number of complaints to intermediaries, in order not to create disproportionate and unnecessary administrative burdens and costs; - The cost of the introduction of a mandatory electronic online secure register should be further assessed, particularly for small to medium sized intermediaries as it is thought that it would not be in proportion with the benefits of introducing such a system. BIPAR Annual Report Page 43

45 EIOPA consultation on a possible EU Single Market for personal pension products In July 2012, the European Commission requested EIOPA to provide technical advice on the prudential regulations and consumer protection measures needed to create a single market for personal pensions. In May 2013 in order to deliver this technical advice, EIOPA, as a first step, published its discussion paper on a possible EU Single Market for personal pension products. The discussion paper focuses on three key aspects of personal pensions: a possible definition of a personal pension; potential cross-border frameworks (passporting and the so-called second (or 28th) regime which would create a uniform European system as an alternative to the different national regimes); and consumer protection, including information disclosure and selling practices. Stakeholders, including BIPAR, have until 16 August 2013 to provide comments. Once their comments have been analysed, EIOPA will prepare a report, containing issues and options which will be made available to the European Commission in early The Commission is then expected to issue a detailed call for advice to EIOPA, with a response deadline set for BIPAR's participation in EIOPA's second Consumer Day EIOPA s second "Consumer Strategy Day" took place on 4 December 2012 in Frankfurt. The event was attended by almost 200 representatives of consumer associations, insurance companies and intermediaries as well as supervisory authorities. A delegation of BIPAR representatives (the Directors Committee and some of the members of the Secretariat) participated in the event. The BIPAR Chairman, Mr. Paul Carty, was one of the speakers of the panel session on "Regulation of insurance intermediaries. Purpose of the event The purpose of the event is 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 its objectives, and 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 during the panels EIOPA s work relating to consumer protection and financial innovation: an update was given on the achievements since the last Consumer Strategy Day and especially on the planned work in the field of consumer protection. Apart from those cases where EIOPA is formally requested to provide its input (such as on insurance guarantee schemes in 2012), EIOPA intends in 2013 to undertake its own initiative work with regard to: the impact of Solvency II on product development, an opinion on PPI selling practices, guidelines on complaints, a report on consumer trends, a life insurance register,... EIOPA will continue its work on general good rules for the IMD II, where it intends to create more transparency next year. Regulation of insurance intermediaries: In this panel, contributions were made by the European Parliament, European Commission, consumers (BEUC), and intermediaries (Paul Carty). From the contributions and the questions and answers session that followed, it became clear that the pressure for full Paul Carty, David Cowan, Monique Goyens, Ulf Linder Page 44 BIPAR Annual Report

46 transparency is high, in particular in life and investment. The issue of cross-selling was also discussed, showing a general consensus on the ban of tying practices and the acceptance of bundling practices. Product disclosures in life insurance: This panel also included speakers from the Commission, Parliament and industry (AXA) and speakers with a supervisory background (Fin-FSA and EIOPA). During this panel on PRIPs, it became clear that several stakeholders would like to see the scope of the Regulation broadened and that some are strongly in favour of a ban on commissions. The consumer representatives want the KID to be a living document and stressed the need for ongoing consumer testing and for taking the specificities of certain groups of consumers into account (for instance, reference was made to age and gender). The industry representative called for stability at an early stage in order to avoid high costs. Consumer trends: During the panel on consumer trends and EIOPA's work in this respect, EIOPA's representatives illustrated the methodology they use to collect trends. A representative from the Danish supervisory authority talked about the problems faced by comparison websites in Denmark (nontransparency of products, lack of advice on the internet,...). A German consumer association representative highlighted the complexity of insurance products, which makes advice even more important and which in turn leads to the need to ensure that the advice is given by somebody who is on the side of the consumer, in which context the commission system was also questioned. Finally, a representative from the UK supervisory authority presented the FSA views on the reasons behind the PPI problems in the UK and how the FSA had reacted: by means of tougher rules, a comparison website and a redress package. The Financial Conduct Authority, the new authority which will partly replace the FSA and will regulate financial firms providing services to customers, will have in the future a broader authority on products. BIPAR Annual Report Page 45

47 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 employees and employers i.e. insurance undertakings and insurance intermediaries. The joint statement deals with the challenges of maintaining a healthy work/life balance, qualifications and continuous lifelong learning and health and safety at work. As a follow-up to this statement, the ISSDC decided to apply and was granted 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, 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 appears under the heading qualifications and life-long learning. The project also consisted of two conferences, where the booklet was presented (June 2012 in Brussels) and where the topic of demographic challenges was further discussed (September 2012 in Prague). The final report on the project can be found on the BIPAR website, together with the different language versions of the booklet. For the new work programme , it was decided to develop an update of the booklet, focusing on countries that are not present in the first edition, especially Central and Eastern European countries. Examples of good practices in the intermediation sector that tackle the demographic challenge in one of the three targeted areas can be sent to the BIPAR Secretariat. Other issues Other issues that are on the work programme are telework, where social partners will work on a joint statement, and exchanges of views on the social and employment aspects of the EU legislative proposals as well as their impact, and consideration of joint initiatives. Such an exchange may concern, for instance, the legislation in the field of pensions and developments related to gender imbalance. Page 46 BIPAR Annual Report

48 Next EU Presidencies The Council is presided over for a period of six months (from January to June, and from July to December) by each Member State in turn, in accordance with a pre-established rota. Ireland is currently holding the Presidency of the Council till 30 June The Presidency of the Council plays an essential role in organising the work of the institution, particularly in promoting legislative and political decisions. It is responsible for organising and chairing all meetings, including the many working groups, and for brokering compromises. 2014: Greece-Italy 2013: Ireland-Lithuania 2015: Latvia-Luxembourg 2017: Malta-UK 2016: Netherlands-Slovakia 2019: 2018: Austria-Romania Estonia-Bulgaria 2020: Finland A new EU Member State Croatia to become the 28th EU Member State on 1 July 2013 Croatia, which applied for EU membership in 2003, will become the 28 th EU Member State on 1 July 2013, after the adoption of a favourable opinion by the European Parliament and the European Commission in 2011 and the ratification of the adhesion treaty by the 27 Members of the EU in 2012 and With 4.2 million inhabitants, Croatia elected its 12 Members of the European Parliament in April 2013: six Christian-Democrats, five Social-Democrats and one Socialist. 28 insurance and reinsurance companies were active in Croatia in 2012, most of them based in its capital city Zagreb. Croatia is, after Slovenia, the second member of the former Yugoslavia to join the European Union. The European Commission recommended opening negotiations with another country from the Balkans, Serbia, in April BIPAR Annual Report Page 47