Introduction to the legal framework. COM(2011) 656 final (hereinafter MiFID II).

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1 Baker & McKenzie Belgium Client Alert 10 March 2014 For more information, please contact Pierre Berger Partner Laura Anckaert Associate Isabelle Van Biesen Associate Baker & McKenzie CVBA/SCRL Meir Antwerpen Tel.: MiFID for the insurance industry as from 30 April 2014 Introduction to the legal framework MiFID in Europe MiFID introduced harmonized conduct of business rules across the European Economic Area for investment service providers. Such conduct of business rules include the overarching principle to act honestly, fairly and professionally and the obligation to be fair, clear and not misleading. Furthermore, MiFID contains several specific conduct of business rules dealing with, among others, management of conflicts of interest, inducements, information requirements regarding customers and a best execution rule. To date, MiFID does not apply to insurance undertakings and their intermediaries at a European level. However, various initiatives, which aim at enhancing transparency and fair competition for insurance product providers and investors, are being discussed at the European level. These initiatives include: the recast of the Market in Financial Instruments Directive (MiFID) 1, strengthening the existing conduct of business rules for investment service providers; the Packaged Retail Investment Products (PRIPs) initiative, which led to the Proposal for a Regulation on key information documents for investment products 2 (both financial instruments and insurances), addressing market imbalances between economically similar products to avoid consumer detriment; and the recast of Insurance Mediation Directive (IMD II) 3, which aims to create a more stringent operational framework for insurance distributors, together with the introduction of MiFID conduct of business rules for insurance providers. 1 Proposal for a Directive of the European Parliament and of the Council on markets in financial instruments repealing Directive 2004/39/EC of the European Parliament and of the Council (recast), , COM(2011) 656 final (hereinafter MiFID II). 2 Proposal for a Regulation of the European Parliament and of the Council on key information documents for investment products, , COM(2012) 352 final (hereinafter, PRIPs Regulation). 3 Proposal for a Directive of the European Parliament and of the Council on insurance mediation (recast), COM(2012) 360/2 (hereinafter IMD II).

2 The EU intends to use MiFID II as a benchmark for both the PRIPs Regulation and IMD II. The introduction of equivalent rules for insurance products as for investment services in relation to financial instruments will ensure that consistent conduct of business, inducements and conflict of interest rules are applied. By regulating the sale of insurance investment products in a similar way as financial instruments the insurance policyholders' protection will definitively be strengthened and a level-playing field will be created. Local implementation of MiFID II and IMD II is tentatively scheduled only for the end of Belgium: One step ahead - Insurance MiFID Rules as from 30 April 2014 Acknowledging the importance of a level-playing field between the insurance industry and the investment services industry resulting from the similarity between certain financial instruments and insurances, new Belgian legislation 4 (granting power to the King to expand the scope of the existing MiFID rules to insurance undertakings and insurance intermediaries) has been adopted. Under MiFID, insurance undertakings and insurance intermediaries will be subject to detailed organisational requirements relating, for example, to matters such as the management of conflicts of interest and the structuring of compliance, internal audit and risk management functions. In addition to this, MiFID will introduce detailed conduct of business rules for insurance undertakings and insurance intermediaries covering aspects of the sales process, including provisions covering marketing communications, suitability and appropriateness requirements. Detailed level 1 Insurance MiFID rules 5 and level 2 Insurance MiFID rules 6 clarifying and adapting existing MiFID rules for the insurance industry as well as amendments to the existing insurance mediation legislation 7 were issued in three new Royal Decrees. All MiFID rules that apply to the insurance industry will hereinafter be called Insurance MiFID Rules. The level 1 Insurance MiFID Rules clarify and define the scope of the conduct of business rules with respect to investment services set forth in articles 27, 4 The Belgian Act of 2 July 2010 amending the Act of 2 August 2002 on the supervision of the financial sector and the financial services and the Act of 22 February 1998 concerning the establishment of the organic statute of the National Bank of Belgium, and regarding the miscellaneous provision and the Act of 30 July 2013 to strengthen the protection of customers of financial products and services as well as the powers of the Financial Services and Markets Authority and concerning several provisions. 5 Royal Decree dated 21 February 2014 regarding rules concerning the application on the insurance industry of articles 27 till 28bis of the Act of 2 August 2002 on the supervision of the financial sector and on financial services (hereinafter Royal Decree regarding rules of conduct level 1). 6 Royal Decree dated 21 February 2014 regarding the rules of conduct and conflict management requirements as established by law concerning the insurance industry (hereinafter Royal Decree regarding rules of conduct level 2). 2 MiFID for the insurance industry as from 30 April March Royal Decree dated 21 February 2014] regarding the alternation of the Act of 27 March 1995 on insurance and reinsurance mediation and the distribution of insurances.

3 28 and 28bis of the Law of 2 August for the insurance industry. The level 2 Insurance MiFID Rules apply the conduct of business rules with respect to investment services set forth in the Royal Decree of 3 June in a more detailed way to the insurance industry. New definitions are introduced in order to apply MiFID to insurances, and such new definitions will be further analyzed throughout this article to the extent they are relevant to understand the scope of the Insurance MiFID Rules. The Insurance MiFID Rules, which were published in the Belgian Official Gazette on 7 March 2014, will come into force on 30 April 2014 and will be applicable to all transactions that take place or are executed in Belgium as of 30 April Further, insurance intermediaries who are already registered as "insurance intermediary" with the FSMA on 30 April 2014, shall maintain their registration only if they show the required knowledge and experience in relation to the Insurance MiFID Rules by 1 May 2015 at the latest. The FSMA will publish a Circular regarding the interpretation of the Insurance MiFID rules in the coming month. Scope of the Insurance MiFID Rules Personal scope of the Insurance MiFID Rules (a) General The Insurance MiFID Rules apply to service providers. New definition: "Service providers" means: (i) insurance undertakings, including their tied agents and the insurance subagents acting under the responsibility of these tied insurance agents (together defined as "insurance undertakings sensu lato"); and (ii) all the insurance intermediaries other than tied insurance agents. (b) Insurance undertakings, including their tied agents and the insurance subagents falling under the responsibility of these tied insurance agents Insurance undertakings, as well as their tied insurance agents, and the insurance subagents who act under the responsibility of those tied insurance agents, are subject to the Insurance MiFID Rules. New definition: "Tied insurance agent" means "the insurance agent: who may only exercise insurance mediation activities in the name and for the account of: o one single insurance undertaking; or 8 Law of 2 August 2002 on the supervision of the financial sector and on financial services, BS 7 August 2002 (hereinafter Law of 2 August 2002). 9 Royal Decree of 3 June 2007 concerning specific rules to implement the Market in Financial Instruments. 3 MiFID for the insurance industry as from 30 April March 2014

4 o several insurance undertakings to the extent that the insurance agreements of these undertakings are not mutually competing agreements; by means of one or more agreements or mandates; and who act under the full responsibility of (these) insurance undertaking(s) regarding the relevant insurance agreement(s). Tied agents will have to inform the FSMA of their statute as "tied agent", as well as of the identity of the insurance undertaking in whose name and for whose account they act and the group(s) of activities and the insurance branches concerned. The insurance undertakings concerned, on the other hand, must inform the FSMA of the name(s) and address(es) of their tied agent(s), as well as the group of activities and insurance branches concerned. The FSMA must also be informed of any changes to this information. New definition: "Mutually competing insurance agreements" are each of the following: The insurance agreements, which form part of the group of activities "life," and qualify as investment insurance products or insured savings 10 ; The insurance agreements, which form part of the group of activities "life," and do not qualify as investment insurance products or insured savings; The insurance agreements, which form part of the group of activities "non-life," belonging to the same branch of activity 11. Tied insurance agents and insurance subagents will be put on a par with, respectively, the insurance undertaking or insurance intermediary in whose name and for whose account they act. They will have to comply with the procedures and policies regarding the 10 The insurance agreements which form part of the group of activities life as defined in Annex I of the Royal Decree of 22 February 1991 regarding the general rules regarding the supervision of insurance undertakings, as well as the insurance agreements making part of the life-insurance branch as defined in Annex I of the Directive 2002/83/EC of the European Parliament and of the Council of 5 November 2002 concerning life assurance or in Annex II of Directive 2009/138/EC of the European Parliament and of the Council of 25 November 2009 on the taking-up and pursuit of the business of Insurance and Reinsurance, which categorise as investment insurance products or insured savings. 11 As defined in the Royal Decree of 22 February 1991 on the general regulation concerning the insurance undertakings, in Annex, section A of Directive 73/239/EEC of 24 July 1973 on the coordination of laws, regulations and administrative provisions relating to the taking-up and pursuit of the business of direct insurance other than life assurance, with the exception of the insurance agreement industry, and the execution thereof, or of Annex I, section A of Directive 2009/138/EC of the European Parliament and of the Council of 25 November 2009 on the taking-up and pursuit of the business of Insurance and Reinsurance, which categorise as investment insurance products or insured savings. 4 MiFID for the insurance industry as from 30 April March 2014

5 Insurance MiFID Rules established by the insurance undertaking or intermediary for whose account they act and they will have to use the documentation published by these insurance undertakings and insurance intermediaries. (c) Insurance intermediaries other than tied insurance agents Insurance intermediaries, other than tied insurance agents, are subject to the Insurance MiFID Rules. New definition: "Insurance intermediary, other than tied insurance agent" means: the insurance intermediary, who, by means of multiple agreements or mandates, may exercise insurance mediation activities in the name and for the account of several insurance undertakings without being tied to such insurance undertakings, and the insurance subagents acting under such insurance intermediary's responsibility; and the insurance broker and the insurance subagents acting under such insurance broker's responsibility. (d) Specific liability regime for insurance (sub)agents Where a tied insurance agent is appointed, insurance undertakings must remain "fully and unconditionally" responsible for any action or omission in relation to the Insurance MiFID Rules on the part of their tied insurance agent when acting on behalf of the insurance undertaking, notwithstanding possible liability of the tied insurance agent in case of an obvious shortcoming. Where a sub-agent is appointed, insurance agents and brokers must remain "fully and unconditionally" responsible for any action or omission on the part of their subagent when acting on behalf of the insurance agent or broker. This liability regime will require the responsible service providers to establish internal measures to ensure compliance with the Insurance MiFID Rules. (e) Reinsurance undertakings and reinsurance intermediaries are exempted. Reinsurance undertakings and reinsurance intermediaries are not subject to the Insurance MiFID Rules. Territorial scope of the Insurance MiFID Rules The Insurance MiFID Rules will generally be applicable to insurance undertakings and insurance intermediaries delivering insurances or offering insurances in Belgium. Insurance undertakings and insurance intermediaries incorporated in Belgium or incorporated outside of Belgium (but having a branch in Belgium or providing insurances through the free provision of services in Belgium) will, as a consequence, also be subject to the Insurance MiFID Rules. 5 MiFID for the insurance industry as from 30 April March 2014

6 6 MiFID for the insurance industry as from 30 April March 2014 This means that non-belgian service providers will need to comply with the Insurance MiFID Rules of Belgium, as host state into which they are conducting business. The Belgian supervisory authorities have ruled that non-eea insurance undertakings are conducting business in Belgium (and - except for certain well-defined exceptions - need to obtain a license) as from the moment they are soliciting Belgian customers or, even in case of passive servicing, insuring risks located in Belgium. In this respect, the Belgian supervisory authorities also took the view that whether or not insurance undertakings solicit Belgian residents for insurances directly or through intermediaries is irrelevant for the assessment of their licensing obligation. Material scope of the Insurance MiFID Rules The Insurance MiFID Rules are applicable to the offering and sale of insurances, but there are some exceptions: (a) Pensions First and second pillar pension products are excluded from the Insurance MiFID Rules. (b) Intra-group insurances Insurance MiFID Rules do not apply to service providers if they only exercise their activities in order to insure or reinsure the risks of their own undertaking or the group of undertakings of which they form part. (c) Non-complex non-life insurances Insurance MiFID Rules do not apply to service providers if the insurance or reinsurance mediation concerns insurance or reinsurance contracts with regard to which all of the following conditions are met: (i) The insurance contract only requires knowledge of the insurance cover that is provided. (ii) The insurance contract is not a life insurance contract. (iii) The insurance contract does not cover any civil liability risks. (iv) The principal professional activity of the person offering the insurance is other than insurance mediation. (v) The insurance is complementary to the product or service supplied by any provider, and such insurance covers: (A) the risk of breakdown, loss of or damage to goods supplied by that provider; or (B) the risk of damage to or loss of luggage and other risks linked to a travel booked with that provider, even if the insurance additionally covers life insurance or civil liability risks, to the extent that such additional cover is ancillary to the main cover for the risks linked to a travel. (vi) The amount of the annual premium does not exceed EUR500 and the total duration of the insurance contract, including any renewals, does not exceed five years.

7 (d) Large-risk insurances Certain Insurance MiFID Rules in relation to the information duty are not applicable to service providers if they offer "large-risk" insurance mediation services, as defined in the Royal Decrees regarding rules of conduct level 1 and 2. The Insurance MiFID Rules The overarching principle In general, service providers will have to ensure that they act honestly, fairly and professionally with regard to their customer's interests in case they offer or close insurance agreements or insurance mediation services. Furthermore, service providers will have to ensure that the information provided to the customer is fair, clear and not misleading. Specification of demands and needs Prior to the conclusion of a specific insurance agreement, the insurance intermediary shall at least specify the demands and needs of the customer on the basis of the information provided by the customer, and ensures that the insurance agreement offered to the customer meets these demands and needs. Further, the insurance intermediary should give the underlying reasons for any advice given to the customer on a given insurance agreement taking into account the complexity of the insurance agreement being proposed. Information duty (a) General The Insurance MiFID Rules also impose service providers to provide customers with accurate information in a comprehensible way in order to enable them to understand the nature of the insurance mediation service and the insurance agreement offered, as well as the nature of the investment insurance products and insured savings, and the risks linked to these insurances, so that they can make an informed decision whether or not to enter into an insurance agreement. The information requirements can be divided in three groups: (i) those that are applicable to all insurance agreements; (ii) those that are applicable to insurance agreements other than investment insurance products and insured savings; and (iii) provisions that are only applicable to investment insurances and insured savings. For the sake of completeness, it should be noted that marketing should also comply with some of the information requirements set forth below. (b) Information duty applicable to all insurance agreements Service providers are subject to several information requirements with respect to the following topics, irrespective of the kind of insurance agreement concerned: (i) General information Information concerning the identification of the regulated company. 7 MiFID for the insurance industry as from 30 April March 2014

8 Information concerning the languages applicable to the relationship between the customer and the service provider. Information concerning the means of communication between the customer and the service provider. A statement by the regulated undertaking containing information regarding its license or registration, as well as information regarding the supervisory authorities. Information regarding the reports that the service provider has to provide to its customer. (ii) Conflicts of interest The service provider should provide a general description of the conflict of interests management policy. The customer is entitled to ask for more information regarding this policy. (iii) Costs and obligations The service provider should provide the customer prior to the performance of an insurance mediation service or each expiry date of the insurance agreement with information regarding the costs and ancillary obligations. The FSMA will, in consultation with the insurance industry, clarify this obligation in a regulation. In case of inducements, the benefits must be disclosed to the customer before rendering the service (please refer to section 3.4 below). The service provider may disclose the essential conditions of the inducements to the customer in a summary form only if it undertakes to provide the customer upon request with more information. (iv) Reports The type, frequency and timing of the sound reports (regarding the insurance mediation services or insurances offered) that the service provider should provide to the customer in accordance with the Insurance MiFID Rules. (c) Information duty applicable to insurance agreements other than investment insurance products and insured savings The Insurance MiFID Rules contain several information requirements that are only applicable to insurance agreements other than investment insurance products and insured savings. These information requirements supplement the general information requirements stated under (b) above, and are, among others, the following: Timely information regarding the conditions of the insurance agreement. The information and marketing provided to the customer regarding insurance mediation services and insurances is accurate, and shall not emphasize the possible benefits hereof without indicating in a correct and clear way the risks related to such activities. 8 MiFID for the insurance industry as from 30 April March 2014

9 Important elements, statements or warnings may not be concealed, hidden or toned down. If insurance mediation activities, insurance agreements or persons performing insurance mediation activities are mutually compared, the information provided to the customer should meet the following conditions: o o o The comparison should be appropriate and should be presented in a proper and balanced way. The information sources used for the comparison should be mentioned. The principal facts and hypothesis used for the comparison should be mentioned. Information about the tax treatment should be qualified by a reference to the required individual circumstances and possible future changes. (d) Information duty applicable to investment insurances and insured savings The MiFID Insurance Rules contain several information requirements which are only applicable to investment insurance products and insured savings. These rules supplement the general information requirements stated under (b) above. Timely information regarding the conditions of the insurance agreement. The information and marketing provided to the customer regarding insurance mediation services, investment insurance products and insured savings are accurate, and shall not emphasize the possible benefits hereof without indicating in a correct and clear way the risks related to such activities. If insurance mediation activities, investment insurance products or insured savings, or persons performing insurance mediation activities are mutually compared, the information provided to the customer should meet the following conditions: o o o The comparison should be appropriate and should be presented in a proper and balanced way. The information sources used for the comparison should be mentioned. The principal facts and hypothesis used for the comparison should be mentioned. The service providers shall provide the (potential) customer with a general description of the nature and risks of investment insurances and insured savings. The information should be sufficiently detailed (as set forth in the Insurance MiFID Rules and a possible future regulation of the supervisory authorities) to enable the customer to take informed decisions regarding the investment insurance or insured savings offered by the insurance undertaking. 9 MiFID for the insurance industry as from 30 April March 2014

10 If the investment insurance or insured savings contain a guarantee provided by a third party, the information regarding the guarantee should contain sufficient details regarding this third party and the guarantee itself. The service providers should comply with detailed legal requirements if the information they provide to the customer refers to past results and simulations about future results. Information about the tax treatment should be qualified by a reference to the required individual circumstances and possible future changes. Inducements 10 MiFID for the insurance industry as from 30 April March 2014 The MiFID rules concerning inducements are applicable to all insurance agreements, including investment insurance products and insured savings. With regard to the rules concerning inducements, tied insurance agents of an insurance undertaking are not considered as individual entities, separated from the insurance undertaking. The relation between the insurance undertaking and its tied agents is therefore mainly covered by the conflict of interest rules and not subject to the rules on inducements. "Inducements" (i.e., fees, commissions and non-monetary benefits received or paid by the service provider in relation to the provision of an insurance mediation service to a customer) are only allowed if: (a) the inducements are paid or provided to or by customer or a person acting on behalf of the customer (e.g., insurance premiums); (b) the inducements meet the following cumulative conditions (e.g., brokers' fees): (i) the benefit must be disclosed to the customer before rendering the services; (ii) the benefit must be designed to enhance the quality of the relevant service to the customer; and (iii) the benefit may not impair the service provider's duty to act in the best interest of the customer (c) the inducements are appropriate to enable or required to provide insurance mediation services, such as taxes, legal fees (e.g., for tax advice) and reinsurance premiums, which do not conflict with the overarching principle to act honestly, fairly and professionally. Client file and record keeping Service providers should keep a client file containing the documents describing the rights and obligations of both parties, and the terms and conditions of the provision of services to the customer. Content requirements for such agreement can be imposed through future implementing decrees. Insurance intermediaries have the obligation to register each activity of insurance mediation in order to allow supervisory authorities to supervise the compliance with the Insurance MiFID Rules. The scope of this registration duty will be further elaborated by FSMA. Conflict of interest rules

11 The rules regarding the management of conflict of interest are to a large degree based on the existing MiFID conflict of interest rules for the banking industry. The "identify, manage or disclose" approach is extended to the insurance industry taking into account the type of activity, size, product range and complexity of the service provider. Policies and measures as well as a follow-up of conflicts of interest thereof should be developed. Records of conflicts of interest should be kept. The conflict of interest rules are applicable irrespective of the kind of insurance mediation service the insurance undertaking provides, and irrespective of the kind of insurance agreement at stake. Advice - a new act of insurance mediation The Insurance MiFID Rules impose a mandatory licensing requirement (as an insurance intermediary) for persons providing advice in relation to the conclusion of insurance agreements. This service constitutes an act of insurance mediation. This is justified on the basis that due to the increasing dependence of investors on personal recommendations, it is appropriate to include the provision of advice as an act of insurance mediation requiring authorization. New definition: "Advice" means the provision of personal recommendations to a customer, either upon its request or at the initiative of the insurance undertaking or insurance intermediary, other than the tied insurance agent in respect of one or more insurance agreements. New definition: "Personal recommendation" means a personal recommendation presented as suitable for a person, or based on a consideration of the circumstances of that person. A recommendation is not a personal recommendation if it is made exclusively through distribution channels or to the public. Generic advice, for example, on asset classes or geographic markets will not constitute advice for the purposes of the Insurance MiFID Rules, as the activity covered by the Insurance MiFID Rules relates to advice on specific insurance agreements. Although generic advice does not fall within the definition of "advice" under the Insurance MiFID Rules, if generic advice is presented to a customer on the basis that it is "suitable" for the customer and it is not so suitable, a breach of the information duty is likely to occur. Suitability and appropriateness requirements (a) General As opposed to the MiFID for the banking industry taking a three-tier approach, the Insurance MiFID Rules take a two-tier approach, as follows: (i) Suitability requirements will apply where the service provider is providing advice in relation to investment insurance products or insured savings. New definition: "Insured savings" means an insurance agreement: 11 MiFID for the insurance industry as from 30 April March 2014

12 (a) of branch 21, 22 or 26 of the group of activities 'life' (as defined in the Royal Decree of 22 February 1991 on the general regulation concerning the insurance undertakings), which contains a savings component, as well as insurance agreements as mentioned in sections I, II or VI of Annex I of Directive 2002/83/EC of the European Parliament and of the Council of 5 November 2002 concerning life assurance or of Annex II of Directive 2009/138/EC of the European Parliament and of the Council of 25 November 2009 on the taking up and pursuit of the business of Insurance and Reinsurance, which categorise as investment insurance products or insured savings, which contain a saving component; or (b) being a combination of several of the agreements referred to under a). New definition: "Investment insurance product" means insurance agreements that are: (a) of branch 23 of the group of activities 'life' (as defined in the Royal Decree of 22 February 1991 on the general regulation concerning the insurance undertakings), as well as insurance agreements as mentioned in sections III of Annex I of Directive 2002/83/EC of the European Parliament and of the Council of 5 November 2002 concerning life assurance or of Annex II of Directive 2009/138/EC of the European Parliament and of the Council of 25 November 2009 on the taking up and pursuit of the business of Insurance and Reinsurance, which categorise as investment insurance products or insured savings, which contain a saving component; or (b) a combination of one or more insured savings and one or more insurance agreements referred to under section a) of the definition of "insured savings"; or (c) a combination of several of the agreements referred to under a). (ii) An appropriateness requirement applies where the service provider is providing other mediation services (than advice) in relation to investment insurance products or insured savings. (iii) There is no execution-only regime, under which suitability and appropriateness requirements do not apply. Generally, the service provider is entitled to rely on the information provided by the customer, unless it knows or should know that the information is clearly obsolete, inaccurate and incomplete. (b) Suitability requirement Where a service provider is providing advice, the service provider must carry out a suitability assessment. This requires the service provider to obtain the necessary information regarding the customer's knowledge and experience in the investment field relevant to the specific type of product or service, the customer's financial situation and the customer's investment objectives so as to enable the service provider to recommend to the customer or potential customer the investment insurance products and insured savings that are suitable for the customer. 12 MiFID for the insurance industry as from 30 April March 2014

13 13 MiFID for the insurance industry as from 30 April March 2014 The level 2 Insurance MiFID Rules expand on this requirement and provide that service providers must obtain from customers or potential customers such information as is necessary for the service provider to understand the essential facts about the customer and to have a reasonable basis for believing, giving due consideration to the nature and extent of the advice provided that the specific transaction to be recommended satisfies the following criteria: (i) The investment insurance products and insured savings meet the savings and investment objectives of the customer in question. (ii) The transaction is such that the customer is able financially to bear any related investment risks consistent with his savings and investment objectives. (iii) The transaction is such that the customer has the necessary experience and knowledge in order to understand the risks involved in the transaction. The suitability requirement is mandatory so that if the customer does not provide the required information, the service provider will not be able to provide the advisory services. (c) Appropriateness requirement Where the services being provided do not comprise the provision of advice, the service provider must comply with an appropriateness test. Under the test, the service provider is required to ask the customer to provide information regarding the customer's knowledge and experience in the savings and investment field relevant to the specific type of investment insurance product or insured savings ordered or demanded so as to enable the service provider to assess whether the insurance mediation service, investment insurance product or insured savings envisaged is appropriate. Where the insurance mediation service, investment insurance product or insured savings envisaged is not appropriate for the customer or potential customer, the service provider must warn the customer hereof. Such warning can be done in a standardized form. The service provider is not under a requirement to obtain information from the customer for the purpose of the appropriateness assessment, although it is under an obligation to request this information. It should be noted that the service provider must not discourage a customer from providing information required for the purpose of the appropriateness assessment. Where the customer elects not to provide the information required for the purpose of the appropriateness assessment, the service provider must warn the customer that this will not allow the service provider to determine whether the insurance mediation service, investment insurance product or insured savings is appropriate. Such warning can be done in a standardized form. Outside the scope of the Insurance MiFID Rules The MiFID rules, which are not explicitly made applicable to the insurance industry, will not be applicable to the insurance industry. Insurance undertakings and insurance intermediaries are therefore amongst others not subject to the conduct of business rules provided for by some paragraphs of Article 27, Article 28 ("the execution of orders") and Article 28bis ("the obligation to act honestly, fairly and professionally and in a way

14 that is beneficial to the integrity of the market, as well as an obligation regarding the transactions in replaceable financial instruments") of the Act of 2 August Liability Civil liability (new causality rule) Insurance undertakings and insurance intermediaries will be subject to the new causality rules in relation to civil liability set forth in Article 30ter of the Act of 2 August as of 30 April Irrespective of common law and notwithstanding any provision to the contrary to the detriment of the customer, if an insurance undertaking or insurance intermediary does not comply with the listed Insurance MiFID Rules (such as the conduct of business rules, information requirements, appropriateness and suitability requirements and conflict of interest rules) when engaging in financial transactions (e.g., offering or selling insurances) and a customer suffers losses as a consequence of such financial transactions, such losses will be deemed resulting from such non-compliance in the absence of evidence to the contrary. Registration duty and administrative sanctions Without entering into a detailed description of the sanction regime, it is important to note in this respect that breaches of the Insurance MiFID Rules can be sanctioned by the supervisory authorities with administrative fines up to EUR 2,500, As amended by the Act of 30 July 2013 to strengthen the protection of customers of financial products and services as well as the powers of the Financial Services and Markets Authority and concerning several provisions. 14 MiFID for the insurance industry as from 30 April March 2014