The European Federation of Insurance Intermediaries

Transcription

1 The European Federation of Insurance Intermediaries Annual Report

2 Annual report 06/ /2011 BIPAR BIPAR, the European Federation of Insurance Intermediaries, is a non-profit European organisation grouping professional associations of insurance intermediaries in Europe. It presently has a membership of 50 national associations, established in 32 countries, and represents some 80,000 insurance agents and brokers, employing in all about 250,000 people. Founded in Paris in 1937, BIPAR headquarters were moved to Brussels in It is the single voice of insurance intermediaries with the European Institutions. BIPAR Annual Report Page 1

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4 Foreword Dear Reader, In response to the events in the financial markets, in 2008, governments decided to revise, increase and deepen regulation in the financial services sector. There was, and continues to be (to a lesser extent) a trend to regulate all financial services sectors in the same way. Over the last two years, BIPAR has been very active in ensuring that regulators and politicians keep in mind that insurance and financial intermediation are different from banking. We will continue and promote the specificities and added value of our sector and this beautiful profession in the future. Details about the role of insurance intermediaries can be found on our new website Jaap Meijers Chairman A real wave of new or revised regulation is coming towards us. The mostly crisis related initiatives or the after crisis regulatory philosophy have an impact on virtually each and every regulation that is of importance to insurance and financial intermediaries. A common denominator to the new (draft) regulations is consumer protection. This being said, there are also a few tax driven initiatives... Intermediaries, very often small and medium-sized enterprises, may in the coming years not only suffer from the long-term direct impact of the financial crisis but also, indirectly, from the compliance cost that will come with the new regulations. BIPAR calls for a proportional approach. We adopted, in all our positions, a policy line which promotes that regulation is effective in terms of consumer protection but does not strangle business. Intermediaries are drivers of competition and are close to consumers. Intermediaries ensure choice, assistance and service in insurance and claims management for consumers and businesses. Transparency and integrity are the values of our sector. These values are reflected in each and every one of our BIPAR positions and initiatives. One has to look no further than the content of this report to both understand and appreciate the breadth and strategic importance of the work being undertaken by BIPAR in cooperation with its national associations. Work in the interest of the intermediaries, work also in the interest of a healthy competitive market and in the interest of hundreds of thousands well-trained and service-minded employees. BIPAR Annual Report Page 3

5 With the new European supervisory architecture, BIPAR s public affairs role both at European and international level will become even more important than in the past. For the same reason, the role of national associations, in coordination and cooperation with BIPAR, will also become more important. Through its advocacy, its continuous interaction and dialogue with the various parties in the market over the last 12 months, BIPAR has consolidated its position as the single voice of intermediaries in Europe. It is ready for the challenges the sector will face in the year ahead. Page 4 BIPAR Annual Report

6 Contents EU STANDING COMMITTEE... 7 Foreword by Paul Carty, Chairman of the EU Standing Committee... 9 Revision of the Insurance Mediation Directive (IMD) Solvency II Directive - Insurance intermediaries issues Commission s White Paper on Insurance Guarantee Schemes Proposed Directive on Consumer Rights Sanctioning regimes in the financial sector New EU Financial Supervisory Structure and new types of legal acts Life & Investment Committee Packaged Retail Investment Products (PRIPs) Revision of the Markets in Financial Instruments Directive (MiFID) Pensions in the European Union Review of the Directive on the Institutions for Occupational Retirement Provision (IORP) Proposed Directive on credit agreements relating to residential property - Impact on intermediaries Consultation on interest rate restrictions VAT treatment of insurance and financial services Taxation of the financial sector Harmonisation of European Insurance Contract Law Tying in retail financial services Alternative Dispute Resolution (ADR) Consumer collective redress Modernisation of the European Public Procurement Market BIPAR Annual Report Page 5

7 Environmental Liability Directive E-commerce Directive ECJ bans gender discrimination from December European Commission s work programme for 2011 and beyond Single Market Act BIPAR mid-term meetings in Brussels Next EU Presidencies AGENTS' STANDING COMMITTEE Foreword by Gérard Lebègue, Chairman of the Agents' Standing Committee Reinforced cooperation of agents at European level BROKERS' STANDING COMMITTEE Foreword by André Van Varenberg, Chairman of the Brokers' Standing Committee Activities SOCIAL AFFAIRS COMMITTEE Activities INTERNATIONAL AFFAIRS World Federation of Insurance Intermediaries (WFII) Glossary Attachments Member associations Steering Committee Secretariat Page 6 BIPAR Annual Report

8 EU Standing Committee BIPAR Annual Report Page 7

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10 Foreword Dear Colleagues, The EU Standing Committee of BIPAR is constituted when the member associations meet together formally to consider, discuss and agree policy in relation to EU legislative matters. Over the years this format where member associations convene to focus their attention exclusively on EU legislative matters has served us well. It has allowed member associations to develop a deep understanding and more importantly a very high level of agreement on BIPAR s policy position in regard of most EU legislative developments concerning insurance and insurance intermediaries. Paul Carty Chairman of the EU Standing Committee Though BIPAR has a highly developed communication strategy to member associations via regular circulars, briefing documents, BIPAR Updates and this Annual Report, nothing substitutes for the physical gathering of members. Such gatherings allowed member associations to receive reports first hand from key influencers and active participation in what is frequently robust debate. Over the last year the EU Standing Committee has met twice, in Tel Aviv in June 2010 and in Brussels in January As ever, the attendance by members at both meetings was excellent. Key influencers made presentations at the meetings. This afforded member associations the invaluable opportunity of hearing first hand with no filtration the most up to date positions regarding legislative development that will shape our business for decades to come. It has been through that process that BIPAR has achieved almost the impossible, high level agreement on policy matters by 50 member associations from 32 different countries with very significant differences between the markets and the distribution systems in those markets. That hard won consensus allowing BIPAR to speak as the sole voice of the profession is reaping significant rewards when it comes to the active representation of the interests of insurance intermediaries all over Europe. There is significant evidence of those rewards and we would draw your attention to just some examples of the successes that have been achieved. EIOPA (former CEIOPS) published its long anticipated advice on the IMD revision in November. The document was comprehensive and well reasoned. The policy options advocated in the document were largely consistent with the policy stance that has been pursued by BIPAR. The public hearing held in Brussels in December on the IMD was a great success for BIPAR which had BIPAR Annual Report Page 9

11 significant representation on the panels who advocated the BIPAR s agreed policy stance. More recently, the decision by EIOPA to appoint a representative from BIPAR on the Insurance Stakeholder Group is another manifestation of BIPAR s influence on EU matters. The importance of the high level of trust and cooperation between member associations which has been fostered by the EU Standing Committee was also evident at the recent coordinated communication with MEPs on the subject of the Guarantee Funds. As IMD II, PRIPs, MiFID II, Consumer Credit and other legislative developments move to the Parliamentary stage in the adoption process, BIPAR s ability to act as a coherent grouping will never be more important. In that regard the ongoing working of the EU Standing Committee will enter an even more critical phase when the need for BIPAR to represent our agreed interests on an agreed policy platform will be crucial. Page 10 BIPAR Annual Report

12 Revision of the Insurance Mediation Directive (IMD) Background 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. In 2006, aimed at ensuring a convergent implementation of the IMD, CEIOPS (now EIOPA since January 2011, see page 26) adopted the Luxembourg Protocol. It develops the procedure for the exchange of information and cooperation in the supervision of cross-border activities of the insurance intermediaries and facilitates their single registration in the EU. The Luxembourg Protocol also promotes a consistent implementation of the registration and notification procedures by the presentation of special templates for those procedures. It covers consumer protection, in particular, with the publication of a list mentioning the bodies/ institutions competent for receiving complaints and the procedures for settling complaints out-of-court. Towards a revision In its Recital 95, the Solvency II Directive, which was adopted in December 2009, requires the European Commission to put forward a proposal for the revision of the IMD as soon as possible, but no later than at the end of 2010, taking into account the consequences for policyholders of this Directive. The implementation check of the IMD conducted by the European Commission over the last three years also showed that, as a result of the minimum harmonisation introduced by the IMD, the practical application of its provisions varies quite significantly between the Member States (scope, definitions, information requirements, ). In addition, gold-plating practices as well as the use of general good requirements at national level, have created some obstacles to the functioning of the Single Market for insurance intermediaries. In its revision of the IMD, the European Commission also intends to take into account the interests of policyholders and to improve legal clarity and certainty. The Commission considers that the current level of consumer protection enshrined in the IMD might not be sufficiently transparent. In this respect it is expected that it will 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. It is also important for the European Commission, from a policyholder perspective, to establish a level playing field between the sales of insurance products through insurance intermediaries and those sold by insurance undertakings. Finally, the European Commission sees a need to align the IMD revision with its ongoing work on packaged retail investment products (PRIPs) and the planned revision of the MiFID. BIPAR Annual Report Page 11

13 IMD Revision: Commission s public consultation process CEIOPS (now EIOPA) advice on the IMD revision In January 2010 the European Commission wrote to CEIOPS requesting advice on how the IMD might be revised. In its advice, CEIOPS covered the following areas: - Legal framework for IMD II. - Scope of the IMD II and its potential application to direct selling. - Insurance mediation by insurance intermediaries established in third countries. - Professional requirements and mutual recognition of professional qualifications. - Improvement of the current notification system. - Management of conflicts of interest. CEIOPS advice, that was issued in November 2010, contains 39 recommendations. The most important ones are the following: Legal framework Members would prefer a classic Directive for a revised IMD. However, as the Commission has a preference for a Lamfalussy style Directive, CEIOPS members would accept a multi-level structure as an alternative to a Lamfalussy structure. Scope - The majority of CEIOPS members agree that direct sales by insurance undertakings should be included within the scope of IMD II. - A revised definition of insurance intermediation is recommended. Introducing should be removed from the definition but there should be clearer drafting on those activities that are considered to fall within insurance intermediation as well as exempt activities. - A majority of members agree that the scope of the IMD should remain as broad as possible. Current exemptions should, however, be clarified to ensure greater legal certainty and there should be flexibility for Member States to disapply exemptions where they impinge on the ability of the State to tackle domestic market failures. - While some provisions of the Luxembourg Protocol (which relates to cooperation between supervisory authorities on the IMD implementation) should be incorporated into the revised IMD (e.g.: FOS definition), the Protocol itself should be retained. - Members of CEIOPS are in favour of reinsurance intermediaries remaining within scope on the basis of retaining the integrity of the Single Market. - There is general agreement that the outsourcing of insurance intermediation activities to third parties should be caught by the scope of the revised IMD and subject to the same rules applicable to intermediaries. Page 12 BIPAR Annual Report

14 International dimension of insurance intermediation The IMD should be amended to clarify the treatment of intermediaries from third countries. The effect will be that third country intermediaries will have to apply directly for permission to carry out mediation activities in each Member State. Consumer protection - A majority of CEIOPS members regard an on request regime as a minimum harmonisation regime, maintaining the possibility for Member States to impose stricter requirements as the best possible solution to the improvement of the transparency of intermediaries' remuneration. Under the on request regime, the intermediary should be obliged to inform the customer if the intermediary receives any kind of remuneration. However, a safeguard could be introduced in the form of a notification procedure in order to ensure that stricter national provisions are not introduced without reason. A majority of CEIOPS members agree that, in this context, disclosure of information does not apply to large risks and reinsurance activities. - A majority of CEIOPS members consider the best possible way to ensure that customers are aware of their right to request information on remuneration is to oblige the intermediary to inform the customer of this right. The customer should, as a minimum, be informed of his right to request information before the conclusion of the contract and before any amendment or renewal of the contract. - CEIOPS members have recommended that all kinds of remuneration are included in a disclosure of remuneration. A majority of members recommend that, where remuneration is uncertain, the information provided by the intermediary should consist of a description of the benefit received (in connection to remuneration in kind) or a description of the calculation criteria (in connection to any contingent commission). Any estimated amount or basis of calculation would still only have to be disclosed if the consumer requests such information. - CEIOPS members believe that the current approach to conflicts of interest under the IMD is insufficient. It is recommended that the revised IMD contain an additional article which specifically addresses such conflicts. It is suggested that the MiFID Level 1 regime could be a good orientation point for the management of conflicts of interest for insurance intermediaries. Commission s consultation paper Drawing on CEIOPS' technical advice, the European Commission published its consultation paper on the revision of the IMD on 26 November 2010, asking comments from stakeholders for 28 February. With this public consultation, the Commission is seeking to improve transparency and to establish a level playing field between the sales of insurance products through insurance intermediaries and those sold by insurance undertakings. They also want to align the IMD revision with the ongoing work of the Commission on Packaged Retail Investment Products (PRIPs). BIPAR Annual Report Page 13

15 Areas for discussion and potential amendment in the Commission s consultation paper Scope of the IMD The consultation paper proposes to revise the scope of the IMD. The Commission suggests that direct sales by insurance undertakings and their employees are included in IMD II. Policyholder protection and a higher level of professional requirements The Commission consults on whether the exemption in relation to large risks should be retained in the revised Directive and whether a definition of "advice" should be introduced in line with the provisions of the MiFID Directive. The Commission is concerned that the IMD does not provide sufficient clarity on conflicts of interest. It considers introducing high level principles that could apply to both insurance intermediaries and insurance undertakings. Most importantly, the consultation paper seeks to establish whether disclosure of remuneration should be introduced. The Commission proposes to introduce requirements whereby all persons in insurance undertakings who are responsible for insurance distribution and sales of insurance products demonstrate the knowledge and ability necessary for the performance of their duties. Increased efficiency in cross-border business The Commission seeks to improve the legal framework in relation to the notification process and integrate definitions of freedom of services (FOS) and freedom of establishment (FOE) into the IMD as well as to encourage a more transparent use of the general good rules. Commission public hearing - BIPAR participation The public hearing, organised by the European Commission on 10 December 2010, aimed at hearing the views of a range of stakeholders, including BIPAR, on the key issues relating to the revision of the IMD. The public hearing consisted of three panels. The first one gave an overview on the new face of insurance intermediation and insurance distribution. It addressed the issue of how to achieve a better level playing field in a more integrated market with optimum consumer protection. The second panel looked at key aspects of information requirements, transparency and potential conflicts of interest. The third one dealt with the issue of regulating sales of PRIPs insurance products within IMD II. The public hearing was opened by Mrs Sharon Bowles, Chair of the Economic and Monetary Affairs Committee of the European Parliament. Mr Michel Barnier, the Commissioner in charge of Internal Market and Services, also addressed the public hearing in the afternoon, and recalled the objective of the IMD revision. He made it clear that he would present a document to the Parliament and Council that contains real changes with regard to transparency, responsible risk management and removal of conflicts of interest. Page 14 BIPAR Annual Report

16 BIPAR at the public hearing BIPAR was represented in the three panels by Mr André Van Varenberg (Chairman of BIPAR Brokers Committee), by Mr Paul Carty (Chairman of BIPAR EU Committee) and by Mr Gérard Lebègue (Chairman of BIPAR Agents Committee). The Commission also invited two other representatives of our national associations, Andrew Strange (AIFA) and Hans-Georg Jenssen (VDVM). They explained BIPAR views on the IMD revision, pointing out for instance that, for consumer protection and competition reasons, the revised IMD should ensure a level playing field between insurance intermediaries and direct writers, and should continue to apply - with only very limited exceptions - to anyone involved in the activity of insurance mediation. BIPAR response to the Commission s paper on the IMD revision On 28 February 2011, after in depth consultation with its member associations, BIPAR submitted its position to the Commission s consultation paper on the IMD revision. Main issues of BIPAR response BIPAR believes that for consumer protection and level playing field purposes, the requirements of the IMD II should apply equally to all those involved in the mediation or distribution of insurance products, while taking into account the specificities of existing channels. BIPAR proposes an approach which would ensure that information requirements and conduct of business rules as well as training requirements applicable to insurance intermediaries are also applicable in a proportionate way to (direct) insurance distributors, while taking into account the specificities of the respective existing channels. In order to mitigate the potential conflicts of interest, BIPAR supports transparency. It promotes that before the conclusion of the contract, insurance intermediaries and direct writers shall provide insurance customers with sufficient and clear information to make informed decisions about the purchase of insurance products and the nature of their services. It also promotes that insurance intermediaries should inform the insurance customers about the existence of underwriting powers and delegated authorities in relation to the contract. BIPAR, with the largest majority of its members, promotes that before the conclusion of the contract, insurance intermediaries should inform insurance customers about the nature of their remuneration or compensation. They should also, upon request of their customers, disclose their remuneration related to the contract. BIPAR believes that such a system would ensure that there is a fair opportunity for dialogue between the client and the intermediary about price, quality, services and solutions and, at the same time, it would offer an adequate level of transparency without creating too much administrative burden for operators. Although BIPAR also promotes this system for private consumers, it wonders whether in private lines total premium is not the best solution for comparison. These are largely commodity products where the overall price is the key factor. Competition from many differing distribution channels is strong and ensures that the market remains competitive. BIPAR Annual Report Page 15

17 Important for BIPAR is that if such a system is introduced, a comparable level of transparency from direct writers should be applicable, not only to ensure a competitive level playing field but also to ensure comparability and consumer protection. Any other system would have competitive side effects and may possibly turn into misleading and irrelevant information for the consumer. Summary of the contributions to the Commission s consultation The Commission received 125 responses to the public consultation from the banking and insurance industry, from intermediaries, consumer groups, public authorities and others. In May 2011, it published a document summarising these contributions. Regarding the scope of the revised IMD, a majority of the respondents believe that it should cover all market players who have insurance mediation as part of their activities direct writers, banking and insurance companies, car rentals, etc. Some respondents specify that the extension of the scope should not impose excessive administrative burden on market players who have a different core activity. Therefore they say that the requirements should be proportionate to the consumer exposure and the risk entailed. It appears that there is a general consensus that the level of policyholder protection embodied in EU law on insurance intermediaries needs to be raised. This conclusion is shared by consumer organisations, as well as by public authorities and financial advisors. The insurance industry and the insurance intermediaries underline that consumer protection has to be consistent all over the EU. In order to harmonise the information requirements for insurance intermediaries it has been suggested by a number of stakeholders to introduce a European standard information document. Regarding the effective management of conflicts of interests and transparency, a large majority of the respondents share the view that there is a need for a new requirement to be introduced which obliges insurance intermediaries to indicate if they own a percentage of the capital of the insurance company which they represent, and whether they are entitled to any other incentives or bonuses provided by that company. Most of the respondents show a preference for more transparency of the administrative costs. They consider that the existing legislation is insufficient and that there is a need for more information disclosure at the pre-contractual stage. There is, however, a view that lowering commission due to disclosure of remuneration could result in lower quality of advice, could encourage mis-buying, could provoke diversion from the issues of coverage, conditions and price and a shift to cheaper internet non-advised sales. Regarding the distribution of insurance PRIPs (investments packaged as life insurance policies), a majority of the respondents agree with the Commission's proposal to add in the revised Directive a chapter on the selling practices of PRIPs insurance products. The general line is that this chapter has to take into account the specificities of the insurance business. At the same time, a majority of the respondents support the Commission's position that the selling practices rules for insurance PRIPs have to be aligned with the MiFID rules, in order to ensure an equal level of consumer protection. Page 16 BIPAR Annual Report

18 Next steps The Commission is now examining the contributions to its consultation and hearing. It has also started discussions on this issue with the Member States. The responses to the public consultation will feed into the preparation of the Commission's proposal for the review of the IMD, which should be published at the end of Before publishing a proposal for a revised Directive on insurance mediation by the end of 2011, the Commission will also be working on a detailed impact assessment of the proposal. TIMELINE January 2010 Commission asks for CEIOPS advice 11/ /2011 Commission s public consultation May 2011 Publication of responses by the Commission November 2010 Publication of CEIOPS advice April 2011 First meeting of Member States June - September 2011 Preparation by the Commission of the impact assessment December 2011 Publication of the proposal for a Directive on the revised IMD Parliament/Council readings IMD implementation? EIOPA technical standards guidelines Adoption of the revised IMD? BIPAR Annual Report Page 17

19 Solvency II Directive Insurance intermediaries issues Background 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 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 s 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 new Solvency II rules have replaced these requirements and done 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 Lamfalussy Level 1 (see page 26) Framework Directive Solvency II was adopted on 10 November It sets out the overarching principles and includes implementing powers for detailed rules at Lamfalussy Level 2, i.e. detailed technical rules set by the Commission based on the EIOPA advice. They are expected to be adopted by the end of Lamfalussy Level 3 supervisory standards will also be issued by the end of 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. The start date for Solvency II was due to be 1 November 2012, but there will be a delay of two months pushing it back until 1 January There have been a number of calls from Member States for this in order to better reflect the year-end dates of the majority of insurance companies. Solvency II and the general impact on intermediaries BIPAR Working Party on Solvency II published a guidance paper on Solvency II in December 2007 as well as another document entitled «Solvency II and captives» in July 2008 (both documents are available upon request at the BIPAR Secretariat) Level 2 consultation - BIPAR response The Commission is currently developing the Level 2 implementing measures and has launched a consultation on this process. The Commission seeks in this consultation more views on the potential impact the implementation measures could have on pricing, design and availability of insurance products, the corresponding effects for consumers and the wider social or economic impacts. Page 18 BIPAR Annual Report

20 In its answer to the consultaiton submitted to the Commission in January 2011, 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. Whatever the option retained, BIPAR stressed that such an option should not lead to unjustifiable costs on insurers, intermediaries and ultimately, consumers. The solution retained should assure to introduce proportionate requirements both for small and specialised insurers so as to continue to guarantee diversity and a wide choice of carriers for intermediaries and consumers. Increased costs for carriers risk reducing choice through consolidation. Choice allows intermediaries to fulfil their role of customer guide and adviser, and without such choice also the role of the intermediary will decline and ultimately the number of insurance intermediaries. Also, intermediaries stimulate competition. Less intermediaries would make insurance products more expensive, and result in less cross-border business. Any choice which limits market offer should also be avoided for sound competition reasons ongoing Level 3 consultation - BIPAR work One of the roles of EIOPA is to develop nonbinding guidelines to enhance convergent and effective application of the regulation and to facilitate cooperation between national supervisors. As such in March 2011 EIOPA started developing Level 3 nonbinding guidelines aimed to ensure convergence in the application of the Level 2 implementing measures still to be adopted by the European Commission in the Solvency II framework. Before issuing these draft guidelines for a public official consultation, EIOPA organised a pre-non-official consultation phase on them with some operators in the EU insurance market. In April BIPAR consulted its member associations on these draft guidelines to check whether they could trigger some problems when applicable to situations where intermediaries are involved. One of the main issues relates 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. Together with its member associations, BIPAR is currently assessing whether intermediaries would be able to comply with the outsourcing requirements in EIOPA's draft guidelines and will inform EIOPA accordingly. Omnibus II proposed Directive and Solvency II Directive On 19 January 2011, the European Commission published its proposal for an Omnibus II Directive which amends two Directives, the Prospectus Directive and the Solvency II Directive. Omnibus II aims at amending the Solvency II Framework Directive, to bring it in line with the EU s Lisbon Treaty and to take account of the EU s new supervisory structure (see page 26). It will also push Solvency II s implementation date back to 1 January 2013 and gives the European Commission powers to defer many parts of Solvency II for up to ten years. BIPAR Annual Report Page 19

21 Commission s White Paper on Insurance Guarantee Schemes Background The European Commission believes that the lack of Community harmonisation in the area of insurance guarantee schemes (IGS) could affect the protection of policyholders should an insurance undertaking become insolvent. The Commission has therefore spent the last four years analysing and examining together with the Member States and the industry, whether harmonisation is possible in some areas of IGS. Commission s White Paper on IGS 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 position on the White Paper After consulting its member associations, BIPAR submitted its comments on the White Paper. It stated that mechanisms should be put in place to protect private policyholders in the event where an insurance company becomes insolvent, in particular, in the framework of cross-border activities. BIPAR held that these mechanisms are also important in helping to maintain consumer confidence in the sector. BIPAR also stated that all classes of policies should be covered and is in favour of ex-post funding. European Parliament s own initiative report on the White Paper The European Parliament also decided to respond to the White Paper in the form of a resolution (a non-legislative report). Contrary to the Commission s proposals presented in its White Paper, the Parliament s draft resolution suggests including intermediary mis-selling or fraud in the scope of a possible European framework for IGS. Although the final resolution will not be binding, it will be an important source of inspiration for the European Commission. The BIPAR Secretariat therefore decided to oppose the Parliamentary proposal to include insurance intermediaries in the scope of any future European framework on IGS and prepared amendments to the Parliament draft resolution accordingly, explaining that the Commission's White Paper only concerns cases of insurance company bankruptcy, that all its preparatory work, studies and impact assessment are related to insurance companies only and not to insurance intermediaries. BIPAR also explained that it was inappropriate to include intermediaries in the future EU legislation on IGS as they are already subject to the Insurance Mediation Directive. Its article 4 states that in order to guarantee protection of customers' financial interests, all intermediaries who handle customers' monies must have sufficient financial capacity. It provides for four possible ways of providing such protection (including a guarantee fund) taking account of the specificities of the Member States. Page 20 BIPAR Annual Report

22 BIPAR amendments were successfully sent to Members of the European Parliament by BIPAR national member associations and included in the Opinion of the Parliament's Internal Market and Consumer Protection Committee (IMCO) on the issue. This Committee is a so-called opinion Committee for this dossier, meaning it provides its input to the Economic and Monetary Affairs Committee (ECON), which is the responsible Committee for the dossier. Some ECON members have already proposed amendments that take on board the view expressed by BIPAR. Summary of the comments to the White Paper The Commission received 64 responses to its consultation. A majority was in favour of measures at EU level in order to harmonise national insurance guarantee schemes but many stakeholders also stressed the need to maintain and complete the existing national schemes. A majority saw IGS as a last resort mechanism. The Commission found support from a majority of respondents for a minimum harmonisation Directive, for the Home State principle, for a cover of both life and non-life policies, for excluding legal persons, for an ex-ante funding system (completed by expost funding) and for a portfolio transfer over a compensation. Next steps The responsible ECON Committee is expected to vote on the draft report on 24 May and the Parliament s plenary vote can be expected in June. BIPAR, with the help of its member associations, will evaluate if further action is needed for the vote in plenary. The European Commission is expected to issue its draft Directive on IGS by early September BIPAR Annual Report Page 21

23 Proposed Directive on Consumer Rights Background The proposed Directive on Consumer Rights was published at the end of It aims at improving cross-border business and increasing consumer confidence. It pulls together four existing Directives on unfair contract terms, sales and guarantees, distance selling and doorstep selling. At the same time the Commission wishes to update and modernise existing consumer rights, bringing them in line with technological change and strengthening provisions in the key areas where consumers have experienced problems in recent years particularly in sales negotiated away from business premises (e.g. door to door selling). Impact on insurance intermediaries The provisions in the Commission s proposal covered contracts related to financial and insurance services, but only insofar as this is necessary to fill regulatory gaps: Provisions on consumer rights concerning contract terms (standard terms) apply to financial services, including insurance. Provisions on consumer information and withdrawal rights for distance and offpremises contracts do not apply to insurance and credit agreements (the latter are covered by the current distance marketing of financial services and consumer credit Directives). However, mortgage and other loans on real state negotiated at the consumer s home are covered by these provisions. The amendments made by the European Parliament and the Council in preparation of their respective first readings on the text have however further reduced the application of this proposed Directive to our sector and to insurance, financial and credit intermediaries in particular. BIPAR action in the European Parliament Between September 2010 and January 2011, BIPAR, together with its member associations, successfully explained to the Members of the different Parliamentary Committees that insurance/financial services are already regulated by specific legislations, some of which are currently under revision (MiFID, IMD, ), and that these legislations provide a high level of consumer protection. The BIPAR statements and voting recommendations also explained that applying the Consumer Rights Directive to financial /insurance services would lead to serious legal uncertainty. The amendments that were subsequently tabled by the Members of Parliament and voted in the responsible Committees, took BIPAR proposals into consideration and indeed recognised that there are already numerous European rules on consumer protection in the field of financial services. As currently amended by the European Parliament, only the chapter on unfair contract terms and the general provisions at the end of the Directive (enforcement of the Directive, penalties, transposition of the Directive, ) would therefore apply to financial services. Page 22 BIPAR Annual Report

24 The EP has also included in its draft report a new reference to financial services in the recitals of the draft Directive, encouraging Member States to draw inspiration from existing EU legislation in that area when legislating in areas not regulated at EU level, in such a way that a level playing field for all European consumers and all contracts relating to financial services is ensured. It adds that the Commission should aim at complementing Union legislation in the field of financial services in order to close existing gaps and protect consumers in all types of contracts. On 24 March 2011, the EP postponed the adoption of its report on the proposed Consumer Rights Directive in order to try and reach a first reading agreement with the Council and the Commission. If such an agreement is found, this will mean that the Directive will be officially adopted. If not, the Council will amend the European Parliament s text and this will then be followed by a second reading in Parliament where the Parliament will have to express itself on the changes introduced by the Council. In its amendments to the draft Directive, the Council envisages a complete deletion of the chapter on contract terms. Next steps The Parliament, Council and the European Commission are negotiating on a compromise text. Following an agreement between the EU institutions, the Parliament could then adopt the Directive after a final vote in June or July. If no agreement is reached, a second reading will follow. BIPAR Annual Report Page 23

25 Sanctioning regimes in the financial sector Background On 8 December 2010, the European Commission published a consultation on reinforcing national sanctioning regimes in the financial sector. The consultation document was inter alia based on a crosssectoral stocktaking exercise on the coherence, equivalence and the actual use of sanctioning powers in the Member States, carried out by the three former Committees of Supervisors (CEBS, CEIOPS and CESR), now transformed into three new Authorities since 2011 (see page 26). Their exercise covered some of the most important Directives applicable in the financial sector including securities, banking and insurance legislation. This was therefore an important consultation for insurance intermediaries as well, especially since the impact assessment that accompanied the consultation document mentioned the IMD in the list of main Directives concerned. The Commission stated in its consultation document that sanctions provided for by Member States in the financial sector diverge in key aspects such as the types of sanctions available and the level of fines and that sanctioning regimes do not always seem to provide sufficient deterrence. It holds the view that in order to prevent the risk of improper functioning of financial markets, further convergence of sanctioning regimes is necessary by setting common minimum standards that Member States should respect in designing administrative sanctions for violations of financial services rules and when applying sanctions in this field (e.g. regarding the types of sanctions available, the level of those sanctions, the availability of sanctions both against financial institutions and individuals responsible for violations, the publication of sanctions). The Commission also questioned if action was needed regarding criminal sanctions. BIPAR response to the consultation BIPAR responded that sanctions are indeed useful for enforcing policy and control and that they should be effective, proportionate and dissuasive. However, it added that the focus should in the first place be on meaningful regulation, proper control and supervision and that without effective oversight, supervision and detection of problems, common sanctions will fail. Sanctioning should be a last resort and proportionate to the offence. BIPAR agreed that minimum common standards, principles or guidance can be acceptable and could help to achieve a level playing field but that this should be tested in terms of cost/benefit. Finally, it strongly supported the Commission s suggestion to make such an approach sector-specific and strictly limited to certain elements of the sanctioning regime. However, BIPAR added that having coherent provisions in each legislative act, indicating for each of the key provisions one or more types of administrative sanctions that must be available to the competent authorities in all Member States in case of violations of that provision, seems difficult to achieve. Page 24 BIPAR Annual Report

26 Moreover, BIPAR added that it would take a very long time to achieve a level playing field, since various existing European legislative acts would have to be reviewed. As for criminal sanctions, BIPAR stated this should continue to be up to the discretion of Member States. Next steps The Commission received 63 responses to the public consultation. It envisages establishing minimum common standards that Member States should respect in designing and using their administrative sanctioning regimes for the EU financial services legislation. The Commission has decided at this stage to introduce such standards in each piece of legislation that is being reviewed. This means that the IMD II and MiFID II may well include such standards. The Commission will also assess whether and in which areas the introduction of criminal sanctions may prove to be essential in order to ensure the effective implementation of EU financial services legislation. BIPAR Annual Report Page 25

27 New EU Financial Supervisory Structure and new types of legal acts New EU Financial Supervisory Structure The Lamfalussy procedure, at the time of its adoption in 2001, constituted a new approach to the development, adoption and supervision of the European Union s financial services legislation. However, since then, the European regulatory and supervisory architecture have undergone significant reform. Based on the de Larosière Report, which suggested that the EU financial regulation had to be enhanced in light of the recent financial crisis, in September 2009, the European Commission brought forward legislative proposals for a new financial supervision structure in the EU. The reform seeks to strengthen the regulation of financial institutions through the establishment of bodies looking at macro- and micro-prudential supervision at European level. After its adoption by the European Parliament and the Council, the new 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) that replace the Level 3 Lamfalussy Committees. Despite this reform, the new structure continues to build on the Lamfalussy arrangements. The concept of the legislative process as split into different levels remains, and legislation continues to be divided between high-level framework provisions and implementing measures. Which new supervisory institutions? Which responsibilities? A European Systemic Risk Board (ESRB) The ESRB has three objectives: 1. Developing a European macro-prudential perspective, to address problems of fragmented individual risk analysis at national level; 2. Enhancing the effectiveness of early warning mechanisms by improving the interaction of macro- and micro-prudential analysis; 3. Allowing risk assessments to be translated into action by the relevant authorities. The ESRB will not have any powers to impose measures on Member States or national authorities. It will issue risk warnings and may recommend specific actions (which may, or may not, be made public). Those to whom the warnings are addressed may take action or may not, in which case their reasons must be explained. In its work, the Board will closely cooperate with the Financial Stability Board and International Monetary Fund, which carry similar responsibilities at international level. The ESRB's Secretariat will be provided by the European Central Bank, based in Frankfurt. Page 26 BIPAR Annual Report

28 Three European Supervisory Authorities (ESAs) ESAs were established through reforming the existing Committees (i.e. Lamfalussy procedure Level 3 Committees: CEBS, CEIOPS and CESR) into the European Banking Authority (EBA), European Insurance and Occupational Pensions Authority (EIOPA), and European Securities and Markets Authority (ESMA). The three new authorities work in tandem with the existing national supervisory authorities to safeguard financial soundness at the level of individual financial firms and protect consumers of financial services (micro-prudential supervision). They have the power to overrule the national supervisors decisions when the latter violate EU law, when there is disagreement between two or more national supervisors and when Member States call an emergency. Their decisions are directly applicable to individual financial institutions. The ESAs also have the power to temporarily prohibit or restrict harmful financial activities or products already covered by specific legislation, or in emergency situations. All three authorities have legal personality under EU law and have a superior legal status compared to the previous committees. They can develop proposals for technical standards that are binding and ensure consistent application of the European legislation. They may also develop implementing technical standards, subject to the same conditions as the technical standards. The new standards should contribute to developing a single European rulebook. Such technical standards have to be endorsed by the Commission and are technical, they shall not imply strategic decisions or policy choices and their content shall be delimited by the acts on which they are based. Where an authority submits a draft regulatory technical standard, the Commission shall immediately forward it to the European Parliament and the Council. The Commission shall decide within three months of receipt whether to adopt a draft regulatory technical standard. A single European rulebook composed of such harmonised technical standards should then provide a common legal basis for supervisory action in the EU - ensuring strengthened stability, equal treatment, lower compliance costs as well as removing possibilities for regulatory arbitrage. However, on account of the financial liabilities that may be involved for the Member States, decisions taken by the ESAs must not impinge in any way on the fiscal responsibilities of the Member States. Any binding decision taken by the ESAs will be subject to review by the EU courts. BIPAR Annual Report Page 27

29 The "new" Lamfalussy procedure Level 1: Framework legislation will continue to be made at level 1 using the co-decision procedure. Level 2: The Commission will continue to prepare more detailed EU rules by working with the existing sectoral committees (EIOPC for the insurance and occupational pensions sector) and taking advice from representatives of national supervisory authorities, now acting through the new ESAs. Level 3: ESAs role at the third level will now be enhanced to involve, inter alia, the creation of draft technical standards (to be adopted by the Commission as EU Law) and the taking of decisions binding on national supervisors and, to a lesser extent, firms. Level 4: The fourth level of compliance and enforcement will remain as such. What difference does it mean in practice for Lamfalussy Level 3? CEIOPS (level 3 Lamfalussy) Advising European Commission on implementation measures for Directives (level 2) Issuing supervisory standards, recommendations and guidelines (level 3) Acting as a forum for supervisory cooperation, including exchange of information on supervised institutions Dealing with convergence in supervision of insurers and occupational pension funds Contributing to the consistent implementation of EU Directives EIOPA All existing tasks of CEIOPS e.g. guidelines, opinions, etc Developing draft Technical Standards to be made binding on competent authorities and financial institutions ("Single Rulebook") Monitoring colleges of supervisors through participation and collection of information; Settling disagreements between competent authorities in cross-border situations ("Binding mediation") Monitoring correct application of EU law Coordination in emergency situations and stress testing Source: David Cowan's presentation "EIOPA New roles & functions" (BIPAR mid-term meetings, 1 February 2011) 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. For EIOPA, two stakeholder groups were set up: the Insurance and Reinsurance Stakeholder Group and the Occupational Pensions Stakeholder Group. BIPAR is represented in the Insurance and Reinsurance Stakeholder Group by its Chairman of the EU Committee, Mr Paul Carty. Next steps The Commission has to report back in 2014 on the functioning of the new system. Page 28 BIPAR Annual Report

30 New types of legal acts, the Lamfalussy procedure and the ESAs The Lisbon Treaty that entered into force in December 2009, introduced two new articles that allow the EU Member States and the European Parliament to delegate powers to the European Commission to adopt two new different types of legal act: delegated acts and implementing acts. Delegated acts (Art. 290 of the TFEU - Treaty on the functioning of the EU) By means of a legislative act (e.g. a Directive), the Council of Ministers and the Parliament, the EU legislators, can empower the Commission to adopt delegated acts. However, this may only take place in cases when non-essential elements of a legislative act are supplemented or amended. The EU legislators have mechanisms for control of the Commission s exercise of powers. They have the right to reject Commission's delegated acts and/or revoke the delegation of powers. The scope of application of delegated acts is set out in the Treaty and the precise conditions for the delegation of powers are specified in every individual legislative act (e.g. a Directive). The main aspects of delegated acts: - No binding framework - common understanding between EU institutions; - Objectives, content, scope and duration are decided on a case-by-case basis in each legislative act; - The Commission can supplement, amend or delete non-essential elements of legislative acts; - Concern issues of general scope only; - Legislators can revoke the entire delegation of powers to the Commission. Examples of delegated acts include issues such as detailed implementing rules in financial services legislation. Implementing acts (Art. 291 of the TFEU) go one step further. In principle, Member States are responsible for the implementation of legal acts. But insofar as uniform conditions are required for the implementation of binding acts, implementing powers may be delegated to the Commission (and in exceptional cases also to the Council). The main aspects of implementing acts: - A binding framework: Implementing Acts Regulation; - Concern only clearly defined tasks; - Can be issues of general or individual scope; - Advisory and Examination Procedures; - Control by Comitology Committees one representative from each Member State; - Referral to an Appeals Committee. The implications of the reform are of particular interest to the financial sector. The Lamfalussy procedure in the area of financial services is maintained but in a modified version. In the case of its drafts for delegated acts, the Commission will continue to consult the three ESAs. The new supervisory authorities (EBA, ESMA and EIOPA) will assume major roles in the drafting of delegated acts and implementing acts in the financial services segment. BIPAR Annual Report Page 29

31 Where we have come from Level 1 o Commission (EC) adopts formal proposal for Directive/Regulation o Council & European Parliament adopt legislative act Level 2 o EC, having consulted Level 2 Committee (2LC), requests advice from Level 3 Committee (L3C*) on technical implementing measures Level 3 o L3C works on: - day-to-day administrative queries - joint interpretation recommendations and common standards - comparisons of regulatory practice in Member States to ensure consistent implementation and application Level 4 o Strengthened enforcement of EU law (EC) * EIOPA, European Insurance and Occupational Pensions Authority (former CEIOPS, Committee of European Insurance and Occupational Pensions Supervisors) EBA, European Banking Authority (former CEBS, Committee of European Banking Supervisors) ESMA, European Securities and Markets Authority (former CESR, Committee of European Securities Regulators) Where we are Level 1 o EC adopts formal proposal for Directive/Regulation o Council & European Parliament adopt legislative act (with or without mandate for the Commission to adopt non-legislative acts (delegated or implementing acts) Level 2 o ESA drafts technical standards and EC adopts o EC requests ESA advice on delegated and implementing acts (EC adopts after consultation of EP/Council) Level 3 o ESA adopts comply or explain guidelines and recommendations o ESA mediates and settles disagreements o ESA takes action in emergency situations o ESA facilitates delegation of tasks and responsibilities o ESA cooperated with ESRB o ESA monitors and assesses market developments o ESA undertakes economic analyses o ESA fosters investor protection Level 4 o Strengthened enforcement of EU law (ESA and EC) (Source: CEIOPS-CEBS-CESR training course Lisbonisation of the rule-making process 6/12/2010) Page 30 BIPAR Annual Report

32 Life & Investment Committee Packaged Retail Investment Products (PRIPs) Background The financial crisis has underscored the need for a regulatory environment which provides a sound basis for informed decision making, and where investors can be confident about the information and services they receive. According to the Commission, PRIPs provide retail investors with easy access to financial markets, but can be complex for investors to understand. Those selling these products can also face conflicts of interest since they are often remunerated by the product manufacturers rather than directly by the retail investors. A complex patchwork of European regulation has evolved to address these risks, and inconsistencies and gaps in the patchwork have raised concerns as to the overall effectiveness of the regulatory regime, both in relation to its capacity to protect investors and its ability to ensure that markets work efficiently. Over the last four years, the Commission has therefore been consulting the industry, including BIPAR which positioned itself on all consultation papers so far, investors and the Member States on how to update legislation, focusing on two main areas product disclosure and selling processes. The aim is to create consistency in the approach for all different PRIPs, so as to help to ensure consumers always receive the right information and treatment Commission s consultation on PRIPs Based on the outcome of its previous public consultations, in November 2010, the European Commission s services launched a further consultation outlining possible measures for improving the transparency and comparability of investment products and ensuring effective rules always govern the sales of the products. It also addresses inconsistencies in the standards that apply to different products and industry sectors and focused mainly on the scope of the PRIPs regime and the rules on pre-contractual product disclosure. The consultation had to be read alongside the IMD revision consultation (see page 11) and MiFID revision consultation (see page 33). As is outlined in its consultation paper, the Commission s services addressed indeed the PRIPs work on sales rules through the IMD and MiFID frameworks. Proposed PRIP definition: A PRIP is a product where the amount payable to the investor is exposed to fluctuations in the market value of assets or payouts from assets, through a combination or wrapping of those assets, or other mechanisms than a direct holding. BIPAR Annual Report Page 31

33 BIPAR response Together with its member associations, BIPAR prepared its response to the PRIPs consultation. In its response BIPAR promotes robust but proportionate regulation which does not destroy choice by the consumer and promotes competition. BIPAR welcomes the Commission s approach to treat insurance PRIPs as a specific case. Pre-contractual information available but proportionate BIPAR strongly supports the idea that for all products which include an investment risk, precontractual information should be available. Consumers should always be made aware of the investment risk and the characteristics of the investment product. BIPAR pointed out that the pre-contractual information requirements should be adapted to and proportionate with the specificities of the product. BIPAR made clear that in the design of regulation related to retail investment products, the difference (in terms of risk) should be recognised between investment products where the initially invested amount is at risk and investment products where the initially invested amount is not at risk and where only the return is fully or partly variable. Also the type of guarantee should be taken into consideration. In such an approach there is room for proportionality (less risk should imply less rules) and reduction of administrative burden. BIPAR supported the idea of the Commission to introduce a Key Investor Information Document, a KIID. BIPAR stated that a KIID should be a stand alone document with a standard look but which takes into consideration the specificities of each PRIP. A KIID should be fair, clear, not misleading and timely and be produced by the manufacturer of the product. It should give information on key product characteristics, the investment risk and in particular the minimum agreed capital, the performance of the products and on the total amount of all costs. MiFID rules too detailed for our sector In its response, BIPAR acknowledged that measures should be taken which create transparency and further protect the consumer in every kind of PRIPs product in a proportionate way. However, BIPAR explained to the Commission that the highly prescriptive and detailed rules under MiFID are for smaller and mid-sized intermediaries from a cost/benefit analysis perspective creating too much cost compared to the intended benefits. The detailed MiFID conflict of interest rules are only seen from the perspective of the best interest of the client, they should however reflect the reality of the market which is that it is allowed that interests are aligned between the producer, the intermediary and the client. The MiFID inducement rules and the possible prohibition of inducements may be considered as an obstacle to free market principles of fair remuneration for services rendered. Indeed, it would become impossible for intermediaries to be remunerated by product providers for the work they do on their behalf (and which is work that is done also in the interest of the client). BIPAR pointed out to the Commission that every intermediary or adviser should have the right to choose his or her own business model and should be transparent about offered services, fees and commissions. The coexistence of various Page 32 BIPAR Annual Report

34 remuneration systems, and in particular the freedom to decide on the remuneration systems (commission or fee) is the best guarantee for competitive and dynamic markets. BIPAR brought the following transparency principles to the attention of the Commission: intermediaries should inform buyers about the nature of their services, the existence of delegated authorities, the nature of their remuneration and about all costs related to the investment product. And of course, the same level of transparency should be given by alternative forms of distribution. Next steps The 140 submitted replies will serve as an input for the Commission when developing legislative proposals on transparency and sales for the products. A proposed Directive on PRIPs is expected to be published in the summer of Revision of the Markets in Financial Instruments Directive (MiFID) Background The Directive on Markets in Financial Instruments (MiFID) aims at both making it easier for investment firms to carry out cross-border business and at enhancing consumer protection. This text, which was adopted in April 2004, concerns many practitioners affiliated to BIPAR via their national associations as it also concerns investment firms providing investment advice only, such as independent financial advisors (IFAs) and insurance intermediaries. MiFID advice involves a personal recommendation to a core investment service that can be passported on a stand-alone basis. Recital 3 of the Directive outlines that due to the increasing dependence of investors on personal recommendations, it is appropriate to include the provision of investment advice as an investment service requiring authorisation. The text introduces new requirements for investment intermediaries with regard to firms conduct of business and internal organisation and will allow them to operate throughout the EU on the basis of authorisation in their home Member State. However, Member States are allowed to exempt small to medium-sized investment intermediaries who do not hold client money or trade cross border from the scope of the MiFID. In the aftermath of the financial crisis, the MiFID revision was launched in 2010 to adapt the Directive to the new global regulatory landscape and to reflect changes in the financial system. The scope of the Directive may be increased massively to cover many new areas, and the end result is expected to be more regulatory in nature than the original intention. BIPAR Annual Report Page 33

35 December 2010 Commission s consultation on MiFID On 8 December 2010 the European Commission issued its consultation paper on the revision of the MiFID. What are the key elements of the Commission s consultation on the MiFID revision for BIPAR members? Developments in market structures and practices The consultation asked how MiFID should be updated to provide a robust regulatory framework covering all investment services and activities in an appropriate manner to avoid risks linked to activities not covered. Investor protection and provision of investment services The consultation asks about measures needed to strengthen investor protection. Supervision The consultation asks where changes to the supervision of the various activities and participants may be needed, and in particular the precise role for the European Securities and Markets Authority (ESMA) to ensure a better supervision of these markets. Regarding investment advice in particular, the Commission considers adding a requirement for intermediaries providing investment advice: they would have to inform the investor whether they give advice on the basis of an independent and fair analysis and in that case, they would be obliged to assess a sufficiently large number of financial instruments available on the market and different providers. The Commission is also thinking of introducing for the intermediary the requirement of regular reports about the performance of the recommended financial instrument, the requirement of an annual update of the personal circumstances of the client and the requirement to confirm, on an annual basis, that the financial instruments initially recommended are still suitable for the client. The Commission would also like to clarify that investment advice may be provided through distribution channels such as the internet and falls also under the scope of the Directive. Regarding information of the client on complex products, the Commission also sees room for improvement. It is thinking of introducing the requirement to give to the client prior to the transaction, a risk/gain and valuation profile of the recommended financial instrument, to give to the client during the life of the product, quarterly valuations of the products and in case of structured products, quarterly reports on the evolution of the underlying assets. In the field of inducement, the Commission sees a need to improve and clarify the current rules. The Commission considers several modifications in the inducement regime such as a different disclosure regime and in case investment advice is provided on an independent basis, the introduction of a ban for intermediaries to receive any inducement from a product provider. The Commission also considers introducing a principle of civil liability for investment firms. It sees it as essential for ensuring an equal level of investor protection in the EU. Page 34 BIPAR Annual Report

36 Furthermore, the Commission envisages some modifications in the current fit and proper requirements, a common mandatory regime for telephone and electronic recording across EU and the introduction of an obligation to record received and transmitted client orders. BIPAR response In its response to the Commission submitted in February 2011, BIPAR highlighted the importance of maintaining the option for Member States to exempt certain activities, under certain conditions from the MiFID and to adopt a national regime. If the full MiFID regime was to be applicable to those situations which are currently optionally exempt, many smaller and mid-sized firms would not be able to continue their activities due to the high cost of compliance, much to the detriment of smaller investors. If, as a result of this consultation of the market, the Commission decides to link the option of exemption with certain requirements, BIPAR promotes amongst others the following principles regarding the sales, intermediation or advising of investment products which currently fall under the exemption option: All those who are selling, intermediating or advising investment products should be registered with a competent authority, should possess appropriate knowledge and ability necessary for the performance of their duty, should be of good repute and should hold a professional indemnity insurance cover. Conflicts of interest should be identified, managed and mitigated by the investment firm in a way which is commensurate with the nature of the business and the conflict, BIPAR believes that the highly prescriptive and detailed rules under MiFID are from a cost/benefit analysis creating too much cost compared to the intended benefits. The investment firm should inform the customer, concerning the product that is provided, whether or not it gives advice, and if it gives advice, on what basis advice is given. The detailed rules regarding inducements in the MiFID create unintended side effects. Intermediaries should have the possibility to be paid fairly for their services to manufacturers. BIPAR believes that a solution can be found in a balanced policy on transparency in combination with a Key Investor Information Document about the product and in combination with a set of transparency principles for every transaction and investment product which is intermediated or sold by investment firms on a level playing field basis. Furthermore, BIPAR stated in its response to the Commission that it is against the abolishment of the execution only regime. Parties involved should always have the possibility to buy a product without advice. However, the client should be clearly warned of the fact that he does not receive any advice. BIPAR Annual Report Page 35

37 BIPAR also believes that it should not be the duty of the intermediary to proactively inform the client but the information should be available to the client. It is up to the parties involved to determine which information should go to the client, when and how. BIPAR believes that there should not be an obligation for the intermediary to report regularly to the client about the market value and the performance of the financial instrument bought by the client. The information should be made available to the client upon request. With regard to the continued suitability of the investment, BIPAR is of the opinion that there should not be an obligation for intermediaries in the Directive to keep the situation of the clients and the financial instruments under constant review. As this is an additional service to the client, with additional costs for him, the parties involved should be free/have the choice to deliver and to accept this additional service. BIPAR is of the same opinion with regard to the updating of the information concerning the personal circumstances of the client. The intermediary and the client should both be free to deliver or ask for this additional service at an additional cost. With regard to the MiFID-inducement rules, BIPAR proposes a different approach based on the following principles: - Intermediaries should provide buyers with sufficient and clear information to make informed decisions about the nature of their services. - Intermediaries should inform clients about the existence of delegated authorities in relation to the product on offer. - BIPAR proposes that intermediaries will inform the client about the nature of their remuneration, be it commission, fee or a combination of both. - BIPAR is of the opinion that transparency on all costs (including distribution and/or intermediary costs and remuneration) related to the investment product is necessary (making clear the difference between the amount paid and the actual invested part of that amount). - BIPAR requires the same level of transparency from alternative forms of distribution of investment products and from substitutable (or comparable) investment product providers. Regarding the proposal of the Commission to introduce civil liability for investment firms, BIPAR explained that it is not in favour of more rules and regulations in this respect. Existing civil law offers enough basis for adequate information and duty of care. To introduce a separate civil right for clients would possibly create legal uncertainty for regulated firms, especially if they remain liable to the concurrent jurisdiction of the out-of-court redress bodies. Next steps The Commission is currently analysing the 4,200 responses it received from market participants, regulators and other stakeholders. These responses will provide guidance for the Commission in preparing a formal Commission's proposal. This proposal is currently scheduled for adoption in summer 2011 and will be accompanied by an impact assessment. Page 36 BIPAR Annual Report

38 Pensions in the European Union Background One of the priorities of the European Union is to ensure an adequate and sustainable retirement income for EU citizens. In July 2010 with its Green Paper Towards adequate, safe and sustainable pensions for all European citizens, the European Commission launched a Europe-wide public debate on how to ensure adequate, sustainable and safe pensions and how the EU can best support the national efforts in reforming the pension systems. It believes that if the EU is to sufficiently support and complement Member State efforts to deliver adequate and sustainable pensions for citizens, the incomplete and fragmented European framework of policy coordination and regulation needs to be reconsidered holistically. BIPAR response In its response to the Commission s Green Paper, BIPAR stressed the role for intermediaries in assisting their clients to find suitable pension provision and proposed suggestions to make it easier for intermediaries to offer pension products cross-border. A majority of BIPAR members see a role for the EU in making pensions more affordable and sustainable and in facilitating their cross-border mobility. In March 2011, a summary of all the responses to the Green Paper was published. The holistic approach and the commitment of the European Union to support the Member States in their efforts to make pension systems adequate and sustainable were welcomed by most of the respondents. The respondents also stressed that pension issues should remain in the hands of the Member States but that some coordination at EU level and some interaction with the EU are essential. EU legislators views o The Council of the European Union s position In its conclusions adopted in December 2010 on the Commission s Green Paper, the Council recognises that adequate, safe and sustainable pension systems are crucial for citizens and for social cohesion. It stresses that public pensions will continue to play an important role in providing pensioners with an adequate income and that for the adequacy and sustainability of pension systems a high level of employment is necessary. Extending working life by reducing early retirement and raising effective retirement age also improves the sustainability and adequacy of pension systems. In its conclusions, the Council also suggests that national pension reforms can be guided and informed through European established frameworks, such as the EU 2020 Strategy. It invites Member States to promote the wellbeing of elderly people as well as to promote information to future pensioners, thus allowing them to be fully and correctly informed about their future public and private pension entitlements. It also asks the Member States to promote the involvement of the social partners in the context of designing and implementing pension reforms. BIPAR Annual Report Page 37

39 The Council invites the Commission to continue to provide input for the discussion at European level, while respecting the diversity of Member States. Member States should be supported by the Commission to further develop their statistical apparatus, enabling them to better assess the implications of their pension policies and to check if these are adequate and sustainable. o European Parliament s Resolution on pensions In February 2011 the European Parliament adopted a Resolution on the Commission s Green Paper. This non-binding resolution, which will serve as input for the Commission's further work on this issue, recognises that there is a link between a higher level of employment and sustainable pensions and that the present financial crisis with an increase of unemployment and poverty has demonstrated the fragility of certain pension systems based on this link. The European Parliament stresses that SMEs, as an important source of employment, contribute significantly to safe pension systems. It wishes therefore to see the development of sectoral, intersectoral and/or territorial funds to increase affiliation of workers in the SMEs to pension systems. The Parliament sees an important role for the social partners in connection with the creation of a stable and strong employment policy. Although the Parliament stresses that pension systems are the responsibility of the Member States, it recognises that Member States' economies are interdependent and therefore calls on the EU and the Member States to properly coordinate their different pension systems and to guarantee the adequacy, safety and sustainability of pension systems. It asks the Commission to come up with a typology of pension systems in the Member States as well as with a common set of definitions in order to make the different pension systems in the EU comparable. The European Parliament also suggests to the Commission the drawing up of guidelines within which each Member State could set criteria meant to guarantee a minimum pension. The Member States should also ensure that first-pillar pensions are higher than the poverty threshold. To ensure gender equality in pension entitlement, members of the European Parliament urge the Member States to consider an approach based on a lifetime, in response to the challenges of modern career cycles. The European Parliament is also opposed to the establishment of a connection between life expectancy and statutory pension age. Next steps This Green Paper is likely to be followed by a White Paper, containing proposals for EU action with the aim to make pension systems adequate, safe and sustainable. According to its Work Programme for 2011 and beyond, the Commission expects to present a non-legislative White Paper by the third quarter of Page 38 BIPAR Annual Report

40 Review of the Directive on the Institutions for Occupational Retirement Provision (IORP) Background An important aim of the European Commission is to create an Internal Market for efficient and safe retirement products. A first step towards the creation of such an Internal Market was taken in 2003 with the adoption of a Directive regulating the functioning of Institutions for Occupational Retirement Provision, the IORP Directive (2003/41/EC). This Directive made it possible for pension funds to develop cross-border activities, i.e. to manage and execute pension schemes for companies established in another Member State. The IORP Directive also made it possible for an employer to entrust a pension fund, established in another Member State, with the execution of the pension scheme and the management of the pension capital of his (former) employees. Revision is needed Several studies of the implementation of the IORP Directive in the different Member States have shown that the effectiveness of the Directive in practice can be increased. Only a very small number of the existing pension funds in Europe develop cross-border activities. It is costly and complex for employers to set up efficient cross-border pension schemes, because a pension fund working in another country has to comply with the social and labour legislation of that country. The European Commission recently announced the review of this Directive, with the aim to simplify the rules and to set up a proper system of solvency rules for pension funds. Next steps The European Commission is expected to publish a draft of a revised IORP Directive by the end of this year. BIPAR will follow, with the help of its Working Party on Pensions, the developments in this dossier and, where needed, bring its views to the attention of EU institutions. BIPAR Annual Report Page 39

41 Proposed Directive on credit agreements relating to residential property - Impact on intermediaries Background On 31 March 2011 the European Commission published a proposal for a Directive on credit agreements relating to residential property. This text will apply to lenders and credit intermediaries (prudential and supervisory requirements). Some provisions of the proposed Directive will be supplemented by detailed implementing measures that will be drafted together by the Commission and new supervisory authority EBA (the European Banking Authority) (see page 26). The proposed Directive was preceded by a 2009 Commission s study aimed at analysing the EU credit intermediation market, reviewing the regulatory framework in which credit intermediaries operate, and examining possible consumer detriment, and a 2009 Commission s public consultation and public hearing on responsible lending and borrowing in which BIPAR participated actively. BIPAR recalled in particular that the presence of credit intermediaries always represents an additional guarantee of consumer protection through professional services and advice and requested that any future legislation on credit intermediaries be based on an activity-based approach in order to ensure a level playing field between operators. The European Parliament also declared an early interest in this dossier, by hosting a workshop on 26 January 2011 on responsible lending and borrowing. Mr. Patrick Bunton, member of AIFA and of the BIPAR Working Group on Credit Intermediaries, who was a participant and speaker, gave the viewpoint of credit intermediaries, expressed BIPAR concerns (e.g.: level playing field) and gave examples of his own UK experience. Proposed Directive - Its impact on credit intermediaries The aim of the Commission s proposal is 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. The proposed Directive covers all loans which allow the consumer to borrow money in order to buy a home as well as certain loans to consumers for renovation. It also covers all loans to consumers that are guaranteed by a mortgage or another comparable security. The proposed Directive contains principles for the authorisation and registration of credit intermediaries as well as the establishment of a passport regime for those intermediaries. This means that once authorised in one Member State, the intermediary would be allowed to provide its services throughout the Internal Market. Page 40 BIPAR Annual Report

42 Lenders and credit intermediaries will be required to make general information available at all times on the range of credit products they offer, to provide personalised information to the consumer through a European Standardised Information Sheet, to give explanations and meet certain standards for the provision of advice and to assess the consumer's ability to repay, based on information provided by the borrower. Finally, credit intermediaries will be required to disclose certain information concerning for example, their identity, status and relationship with the creditor, to render transparent any potential conflicts of interest. BIPAR action BIPAR, together with its Working Group on Credit Intermediaries, has been closely involved in the Commission s preparatory work for this Directive. Since the publication of the proposed Directive by the Commission, BIPAR has been working on the preparation of possible amendments to be submitted to the European Parliament in preparation of its first reading on the text. After consultation with its member associations, BIPAR amendments have been prepared on the level playing field (to ensure that there is one between lenders and intermediaries in particular regarding the transparency on remuneration), 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 (to ensure that not only part of the IMD becomes applicable in case a credit intermediary performs ancillary services that fall under the IMD). In the amendments, BIPAR also warned against too far-reaching implementation measures (delegated acts). Next steps The proposed Directive has been sent to the European Parliament (usually two readings) and to the Council of Ministers for consideration and adoption. The EP Rapporteur of the dossier is Mr. Antolin Sanchez Presedo (Spanish Socialist). In cooperation with its member associations, BIPAR will submit its first reading amendments to MEPs by the end of May It will also monitor the second reading (if any) actively. The adoption of the Directive can be expected to take place by mid 2012 and the implementation into national law two years after its adoption, i.e. possibly by BIPAR Annual Report Page 41

43 Consultation on interest rate restrictions Background On 25 January, the European Commission published a public consultation on Interest Rate Restrictions (IRR). IRR are to be interpreted as all existing laws and legal rules and their application in limiting charges imposed by lenders, directly or indirectly, for the use of capital by borrowers. The purpose of this consultation was to collect stakeholders' reactions to the findings of a broad study commissioned by the Commission on interest rate restrictions in the EU, on the accuracy of this study, the economic, social and financial impact of IRR on various stakeholders, including credit intermediaries and on the possible need for follow-up at European level. BIPAR response In March 2011, BIPAR, together with its Working Group on Credit Intermediaries, replied to the Commission s consultation on IRR. The main message of the BIPAR response, based on the replies of the BIPAR member associations, is that IRR policies can be justified on the condition that they are carefully balanced and do not discourage lenders. If these conditions are fulfilled, IRR can be a tool to help avoid over-indebtedness. BIPAR added that IRR will not be a barrier on the condition that they are imposed in all Member States. A possibility could be a Directive that asks Member States to apply IRR but leaves it to the Member States to fix the ceiling and such an instrument should consist of simple rules. Next steps The Commission received 46 responses to this consultation. These responses and a summary will be made public shortly. The Commission s services will take the study s findings, as well as the comments received during the consultation, into account when developing any future position on interest rate restrictions. Page 42 BIPAR Annual Report

44 VAT treatment of insurance and financial services Background On 27 November 2007, the European Commission adopted 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. The aim of the Commission is to create 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. The legislative process The draft proposals have been debated by the Council of Ministers over the past 4 years. The reason for the lengthy process is that a decision on fiscal matters in the Council must be taken in complete unanimity. The European Parliament has no deciding power and can only offer its non-binding opinion to the Council, which it did in David Jordorson The BIPAR VAT Working Party, chaired by David Jordorson, has been successful in communicating its view to all parties involved. Contents of the proposals One of the main objectives of the revision is 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 will be directly applicable in all Member States. Concerning intermediation, there is a new definition on insurance and financial intermediation services. The definition below is the current Hungarian Presidency s proposed definition. BIPAR s VAT Working Party supports this definition and feels that it is wide enough to cover the activities of insurance intermediation and hence ensure exemption. The current proposed definition by the Hungarian Presidency (1 Jan 30 June 2011) reads as follows: "Intermediation in insurance and financial transactions" means a distinct act of mediation rendered by a third party who brings the parties together and does what is necessary in order for the parties to enter into, maintain, renew or alter a contract in insurance or financial transactions as referred to in points (a) to (gb)". 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. The Commission s original proposal also included the introduction of an industry exemption from VAT for cost-sharing agreements, including those which are cross-border. Financial institutions which are members of such a group may pool their operations and BIPAR Annual Report Page 43

45 share costs between them without creating additional VAT that is non-recoverable. This element was dropped in the framework of the Council VAT review under the Spanish Presidency (1 Jan-30 June 2010). However, the cost-sharing provision in the VAT review has not been completely abandoned but there is rather a re-thinking of the existing costsharing arrangement (art.136 of the current VAT Directive) where there has been some uncertainty as to whether this provision could also be applied to the insurance and financial services sector. A broader interpretation allows for its general application in this area and in order to encourage a wider possibility of tax relief the Commission is taking a number of Member States to the ECJ. The discussions on the option-to-tax mechanism were postponed due to the compromise difficulties in the Council. However, during the Hungarian Presidency, some Member States have shown an appetite to re-open the discussions due to the clear benefits of having such a mechanism in place. Actions of the BIPAR VAT Working Party BIPAR has been adamant in communicating its general position on this issue to the current Hungarian Presidency and the previous Belgian Presidency as well as to the predecessors. BIPAR has always been of the opinion that core activities of intermediation services, where an intermediary delivers services in an intermediation capacity, should continue to be exempt. In this regard, the BIPAR VAT Working Party has identified some issues that need to be clarified so as to allow our interests to be protected in the Directive: - Co- and sub-intermediation: The BIPAR VAT Working Party opposes an interpretation that excludes from the VAT exemption those intermediaries not in direct relationship with the contractual parties of the main service; - Administrative tasks: An administrative task which is inherently part of the intermediation or insurance process should be exempt from VAT. - Outsourcing: If outsourced services are exempt for insurers they should also be exempt for intermediaries so as to ensure a level playing field. - Claims handling activities: If claims handling activities are exempt for insurers they should also be exempt for intermediaries so as to ensure a level playing field. - Non-concluded contract: The remuneration of the intermediary when the contract is not ultimately concluded should be exempt. - Option to tax: BIPAR would support such a measure: however, the modalities of the application of this option to tax must be clarified in order to achieve a workable solution. David Jordorson and the BIPAR Secretariat have met with the Hungarian Presidency on a number of occasions to communicate BIPAR s position on this VAT review. Generally, the Presidency has agreed with BIPAR s points and adopted a number of its suggested amendments which enhance the legal clarity of the proposals and more accurately reflect market practice. Next steps It is unknown whether or not the Council will reach consensus during the Hungarian Presidency but it is clear that should the discussions not significantly move forward in 2011, the European Commission may have to intervene. Page 44 BIPAR Annual Report

46 Taxation of the financial sector Background With its Communication on Taxation on the financial sector, the European Commission launched an impact assessment on taxation of the financial sector in October The Commission outlined the objective of this impact assessment as follows: Additional tax levy can contribute to enhancing the efficiency and stability of financial markets and reducing their volatility as well as the harmful effects of excessive risk-taking. Additional taxes could be justified by the fact that some governments provided substantial support to the sector during the crisis and the financial sector should hence make a fair contribution in return. Most financial services are exempt from value added taxation in the EU today. There are therefore arguments that the financial sector could make a fairer and more substantial contribution to government finances. In its Communication, the Commission already provided a preliminary analysis of possible measures for the taxation of the financial sector. Amongst other things, the Communication distinguished between two approaches. At global level, a Financial Transactions Tax (FTT) could help fund international challenges. The FTT could tax every transaction generally speaking based on its transaction value. If the FTT is wellimplemented and globally-applied, it could be a way to raise large funds. The Commission will support further exploration and development of the FTT within the G20. At EU level, the Commission considered that there is greater potential for a Financial Activities Tax (FAT), in principle a tax on profits and wages. If carefully designed and implemented, an EU FAT could generate significant revenues, without posing an undue risk of relocation. Commission s 2011 public consultation on taxation of the financial sector - BIPAR response As a follow up to the 2010 Communication, 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, FTT, FAT, cumulative effects with other measures, such as bank levies and regulatory measures. The Commission wanted especially the respondents to (i) test its assumptions and collect related evidence as regards the definition of the problems to be addressed by the initiative, (ii) to assess the impacts of the set of policy options and (iii) to consult on more detailed aspects of the feasibility and design of the policy options. BIPAR Annual Report Page 45

47 BIPAR submitted a consultation response after having consulted its member associations and coordinated with the BIPAR VAT Working Party. BIPAR highlighted the fact that it is a perception that the insurance and insurance intermediation sector is under-taxed. Intermediaries indeed are subject to burdensome taxes (insurance premium tax, parafiscal taxes etc.). In its consultation response, BIPAR states that an introduction of additional taxation on an already fiscally burdened insurance and insurance intermediation sector must be studied in great detail. BIPAR strongly recommends that the European Commission reconsiders its objectives for this initiative taking on a proportionate approach when looking at the insurance and insurance intermediation sector. The Commission should study the real benefits/disadvantages in practice of an FTT and FAT and analyse who will bear the final cost. BIPAR also stressed the importance for the Commission to consider the parallel initiatives, the Green Paper on the future of VAT in Europe and the Council review of Directive 2006/112/EC on the common system for VAT of insurance and financial services, and their long-term impact on the market. Furthermore, BIPAR was invited by the European Commission to a special key stakeholder workshop as part of the impact assessment where BIPAR had the opportunity to further reinforce its position. Next steps The European Commission is expected to publish its follow-up communication on the consultation on 13 July Based on its findings, the Commission will give its analysis on whether there should be a legislative proposal or not. BIPAR will continue to monitor the developments and to communicate its position on the inclusion of insurance and insurance intermediaries in a possible legislative initiative. Page 46 BIPAR Annual Report

48 Harmonisation of European Insurance Contract Law Background The European institutions and a number of academics have been debating for several years already about the desirability and feasibility of the harmonisation of contract law at European level. It would aim at reducing the transaction costs and legal uncertainty for businesses and the lack of consumer confidence in the Internal Market caused by differences between national contract laws. Work has been carried out by a group of academics on a Draft Common Frame of Reference (DCFR) which aims at providing the European Legislators (Council and European Parliament) with a "toolbox" to be used for the revision of existing and the preparation of new European legislation in the area of contract law. This toolbox could contain fundamental principles of contract law, definitions of key concepts and model provisions. Insurance contract law would be part of the CFR. A draft set of Principles of European Insurance Contract Law (PEICL) has already been developed by European academics to establish a European voluntary insurance contract law regime across the EU. BIPAR position on Draft Principles of European Insurance Contract Law (PEICL) The project group working on PEICL found that although there has been significant progress towards a Single European Insurance Market, relatively little crossborder insurance business is actually being done outside the field of large commercial risks. Differences in national laws and regulations mean that insurers still need to tailor their wording to meet local requirements. Allowing parties to opt out of national law regimes and agreeing that the insurance contract will be governed by the PEICL, could change this situation. Once chosen, the PEICL would apply as a whole. BIPAR has always been strongly in favour of an integrated European Single Market for insurance services and believes that an optional insurance contract law could largely improve the situation and help cross-border activities emerge where there is a real market potential. Insurance intermediaries could play an important role in promoting this European regime with their clients and, by so doing, create a wider choice of insurance products for consumers and new business opportunities and competitiveness for the industry. However, it is crucial that the role of insurance intermediaries in this context are better clarified (taking into account that insurance intermediaries are not parties to the contract) and that such an optional regime is really channel neutral. BIPAR also pointed out that specific forms of intermediaries, such as wholesale brokers or intermediaries having underwriting powers are not taken into consideration in the proposed framework of the European regime. This may lead to their exclusion from the European regime. Lastly, the fact that the European regime neither transposes the IMD, nor uses its terminology, may lead to some confusion as to the information and advice duties of the intermediary when the parties to the contract choose the European regime and use the services of an intermediary. BIPAR Annual Report Page 47

49 Commission s consultation on contract law - BIPAR position On 1 July 2010, the European Commission published a Green Paper on policy options for progress towards a European contract law for consumers and businesses, identifying several options in respect of the legal nature, scope of application and the material scope of a possible instrument. Stakeholders were invited to respond to this Green Paper and its questions by the end of January BIPAR provided a response after having consulted its members. BIPAR supports the setting up of an optional (28 th ) system of (insurance) contract law by means of a Regulation, which could be used in parallel to the national systems. The European Parliament s Legal Affairs Committee (JURI) also prepared a reaction to the Green Paper, supporting an optional instrument and adding that such an instrument could be complemented with a reference toolbox to ensure the coherence and quality of legislation on European contract law. The report refers to the PEICL and calls for the optional instrument to include insurance contracts. Regarding financial services in general, the report calls on the Commission to establish an intraservice expert group for any future preparatory work. Regarding SMEs, the Committee stressed that divergent contract law is not the only obstacle for them and that there are many other barriers to cross-border trading such as different taxation systems, complaint handling, etc. The report calls for the think small first principle to be well implemented and considered as a priority in the debate over EU initiatives related to contract law. The JURI report was voted in the Committee in April and will be voted in Plenary in June. Expert Group on contract law Also in 2010, the Commission set up a legal expert group, consisting of 18 contract law experts to assist the Commission in its work on the issue. The working group s main task has been to identify, restructure, update and supplement those elements of the DCFR that should be part of a Common Framework for contract law. On 3 May 2011, this group published a feasibility study on a future initiative on European contract law and the Commission is currently consulting on its findings. The feasibility study carried out by the expert group covers the most relevant practical issues in a contractual relationship, such as legal rights for faulty goods and rules on which contract terms may be unfair. The Commission indicated that, as a next step, it will have to determine if and to what extent the expert group s text can serve as a starting point for a political follow-up initiative on European contract law. Commissioner Viviane Reding stated : My goal is that SMEs and consumers should benefit from a user-friendly contract law instrument, especially when it comes to crossborder transactions in the Single Market." Next steps The Commission is expected to issue a legislative proposal on European contract law at the end of Such a legislative proposal will then be sent to the European Parliament and to the Council for readings. BIPAR will study this proposal when it is published and will, if necessary, together with its member associations prepare amendments. In the meantime, BIPAR will also analyse the feasibility study of the expert group to see whether it is desirable to provide comments. Page 48 BIPAR Annual Report

50 Tying in retail financial services Background Since 2007, the Commission has been looking into tying in retail financial services, including insurance services, in the EU, in order to obtain an overview of these practices, to understand how and why they are used, as well as to measure their impact on consumers and on competition. On 15 January 2010, the European Commission published a report entitled Tying and other potentially unfair commercial practices in the retail financial services sector prepared by consultants and a consultation paper with specific questions on the findings of this report. Stakeholders, including BIPAR, were invited by the Commission to respond to this consultation paper. A workshop was organised by the Commission in October Commission s report and consultation on tying - BIPAR action The Commission s report covered all kinds of financial products (banking, insurance, investment services) and analysed different conducts and commercial tactics, such as cross-selling practices (e.g.: two or more products are sold together in a package and at least one of these products is not sold separately) and conditional sales practices (e.g.: the service provision is subject to a specific condition). The Commission s report concluded that tying and other potentially unfair practices are widespread in the EU 27, they are insufficiently addressed by both EU and national policies and can be harmful to consumers and SMEs across Europe. The report stated that the current situation deprived consumers and SMEs of product variety, low prices, and control of the consequences of their choices. The report also referred to a possible negative impact on the Single Market for financial services. The report concluded that there may thus be scope for acting in common, as well as acting at EU level in order to ensure that financial service providers can face the same legal rules when operating across borders, and consumers and SMEs can benefit from a broader availability of offers and a more competitive and integrated Internal Market in the European Union. BIPAR position After consultation with its member associations, BIPAR submitted its position on the Commission s report in April BIPAR states it is generally in favour of a well-balanced level of consumer protection, and at the same time, welcomes any initiative aimed at avoiding distortion of competition and obstacles to the smooth functioning of the Internal Market. BIPAR pointed out the differences in legislative approach to tying in the various Member States. Though agreeing in general with the report s main findings, BIPAR stated that it is, however, important to underline that tying (or similar practices) can be beneficial for the consumer provided that he/she makes a free and informed choice. BIPAR also stated that consumer protection in this field requires, beyond the adoption of legislation prohibiting some practice or other, a reinforcement of all systems of prevention, training and sanctions. BIPAR Annual Report Page 49

51 Outcome of the consultation The Commission received 55 replies to its consultation. Consumers generally supported the study and called for an expansion of the Unfair Commercial Practices Directive (UCPD). Industry generally pointed at the unrepresentativeness of the study, at the fact that the disadvantages of practices were more stressed than the possible advantages and added that current legislation was sufficient and maybe consumers' financial education could be improved. A proposal from the trade union side was ensuring greater transparency regarding remuneration of financial services staff. On the question of what the next steps should be, industry generally stated that the current rules are sufficient and that there is not enough evidence regarding the problems. If rules are to be created, then they should be horizontal and possible harmonisation should be maximum harmonisation. Consumers and trade unions on the other hand said the UCPD was insufficient and that in case the Commission would opt for harmonisation, this should be minimum harmonisation. The Member States gave a mixed message but most called for sectoral rules, if any. Commission s workshop on tying and other similar commercial practices As a follow-up to its consultation, the European Commission s Directorate General Internal Market and Services organised a workshop on 14 October 2010 on tying and other similar commercial practices. BIPAR was invited to send one representative to this workshop and was represented by Steve White (BIBA, UK). To facilitate discussion, the Commission had provided a discussion note prior to the meeting, which set out the benefits and risks of tying, bundling and conditional lending plus some high level options on the possible way forward. It was explained that there were no preconceived ideas and that the Commission wanted to facilitate and learn from an open discussion between the consumers and the industry. The industry representatives listed four benefits of tying: increasing the variety and range of products, decreasing costs, improved risk management and convenience. The consumer representatives, however, did not agree. The risks of tying, as listed by the consumer side were: reduced consumer choice, consumers end up with products they do not need, reduced consumer mobility, difficulty in understanding the offer and its consequences and difficulty for consumers in comparing offers. No agreement was reached during the meeting on future options at EU level. The Commission said it would reflect on what it had heard but no indication was given as to when any next steps would be announced. Page 50 BIPAR Annual Report

52 Alternative Dispute Resolution (ADR) Background The Commission has been active over the last years in promoting the development of Alternative Dispute Resolution (ADR). However, these out-of-court mechanisms have been developed differently across the European Union. ADR schemes (or out-ofcourt mechanisms) have been developed 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 usually use a third party such as an arbitrator, mediator or an ombudsman to help the consumer and the trader reach a solution Commission s consultation on ADR In February 2011 the European Commission launched a public consultation On the use of Alternative Dispute Resolution (ADR) as a means to resolving disputes related to commercial transactions and practices in the European Union. For the Commission, consumer confidence plays a key role in the globalised economy of today. To have confidence in the market, consumers need to have access to efficient and low-priced means to resolve their disputes with traders. The Commission believes that dispute resolution schemes are one of those means that offer a good alternative to existing and often overburdened judicial systems. It recognizes the existence of several hundreds of ADR-schemes throughout Europe; the financial services sector has also its own ADR-schemes. However, it stresses that studies on ADR point to a number of shortcomings, such as the lack of consumer and business awareness of ADR or the gaps in ADR coverage, which hinder the effectiveness of ADR in the EU. The Commission s aim with this consultation is to gather stakeholders' views on these shortcomings and to define how ADR could be improved in order to enhance consumers access to simple, cheap and quick means to resolve disputes and obtain compensation. The Commission ADR-consultation is a broad consultation and is not focused specifically on the insurance sector. BIPAR response In its response to the European 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 mediation sector. Though BIPAR underlined that in the financial and insurance services sector current EU provisions (e.g. IMD) already ensure that consumers are aware of the existence of and access to ADR schemes, it admitted that this awareness could be further improved. In its contribution BIPAR also stressed that ADR represents costs for the industry and requests that this cost aspect should be the subject of further study from the Commission before the introduction of any new regulation. Next steps In its work programme for 2011 and beyond, the Commission has scheduled the adoption of a legislative proposal on ADR in the EU for the last quarter of BIPAR Annual Report Page 51

53 Consumer collective redress Background In the European Union, a trend can be identified towards an increased scaling up of mass claims. The Commission is exploring ways to ensure that such consumer mass claims are solved and believes that collective redress could be a means to handle these types of claims. Over the last 4 years it worked on developing European standards of collective redress in the field of consumer and competition law. It published different general consultation papers on the issue (i.e. which do not only concern financial services) to which BIPAR responded, mainly stating that instead of introducing an EU-wide judicial collective redress mechanism, the European Commission should favour the development of non-litigious individual resolutions of disputes between consumers and companies. "Collective redress" is a broad concept encompassing any mechanism that may accomplish the cessation or prevention of unlawful business practices which affect a multitude of claimants or the compensation for the harm caused by such practices. In Europe, collective redress procedures can take a variety of forms, such as actions in court, outof-court settlements, alternative dispute resolution mechanisms, as well as entrusting representatives with the enforcement of legal claims Commission s consultation Towards a Coherent European Approach to Collective Redress Collective redress is not a new concept in the EU. Injunctive collective redress is a normal feature in the EU's consumer protection legislation and is also known in the field of EU environmental law. As regards collective actions for damages, some Member States have them, while others do not. In February 2011, the Commission therefore launched a horizontal public consultation Towards a more coherent European approach to collective redress. The purpose of this consultation is to identify common legal principles and how these principles could fit into the EU legal system and into the legal orders of the 27 EU Member States. The consultation also explores in which fields different forms of collective redress (injunctive and /or compensatory) could have an added value for improving the enforcement of EU legislation or for better protecting the rights of victims. BIPAR response In its response to this consultation, BIPAR stated that the introduction of new EU-wide mechanisms of collective redress, be it judicial or out-of-court, would not lead to the effective improvement of the compensation of consumers. On the contrary, it could lead to potential un-insurability of certain risks and might make procedures more complex. The initial step should be the enhancement of the existing individual Alternative Dispute Resolution (ADR) systems. BIPAR also stressed that the Commission should take measures to increase the awareness of FIN-NET in the financial services sector (FIN-NET is a financial dispute resolution network of national out-of-court complaint schemes in the European Economic Area countries). It welcomes therefore the Commission s intention to come forward in the third quarter of 2011 with a Recommendation aimed at improving sectoral and geographical coverage of FIN-NET. Should the Commission decide to take an initiative in the field of collective redress, BIPAR underlined that in this case, adequate safeguards such as an opt-in system should be taken into consideration. Next steps By the end of 2011, the Commission will publish a Communication on the results of its consultation. The final decision on whether new EU legislation on collective redress is needed will be based on the consultation s outcome and, if appropriate, after a detailed impact assessment exploring all possible actions. Page 52 BIPAR Annual Report

54 Modernisation of the European Public Procurement Market Background In March 2011, the European Commission launched a public consultation on the modernisation of the rules, tools and methods for public procurement. Public procurement accounts for roughly 17% of the EU s GDP. The Commission aims at putting this 17% to the best possible use for re-launching the economy and creating jobs, even more so in a period of crisis. The existing EU public procurement rules (two 2004 Directives /17/EC & 2004/18/EC) provide for contract award procedures ensuring transparency, equal access and fair competition within the European procurement market for public contracts above a certain amount. The EU rules cover the provision of most services, including insurance, reinsurance, insurance brokerage services, insurance agency services and risk management insurance services. Broadly speaking, intermediaries are concerned in two ways by public procurement: - 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) - In the case where intermediaries themselves participate as bidders in a call for tender. The European Commission believes that companies, especially SMEs (estimated to secure between 31% and 38% in terms of total contract value of public procurement), need better and easier access to public contracts throughout the EU so that they can reap the full benefits of a truly European procurement market. Similarly, procurers need simple and flexible procedures allowing them to contribute effectively to the achievement of the common objectives of the Europe 2020 strategy: fostering innovation, protecting the environment, fighting climate change and social exclusion. What is the public consultation about? The Green Paper identifies a number of key areas for possible reform and asks for stakeholders' views on options for legislative changes. Some of the issues covered are the following: - Do the current procedures need to be simplified, in particular for small local and regional authorities? How can this usefully be done without jeopardizing essential guarantees for transparency and non-discrimination amongst bidders? - How can we reduce red tape for economic operators, notably SMEs? How can bidding across intra-european borders be facilitated? - Under which conditions should contracts between public authorities be exempted from the application of EU public procurement rules? - Should the EU public procurement rules be modified to allow other policy objectives such as promotion of innovation or environmental or social considerations to be better taken into account? - Do we need stricter rules or better safeguards to prevent favouritism, corruption or conflicts of interest? BIPAR Annual Report Page 53

55 - How can efficient competition in procurement markets be guaranteed? For instance, how could the development of dominant suppliers, bid rigging or market sharing between bidders be avoided? - What should be done to improve the access of European undertakings to third country public procurement markets? BIPAR response In its response to this consultation, BIPAR focused on the questions that are relevant to insurance intermediaries, that is to say a better access for SMEs to the public procurement procedures, a more accessible negotiated procedure (this is the standard procedure of public procurement for the insurance sector), or the specific concern of intermediaries in certain countries (Germany, Denmark) that are excluded from participation in the tender specifications. BIPAR explained in particular that for the insurance sector, the negotiated procedure 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. In the insurance sector, the best results for all parties are generally reached through discussion and negotiation since insurance is a technical matter where it is very difficult to specify all insurance policy specifications into the tender specifications. If an authority simply copied, for instance, the policy of its current insurer into the tender specifications, this would disable competition and weaken the final outcome. Related initiatives and next steps In addition to the Green Paper, the Commission is currently undertaking a comprehensive expost evaluation to take stock of the efficiency and cost-effectiveness of the current European public procurement rules. The results of this evaluation (expected to be available by the summer 2011) and of the Green Paper consultation will be discussed at a high level conference on public procurement reform, planned for 30 June 2011 in Brussels. All work streams will then feed into any appropriate legislative proposals. The Commission intends to make legislative proposals by early 2012 at the latest. Page 54 BIPAR Annual Report

56 Environmental Liability Directive Background 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. Liability kicks in when the polluter is identifiable, the damage is quantifiable and there is a link between damage and polluter. The ELD is important for the insurance intermediation sector since it asks Member States to encourage the development of financial security instruments. In the run-up to the adoption of the Directive in 2004, BIPAR 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. Regarding mandatory financial security, a gradual approach was adopted in developing possible 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. Member States had until 30 April 2007 to transpose the Directive into national law but it was only by 10 March 2010 that all 27 did so. Financial security/insurance From an insurance perspective, it is thus important to note that the ELD includes an article on financial security, obliging Member States to take measures to encourage the development of financial security instruments and markets with the aim of enabling operators to use financial guarantees to cover their responsibilities under this Directive. In November 2009, Bio Intelligence System (a company specialised in research and consultancy in the field of environmental and health information on products) issued a study ordered by the Commission s DG Environment on the implementation effectiveness of the ELD and related financial security issues. 23 brokers and reinsurers were interviewed in the course of the study. BIPAR Annual Report Page 55

57 Some of the conclusions of this study were that it was (too) early to evaluate the Directive, that the market for ELD insurance remained small but is growing (though at different speeds in the different Member States) and that there is a different approach amongst Member States in the choice for voluntary or mandatory systems. In October 2010, the Commission published a report that assessed the effectiveness of the Directive in terms of actual remediation of environmental damage and the availability at reasonable costs of, and conditions for, financial security. Regarding financial securities, the response of the financial sector was analysed. 3 aspects covered in particular were: - A gradual approach (Member States can gradually phase in a mandatory system) - Setting ceilings for financial guarantees - Excluding low-risk activities The report states that 8 Member States introduced mandatory security, entering into force at different dates, up to 2014: Bulgaria, Czech Republic, Greece, Hungary, Portugal, Romania, Slovakia and Spain. The remaining 19 Member States apply a voluntary approach. The report further indicates that Member States took rather limited action in encouraging the development of financial security instruments. The market developed mostly at the initiative of insurers, even in cases of mandatory financial security. Insurance is the most popular instrument, followed by bank guarantees, followed by other market based instruments. The report concludes that the Commission has to further examine the need to have a (harmonised) mandatory financial security system at EU level and that it is premature to propose it (due to different implementation, more products becoming available and the fact that countries that opted for a mandatory system do not yet have it in place). The Commission will monitor the situation and the option of mandatory financial security may be re-examined before the 2014 review of the ELD. Next steps BIPAR, together with its Working Party on Environmental Liability, will monitor the follow-up of the Commission s report and especially any new discussions on a mandatory financial security system and, later on, the Commission s report to Parliament and Council that is expected by 30 April 2014 (based on national feedback and possibly accompanied by proposals for modification of the Directive). Page 56 BIPAR Annual Report

58 E-commerce Directive Background The Electronic Commerce Directive (e-commerce Directive) was adopted in It sets out a legal framework governing information society services throughout the Internal Market. It establishes that such services can be provided freely throughout the EU by a service provider on the basis of his compliance with the rules and regulations of the Member State in which he is established. As a consequence, the destination Member States cannot, in principle, restrict incoming online services from another Member State. This is the country of origin principle or Internal Market clause. The Directive applies to e-commerce activities of the insurance sector, including those of insurance intermediaries, as well as to all other financial services, with some exceptions. The specific insurance-related derogations to the Internal Market clause only concern particular aspects of the insurers' business, and not that of intermediaries. Indeed, provisions of the existing insurance Directives requiring the compliance with the host country rules will still need to be complied with by the insurers operating online. No such derogation exists with regard to insurance intermediaries in the e-commerce Directive. Therefore, in principle, the main rule applies: once established in his home country in accordance with the licensing rules of that country, an intermediary doing online business, cannot be restricted to provide his services from that State to another Member State. BIPAR response to Commission s consultation on the evaluation of the Directive In August 2010, the European Commission launched a consultation on the implementation of the e-commerce Directive to study in detail the various reasons for the limited takeoff of e- commerce, and to evaluate the implementation of the Directive. insurance services did not bring clarity as to whether or not the country of origin principle and its derogations apply to marketing rules of the activity of insurance mediation or only to one category of these rules (marketing/advertisement and information). In its contribution, BIPAR requested that an overall coherent and consistent framework for offline and online cross-border activities of insurance intermediaries be established at European level. BIPAR regretted that the 2003 explanatory Commission s Communication on the application of the Directive specifically to financial and Finally, BIPAR also flagged some issues regarding the increase in the number of aggregate sites, regarding advertising or promoting web-based insurance offers and regarding the tendency to focus on price solely. BIPAR stated that more clarity on this point will lead to enhanced consumer protection. Next steps Even though the deadline for response was in November 2010, the outcome of the consultation has not as yet been made public. The Commission had announced taking the result of the consultation into account in its deliberations with a view to the adoption of a Communication on e-commerce, including on the impact of the e-commerce Directive, in the first half of BIPAR Annual Report Page 57

59 ECJ bans gender discrimination from December 2012 Background In June 2009, the Belgian Constitutional Court referred a preliminary question to the European Court of Justice after the Belgian consumer association Test Achats/Test Aankoop and two individuals had called for the annulment of the Belgian legal provision that transposes 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, allows 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. ECJ Judgment On 1 March 2011, the European Court of Justice (ECJ) gave its judgment in this case. The Court decided to follow the opinion of its Advocate General, Juliane Kokott, and says that the derogation of the prohibition to take into account gender for calculating premiums is not compatible with the (higher ranking) fundamental right prohibiting discrimination on grounds of sex. The Court explains that the derogations 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 rules 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 (the Court did not answer the separate question on life insurance since it says that the differentiation is invalid (in all cases) as of 21 December 2012 so there is no need to answer that question). The rule of unisex premiums and benefits will therefore come into force from 21 December The ECJ s decision, which is binding on all Member States, will have far-reaching implications for the insurance industry. Insurers will now need to consider how insurance premiums and benefits should be priced and calculated to be compliant with the Judgment from 21 December Industrial reaction The insurance industry and insurance associations are very critical of this ruling. According to them, there will be for instance 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. Female drivers, who are statistically safer than male drivers, will have to pay more for their car insurance as it will not be permissible to charge them lower premiums than male drivers. The feeling of the insurance industry and insurance associations is that it should be allowed to treat different situations differently. Page 58 BIPAR Annual Report

60 European Commission s work programme for 2011 and beyond On 28 October 2010 the European Commission published a Communication on its provisional work programme for The Commission publishes monthly updates of its work programme. The 2011 work programme is based on the five main political priorities that the European Commission's President Barroso listed in his State of the Union address in September 2010: Dealing with the crisis and building on the momentum of the recovery Restoring growth for jobs Building an area of freedom, justice and security Launching negotiations for a modern EU budget Pulling the EU s weight on the global stage When publishing the programme, the Commission announced its intention to explore together with the other European Institutions how to give priority to urgent proposals on key areas such as economic governance and financial regulation. Early in 2011, the Commission wanted to table the remaining proposals to complete the financial reform. The work programme is accompanied by annexes that contain a brief description of all concrete proposals and their foreseen adoption date, as well as by roadmaps for various initiatives. The latter give a more detailed overview of the content and scope of the initiatives. BIPAR Annual Report Page 59

61 Among the initiatives still scheduled for adoption in 2011 that are of interest to insurance intermediaries (the timing of which may still change) are: a proposal of a Directive to amend Directives 2006/48/EC and 7th June /49/EC as regards internal governance of credit institutions and investment firms a legislative proposal on MiFID 5 July 2011 a legislative initiative on PRIPs: a "Legislative instrument creating a 13 July 2011 framework for standardising precontractual information for retail investors about packaged retail investment products, so that these investors can make informed investment decisions and compare between different products" a Commission s Communication on the taxation of the financial sector 13 July 2011 an amendment of the UCITS Directive as regards rules on UCITS 13 July 2011 depositaries and remuneration rules a non-legislative White Paper on pensions September 2011 a legislative proposal on ADR in the EU November 2011 a recommendation on financial dispute resolution network (FIN-NET) 3 rd quarter 2011 a non-legislative follow-up on the consultation on collective redress 4 th quarter 2011 a revision of the IMD 4 th quarter 2011 a legal instrument on contract law 4 th quarter 2011 a Directive on Insurance Guarantee Schemes 4 th quarter 2011 Level 2 measures on Solvency II (Directive 2009/138/EC) 4 th quarter 2011 a Directive establishing an EU framework for the approximation of 4 th quarter 2011 sanctioning regimes in the financial sector a revision of the e-signature Directive 4 th quarter 2011 a Green Paper on the Professional Qualifications Directive 4 th quarter 2011 a Communication on a new VAT strategy 4 th quarter 2011 a review of Institutions for Occupational Retirement Pensions 4 th quarter 2011 Directive Among the indicative list of possible initiatives under consideration for are: a non-legislative communication on consumer empowerment adoption in 2012 a proposal to amend the financial conglomerates Directive adoption in 2012 a review of professional qualifications legislation 2012 an evaluation of the financial supervision system a non-legislative evaluation of regulatory reform in the financial sector Page 60 BIPAR Annual Report

62 Single Market Act On 27 October 2010, the European Commission launched the Communication: Towards a Single Market Act - for a highly competitive social market economy - 50 proposals for improving our work, business and exchanges with one another. The Communication addressed the two focus groups of the Single Market: Business and Citizens ( Europeans ) and dedicated another chapter to good governance of the Single Market. The work on the Single Market Act is important for the insurance intermediation sector, since it addresses what can be improved for cross-border business in general and it gives an idea of the Commission s (legislative or not) projects for the coming years, including action at financial services level. The Commission issued a wide public consultation on the Communication on the Act, to which BIPAR responded. BIPAR response to public consultation on the Single Market Act BIPAR expressed its support for a better functioning Single Market. In its response, BIPAR stressed the need for taking SMEs problems and specificities into account. BIPAR welcomed the impetus given to the Single Market through the Communication but warned that various markets in Europe are still very different from one Member State compared to another, mainly due to cultural/historical reasons, which are, amongst others, reflected in the insurance and insurance intermediation market. Although the basics of regulation and consumer protection rules should be applicable in all EU markets, regulation and other initiatives at EU level should take these differences into consideration by leaving some level of flexibility to national markets. In general, BIPAR also called for more focus on a proper implementation of existing instruments, instead of creating new instruments and for a general reduction of the administrative burden (making reference to the issue with rules of general good). BIPAR further stressed the importance of taking the special needs of SMEs into account, of involving them in impact assessment and early stakeholder consultation, and to allow sufficient time for such consultations. Content of the final Single Market Act Based on the outcome of its consultation of 27 October, on 13 April 2011 the European Commission published a Communication on the Single Market Act, containing 12 proposals for action to relaunch the Single Market for With its final Communication, the Commission recognises that the Single Market currently has shortcomings and intends to remedy those by giving the Single Market the opportunity to develop to its full potential. With regard to financial services, the Commission states that reforms undertaken in the field of financial services regulation - putting it at the service of BIPAR Annual Report Page 61

63 sustainable growth - will continue. The final Single Market Act contains 12 key actions to boost European competitiveness and to unlock economic growth and jobs. The aim is to have the 12 actions adopted by the end of 2012, the 20 th anniversary of the Single Market. The 12 proposals each consist of a key action and further important actions, with a longer deadline than The key actions are the following: 1. Improving access to finance for SMEs (introducing legislation making it easier for venture capital funds established in one Member State to invest freely in any other Member State); 2. Facilitating the mobility of citizens (modernising the recognition of professional qualifications); 3. Supporting research and innovation (establishing a unitary patent protection and a unified patent litigation system); 4. Helping consumer-business relations (facilitating alternative dispute resolution in the Single Market); 5. Boosting free movement of services (facilitating the definition of services standards at European level); 6. Improving transport and energy infrastructures in the Single Market; 7. Developing the digital Single Market (ensuring the pan-european operation of electronic identification and signatures); 8. Facilitating social entrepreneurship (setting up a European framework for the development of ethical investment funds); 9. Improving energy taxation (ensuring a consistent tax treatment of different energy sources. Further action in the taxation sector are foreseen, e.g. on VAT); 10. Enhancing social cohesion (improving the application of legislation on the posting of workers / ensuring that social rights are applied); 11. Improving the regulatory business environment (simplifying accounting rules); 12. Modernising public procurement legislation. The Commission recognises that in order for these 12 actions to be successful, there is a need for better dialogue with civil society, close partnership with the various market participants, efficient provision of information for citizens and enterprises and closer monitoring of the application of Single Market legislation. The Commission will also focus more on regulatory convergence (at international level) and promote wider adoption of international standards. BIPAR is already working on a number of these initiatives, such as ADR, VAT, public procurement, etc. (see pages 51, 43, 53). Next steps At the end of 2012 the Commission will take stock of the process and present a programme for the next stage. Its considerations will be fed by a large-scale economic study, the result of which should help to identify any areas with still unexploited growth potential and, where appropriate pinpoint new drivers of growth. The Commission is calling on all stakeholders and on the other European Institutions to give the Single Market Act their full support and cooperation. Page 62 BIPAR Annual Report

64 BIPAR mid-term meetings in Brussels 2011 On 31 January and 1 February 2011, BIPAR held its mid-term meetings in Brussels at the Renaissance Hotel. More than 90 participants from 23 countries, representing 37 member associations were present. The mid-term meetings were, as usual, the occasion to inform the management of the BIPAR member associations about current European dossiers concerning directly or indirectly the profession of insurance intermediaries, in particular, the latest EU developments regarding the Insurance Mediation Directive (IMD) review, the PRIPs review, the MiFID review and a number of other European legislative initiatives. The EU Standing Committee was opened on 31 January by its Chairman, Mr. Paul Carty, and the member associations were presented with the BIPAR draft answers to the IMD, PRIPs as well as the MiFID consultations issued by the European Commission. After discussions, the draft BIPAR consultation responses were unanimously approved by the BIPAR membership. The Chairman of the BIPAR VAT Working Party, Mr. David Jordorson, gave a presentation on the European Council s review of Directive 2006/112/EC on VAT exemption for the insurance and financial sector. Mr. Arthur Kerrigan, Head of sector, VAT Policy and Legislation at DG TAXUD, gave the Commission s point of view on the current state of affairs. Member associations were also D. Jordorson & A. Kerrigan informed of the impact assessment on taxation of the financial sector, including insurance. The Commission is investigating the impact of a financial transaction tax (FTT) and a financial activities tax (FAT). The second part of the EU Committee was opened by Mr. Karel Van Hulle, Head of the insurance unit in DG Internal Market. Mr. Van Hulle provided member associations with a detailed insight with regard to the IMD, PRIPS, MiFID and Solvency II dossiers as well as a briefing on other issues such as the Omnibus II and Contract Law. The session continued with Mr. Victor Rod, Chairman of the Committee of consumer protection, from EIOPA (former CEIOPS). Mr. Rod gave an Karel Van Hulle overview of the CEIOPS advice on the revision of the IMD. Mr. David Cowan, Administrator at EIOPA, gave a presentation of the new mandate and powers of EIOPA and how EIOPA will be involved in the IMD review process. The mid-term meeting was followed with an exchange of D. Cowan, V. Rod & P. Carty views regarding a number of member initiatives in national markets. Presentations relating to the TMF-Group s tax calculation tool database, social media, professional data survey, PI cover for intermediaries in cross-border activities and financial education in terms of professional requirements were provided. BIPAR Annual Report Page 63

65 Next EU Presidencies The Council is presided 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. 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. 2012: Denmark-Cyprus 2011: Hungary-Poland 2014: Greece-Italy 2013: Ireland-Lithuania 2015: Latvia-Luxembourg 2017: Malta-UK 2016: Netherlands-Slovakia 2019: 2018: Austria-Romania Estonia-Bulgaria 2020: Finland Page 64 BIPAR Annual Report

66 Agents Standing Committee BIPAR Annual Report Page 65

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68 Foreword Dear Colleagues, If we did not deal with Europe, it would not prevent Europe from dealing with us. It is estimated that over half of national legislations derive from European law. So the mission of BIPAR and of its Agents' Standing Committee is clearly justified. "Those who are possessed of a definite body of doctrine and of deeply rooted convictions upon it will be in a much better position to deal with the shifts and surprises of daily affairs than those who are merely taking short views, and indulging their natural impulses as they are evoked by what they read from day to day." Gérard Lebègue Chairman of the Agents Standing Committee You will not be surprised that I quote Winston Churchill because this perfectly illustrates our commitment and the quality of our representation on behalf of insurance agents in Europe. Indeed we are possessed of a definite body of doctrine and deeply rooted convictions. With these intelligence and "goodwill" tools, we have the means to ask the "right" questions and to suggest the "right" answers: - With regard to our functioning, what is Brussels policy towards our industry? - Which economic model of the overregulated system does the European Union want? - Isn't the piling up of rules that lead to overregulation - which are supposed to protect the consumer - counterproductive? - Doesn't this overregulation divide economically large intermediation structures and "human- sized" ones? - Isn't all this eventually harmful to the consumer because it is contrary to the level playing field? - How to take into consideration Europe's richness through diversity? These issues enable us to refer constantly to the principle of proportionality between the measures envisaged and their real consequences on the issues that are dealt with. According to William Arthur Ward, "the pessimist complains about the wind, the optimist expects it to change, the realist adjusts the sails." Let us adjust our sails together and I wish happy sailing to BIPAR Agents Standing Committee. BIPAR Annual Report Page 67

69 Reinforced cooperation of agents at European level In addition to the permanent information exchange between its members, BIPAR Agents Standing Committee decided a few years ago to reinforce agents cooperation and to bring together the agents in-house structures - of various countries of networks of agents from the same company in order to study the policies of the latter with regard to their agents in different European markets. Today, an increasing number of decisions that concern our profession are taken at national level and it is important to have a global vision of a company s strategies to avoid possible negative effects and to benefit from favourable experiences of colleagues in other markets. Further to the success of these meetings, it was unanimously decided at the 2004 BIPAR AGM in Rome to follow the policy proposed by the Agents Committee, i.e. to promote the creation of European associations. AXA agents European Association The European Association of national organisations of AXA agents was set up on 29 June 2006 in Brussels under the aegis of the BIPAR Agents Committee. Its members are the French (Réussir), German (USV), Italian (Confederazione dei Gruppi Aziendali Agenti AXA), Spanish (Club Diálogo de agentes generales AXA) and Swiss (GAV AXA Winterthur) organisations of AXA agents. It held three meetings during 2010 and 2011 (in Brussels in April 2010, in Seville in September 2010 and in Geneva in February 2011). The Association has successfully continued its work exchanging information and best practices. In November 2010, the European Directory for AXA insurance agents was made fully operational. It aims at facilitating cross-border collaboration between AXA insurance agents who are members of one of the organisations of the European Association. 278 agents have already registered. The Directory exists in French, German, Spanish and Italian. At the Seville meeting, outgoing Chairman Hans-Peter Albers handed over the Presidency of the European Association to Manuel Pérez Ortega from the Spanish Association of AXA agents, Club Diálogo. M. P. Ortega The Spanish presidential programme is based on 4 objectives: dynamism, cooperation and dialogue; commercial efficiency - role of the new AXA agent ; corporate services; enlargement of the Association. The next meeting of the Association will take place in September Allianz agents European Association The European Association of national organisations of Allianz agents was created in April 2008 under the aegis of the BIPAR Agents Committee. Its members are the French (MAG3***), German (IG), Italian (UIA, GALA and GNA) and Austrian (Allianz Agenturverbund Österreich) organisations of Allianz agents. In 2010 and 2011, the Association met twice. In September 2010, the meeting was held in Vienna. During this meeting the first change of Presidency took place. Herbert J.-J. Gadrat Pilzweger from the German association IG handed over the Presidency to Jean-Jacques Gadrat from the French Association of Allianz agents, MAG3***. The meeting focused on issues such as a European exchange project for children of Allianz employees and agents, the Allianz advertising campaign in Europe and the Allianz sales strategy. The focus of the French Presidency will be on the (future) Allianz insurance distribution models and on the role the general agents can play in this context. The 2011 meeting took place in April in Paris and mainly focused on the Allianz sales strategy. Page 68 BIPAR Annual Report

70 Brokers Standing Committee BIPAR Annual Report Page 69

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72 Foreword Dear Colleagues, I share the reflections made by Gérard Lebègue in his foreword. The regulator has great difficulty finding the right balance, i.e. the relevant regulation. What I mean by that is a regulation that contributes to the consumers' effective protection, which is far from overliberalism or feverish interventionism and which does not affect insurance brokers' added value and the carrying out of their mission. André Van Varenberg Chairman of the Brokers Standing Committee There is no hostility therefore towards the numerous regulators who have this philosophy. On the contrary, there are areas where we regret the absence of a balanced regulatory framework, such as the placement of multinational risks. In our globalised economy, requests for international and master policies by clients are more and more frequent and justified. However, faced with an incredible international legislative patchwork, we are living a real nightmare due to two aspects that are inherent to these placements : - the taxes applicable and the premium allocations, - the placement with non-admitted insurers. Upon the request of various national federations, BIPAR is now dealing with this issue and trying to find adequate solutions and answers. In this respect, WFII has been called upon for assistance. This is a great challenge for both regulators and for BIPAR. As Marcel Pagnol used to say: "Everyone knew that it was impossible, except for an idiot who came along and did it". If we could only be this idiot. BIPAR Annual Report Page 71

73 Activities The BIPAR Brokers Committee met in June at the BIPAR AGM 2010 in Tel Aviv. Fittingly, in the framework of the IMD and PRIPs review, the focus of the meeting was markets in motion with focus on remuneration. Rob Groenemeijer (Adfiz, Netherlands), gave a presentation of recent developments as regards to remuneration in the Dutch market. The focus of the discussion was transparency and the balance between sound business and consumer benefits. The Brokers Committee discussed what the real benefits or what the negative consequences would be in a net-quoting remuneration system for insurance intermediaries as well as what an appropriate level of transparency would be. It was agreed by the Committee to continue to study this issue. For further information, please consult the minutes of the Brokers Standing Committee meeting available at the BIPAR Secretariat upon request. Page 72 BIPAR Annual Report

74 EU Social Affairs Committee BIPAR Annual Report Page 73

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76 Activities 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 Its purpose is to facilitate the integration in the European social dialogue of social partners in the new EU Member States. The ISSDC comprises, on the one hand, the employers of the insurance sector represented by BIPAR, the CEA (European Insurance and Reinsurance Federation) 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. Didier Pissoort BIPAR activities Joint statement on demography Over the past couple of years, the ISSDC has been working on a joint statement on demographic challenges in the insurance sector. BIPAR consulted with its member associations on the draft joint statement in autumn 2009 for comments and input. The final compromised joint statement was signed by the social partners on 26 January 2010 after lengthy negotiations. Mr Didier Pissoort was the signatory for BIPAR. The content of the joint statement puts forward issues which will come on BIPAR s national associations social dialogue agenda over the next few years. This joint statement by the ISSDC social partners may also become a reference in collective bargaining with the trade union in your national market. The joint statement focuses on players in the insurance sector in their capacity as 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. BIPAR strongly encourages its member associations to address these demographic challenges in their respective national markets. The signed joint statement was sent to all member associations in February BIPAR Annual Report Page 75

77 Follow-up booklet on demography statement The ISSDC is planning to follow up on this joint statement on demography in the insurance sector by producing a booklet with examples of good practices on demography measures in various Member States. The good practices will be examples that fits under one of the three titles in the joint statement: work/life balance, qualifications/life-long learning and health and safety at the workplace. BIPAR has consulted with its member associations to find examples of various company/association schemes that can be included in this follow-up booklet. The project of a booklet will be submitted to the European Commission for funding approval in August BIPAR member associations will be kept informed as regarding the progress. Page 76 BIPAR Annual Report

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80 World Federation of Insurance Intermediaries (WFII) BACKGROUND BIPAR is a member of the World Federation of Insurance Intermediaries (WFII). WFII was established in 1999 and is now recognised by the international institutions that have influence on our sector (OECD, IAIS, WTO, UN, World Bank, IMF) as the single voice of insurance intermediaries in international Public Affairs. WFII has observer status in the OECD and the IAIS and is regularly consulted on current issues in the market. Other members of WFII are: for North America: - CIAB (Council of Insurance Agents and Brokers), - IIABA (Independent Insurance Agents and Brokers of America), - IBAC (Insurance Brokers Association of Canada). For Africa: - FIA (Financial Intermediaries Association of Southern Africa) for Asia/Pacific Rim: - CAPIBA (Council of Asia Pacific Insurance Brokers Associations) for Latin America: - COPAPROSE (Confederacion Panamericana de Productores de Seguros) WFII works on the basis of principles and positions and, in its recent history, this structure has proven to be efficient and effective in the promotion and defence of the sector s interests at international institution level. The principles and positions of WFII are defined at the World Council meetings. In terms of regulatory standards and liberalisation WFII has achieved a number of impressive structural results over the last years. Over the last 12 months WFII has again shown its solidity. BIPAR Annual Report Page 79

81 THE ROLE OF THE WFII WORLD COUNCIL AND EXECUTIVE CSE COMMITTEE 1. To detect international trends in intermediary-related Public Affairs issues (by exchanging information on national issues). 2. To give policy direction to WFII on current and future issues on the international Public Affairs agenda. 3. To exchange information between participants. The World Council and Executive CSE Committee are thus the policymakers of WFII and consequently the guide for many national associations around the world in structural Public Affairs issues. WFII also allows the exchange of information and the analysis of issues which are potential future drivers of change in the industry. Members of the WFII World Council and Executive CSE Committee come from all corners of the world and represent five continents. WFII has its permanent Secretariat in Brussels which coordinates its activities. In 2010/2011 Mr. Luis Ros (South America - Copaprose) was the Chairman of WFII. Mr. Luis Ros successor and the current Chairman of WFII in 2011/2012 is Mr. Jaap Meijers (Europe, BIPAR). Luis Ros Jaap Meijers The WFII Secretariat is run by the BIPAR Secretariat. Nic De Maesschalck, the BIPAR Director, is also the Director of WFII. Gabriella Almberg is Policy Adviser for WFII Affairs. 2010/2011 WFII MAIN ACTIVITIES The WFII Executive CSE Committee & World Council meetings of 2011 The 2011 annual WFII World Council and Executive CSE Committee meeting took place in Rome on March. The major issues under discussion were: international regulatory changes concerning conduct of business, multinational placements, liberalisation and regional market trends. The WFII meetings were held back-to-back with AIBA s (BIPAR Italian member association) annual conference on European and Italian Insurance Market: vigilance, reliability and consumer protection. The WFII World Council was addressed by the Deputy Secretary General of the IAIS, Catherine Lezon. An extensive and informative overview of the current work and the future projects of the IAIS was presented by Ms. Lezon and in particular the IAIS Insurance Core Principles that are in the process of being reviewed. Page 80 BIPAR Annual Report

82 The IAIS Annual Conference 2010 WFII attended the Annual IAIS Conference that took place in October 2010 with a small delegation. The theme of the conference was The Gateway to Trust in the Insurance Industry. The discussions focused on new regulatory initiatives throughout the world. The discussion especially revolved around global systemic risk, strengthened regulation following the lessons learned from the crisis, market conduct and consumer protection and Takaful insurance. There were approximately 800 participants in this conference where both the regulators and the insurance and insurance intermediation industry were represented. New global principles on market conduct for insurance intermediaries What are the Insurance Core Principles (ICPs)? In 2008, the IAIS initiated the revision and modernisation of its Insurance Core Principles. According to the IAIS, these principles identify areas in which the insurance supervisor should have authority or control, in all jurisdictions around the world, and that forms the basis on which standards and more detailed guidance are developed. Why are the ICPs important for WFII and BIPAR? The IAIS ICPs are of great importance as they are the international reference for the World Bank and the IMF to assess the financial (including insurance) regulation quality in various jurisdictions through their FSAP (Financial Sector Assessment Program) evaluations. The ICPs are, for many national jurisdictions the benchmark for future regulatory requirements. Two of these ICPs are of particular importance to insurance intermediaries. The future ICP 18 and the future ICP 19 deal with insurance intermediaries and conduct of business respectively. These two principles set the benchmark for how the future regulatory landscape will look like for insurance intermediaries. The non-prudential concept of market conduct is reflected in these new principles. The IAIS objective of these two principles is to deal with existing and potential policyholders and beneficiaries in the selling and handling of insurance products and services and the provision of information to such parties. The main issues addressed in these principles are: o Disclosure and transparency of relevant information to policyholders o Consumer protection, such as dealing with customers in the selling and handling of insurance policies and claims, handling of consumer complaints, or other areas such as insurance supervisors role in consumer empowerment and enhancing consumer capability o Coordination between national supervisory or other bodies dealing with aspects of supervision of market conduct of insurers and intermediaries BIPAR Annual Report Page 81

83 The role of WFII in the ICP review WFII is an observer member of the IAIS and, as such, has been participating in the IAIS Market Conduct subcommittee meetings that deal with ICPs 18 & 19. WFII has provided industry input during the drafting process and clarified various market practices around the globe whenever requested. The draft ICPs 18 & 19 were issued for consultation amongst the IAIS members and observers in autumn BIPAR national associations, as indirect members of WFII, were consulted on this. WFII, after having consulted its members, has responded to this consultation. In general terms, much like BIPAR s position on the IMD review, WFII is of the opinion that any regulation must maintain a level-playing field between distributors by taking on an activity-based approach. Regulation must also be proportionate and reflect the fact that insurance intermediaries come in various sizes from micro businesses to large multinationals. WFII also strongly opposes the prohibition of any form of remuneration as this is counter competitive and puts intermediaries in an unfair disadvantage. Next steps The ICP review is approaching its final stages. The IAIS issued a package consultation with the whole set of 26 ICPs at the beginning of March and WFII contributed to this consultation with comments. The ICPs are expected to be adopted at the next IAIS annual meeting in Seoul, South Korea in October It is important to note that even though these principles are not mandatory or binding for IAIS members, they are still the benchmark for new insurance regulation in development across the globe. WFII will continue to work closely with the IAIS and to monitor any future development and will keep its members informed accordingly. The issue of Global programmes and Multinational Placements As global trade expands, intermediaries face the challenge of placing insurance policies to cover insureds global risks. Master policies are often used for certain types of global business risks, i.e. global property, Difference in Conditions (DIC) policies, umbrella liability, D&O liability and E&O coverage. The use of master policies can offer distinct advantages to the insured by providing comprehensive coverage and by helping to avoid coverage gaps. Furthermore, a master policy can help the insured manage its multinational risks more efficiently. Unfortunately, there are many barriers to placing global policies. Conflicting tax and insurance laws and regulations country- to- country make it difficult to make effective use of master policies. A WFII coordination group, chaired by WFII incoming Chairperson, Ms. Elizabeth Francy Demaret, on multinational placements was established in 2009 in order to discuss how WFII could advance in this complicated area of global placements. Essentially, there are three key elements: proper understanding of the local regulations applying to various Page 82 BIPAR Annual Report

84 types of contract, the tax issues and finally building a case to support a different regulatory approach for certain types of contracts for multinational companies and their subsidiaries. Firstly, in terms of insurance regulations, WFII is beginning to look at the possibility of an industry wide database of rules and regulations. Such a database would be aimed at becoming the standard tool by the industry so as to ensure consistency in application. Secondly, regarding the regulatory approach, WFII is working towards defining an approach to facilitate Multinational clients being able to purchase insurances to satisfy their commercial needs while being aligned with the local laws and tax rules. Thirdly, in relation to the tax issues, the amount of IPT (Insurance Premium Tax), VAT, GST (Goods & Services Tax) and US surplus lines and other taxes payable on premiums varies from jurisdiction to jurisdiction as well as from class to class. Clear information on this is important for all parties involved the policyholder, the intermediary, the insurer as well as the tax authority. In 2010, WFII, in cooperation with LIIBA (London & International Insurance Brokers Association) identified a tax calculation tool developed by the TMF- Group that allows intermediaries to make detailed calculation of tax payable on global re/insurance programmes. Next steps For 2011/12, the coordination group will do further work on analysing how existing models treat these types of global covers, get the input from industry players and evaluate the possibility of a regulatory database. Activities with the Organisation of Economic Cooperation and Development (OECD) WFII has attended the IPPC (Insurance and Private Pensions Committee) meetings with the OECD in 2010/2011. The OECD has during 2010/2011 organised industry roundtables discussing the topic: Insurance and Pensions in promoting Economic Growth. The latest meeting where WFII was asked to participate and to bring in a speaker was on the occasion of the OECD s 50 th anniversary events on 6-11 June. WFII has been taking part in this initiative on both occasions over the past year. These occasions provide insurance intermediaries with an opportunity to highlight the importance of the profession to government officials, supervisors and international standard setters from all OECD Member States. BIPAR Annual Report Page 83

85 Glossary ADR AMICE CEA CEBS CEIOPS CESR CFR Directive EBA EIOPA ELD ESAs ESFS ESMA ESRB FAT FOE FOS FTT Alternative Disputes Resolutions Federation of Mutual Insurance Companies Comité européen des assurances (European Insurance and Reinsurance Federation) European Banking Supervisors Committee of European Insurance and Occupational Pensions Supervisors (now EIOPA) Committee of European Securities Regulators (now ESMA) Common Frame of Reference A Directive shall be binding, as to the result to be achieved, upon each Member State to which it is addressed, but shall leave to the national authorities the choice of form and methods. 1 European Banking Authority European Insurance and Occupational Pensions Authority Environmental Liability Directive European Supervisory Authorities European System of Financial Supervisors European Securities and Markets Authority European Systemic Risk Board Financial Activities Tax Freedom of establishment Freedom of services Financial Transactions Tax 1 article 249 of the consolidated version of the Treaty establishing the European Community Official Journal of the EC of C325/33 Page 84 BIPAR Annual Report

86 Green Papers IAIS ICPs IGS IMD IMF IORP IRR KIID MiFID OECD PEICL PRIPs Regulation UCITS UCPD VAT White Papers WTO Green Papers are documents published by the European Commission to stimulate discussion on given topics at European level. They invite the relevant parties (bodies or individuals) to participate in a consultation process and debate on the basis of the proposals they put forward. Green Papers may give rise to legislative developments that are then outlined in White Papers. 2 International Association of Insurance Supervisors Insurance Core Principles Insurance guarantee schemes Directive on Insurance Mediation International Monetary Fund Institutions for Occupational Retirement Provision Interest Rate Restrictions Key Investor Information Document Markets in Financial Instruments Directive Organisation for Economic Cooperation and Development Principles of European Insurance Contract Law Packaged Retail Investment Products A regulation shall have general application. It shall be binding in its entirety and directly applicable in all Member States. 1 Undertakings for Collective Investment in Transferable Securities Unfair Commercial Practices Directive Value Added Tax The Commission s White Papers are documents containing proposals for Community action in a specific area. In some cases they follow a Green Paper published to launch a consultation process at European level. When a White Paper is favourably received by the Council, it can lead to an action programme for the Union in the area concerned. 2 World Trade Organisation 2 «Europa», Gateway to the European Union BIPAR Annual Report Page 85

87 BIPAR 50 member associations in 32 countries EU COUNTRIES Austria Estonia Fachverband Versicherungsmakler und Berater in Versicherungsangelegenheiten Estonian Insurance Brokers Association (EKML) Belgium Verband Österreichischer Versicherungsmakler (VÖVM) Professional Association of Financial Service Provider in the Austrian Federal Economic Chamber (FV FDL)* Finland France Finnish Insurance Brokers Association (SVAM) Fédération Nationale des Syndicats d'agents Généraux d'assurances (AGEA) Fédération des Courtiers d assurances et Intermédiaires financiers de Belgique (FEPRABEL) Federatie voor Verzekerings- en Financiële tussenpersonen (FVF) Germany Chambre syndicale des courtiers d assurances (CSCA) Chambre des indépendants du patrimoine* Bulgaria Cyprus Czech Republic Denmark Union Professionnelle de Courtiers d'assurance (UPCA) Bulgarian Association of Insurance Brokers (BAIB)* Pancyprian Federation of Professional Intermediaries (PSEAD) Association of Czech Insurance Brokers (ACPM) Forsikringsmaeglerforeningen (FMF) Greece Hungary Bundesverband Deutscher Versicherungskaufleute e.v. (BVK) Verband Deutscher Versicherungsmakler e.v. (VDVM) Hellenic Insurance Brokers Association (HIBA) Hellenic Federation of Insurance Agents (HEFEPI) Panhellenic Association of Insurance Advisors (PSAS) Association of Independent Insurance Brokers in Hungary (FBAMSZ) Page 86 BIPAR Annual Report

88 Ireland Portugal Irish Brokers Association (IBA) Professional Insurance Brokers Association (PIBA) Romania Associacao portuguesa dos produtores profissionais de seguros (APROSE) Italy Associazione di Categoria Brokers di Assicurazioni e Riassicurazioni (ACB) Slovakia Romanian National Insurance Intermediaries and Consultants Association (UNSICAR) Associazione Italiana Brokers di Assicurazioni e Riassicurazioni (AIBA) Sindacato Nazionale Agenti di Assicurazione (SNA) Slovak Association of Insurance Intermediaries (SASP) Association of Financial Intermediaries and Financial Advisors (AFISP)* Lithuania Chamber of Insurance Brokers of Lithuania (DBR) Spain Asociación Española de Corredurias de Seguros (ADECOSE) Luxembourg Malta The Netherlands Poland Association Luxembourgeoise des Intermédiaires Professionnels d'assurances (ALUPASS) Association of Insurance Brokers of Malta (AIB) Adviseurs in Financiële Zekerheid (Adfiz ) Association of Polish Insurance and Reinsurance Brokers Chambre Polonaise des Intermédiaires d'assurances et de Finance Sweden United Kingdom Consejo General de Colegios de Mediadores de Seguros Swedish Insurance Brokers Association (Sfm) British Insurance Brokers' Association (BIBA) London & International Insurance Brokers Association (LIIBA) Association of Independent Financial Advisers (AIFA) * Member associate BIPAR Annual Report Page 87

89 NON-EU COUNTRIES Israel Association of Insurance Brokers and Agents in Israel Lebanon Lebanese Insurance Brokers Syndicate (LIBS) Norway Norwegian Association of Insurance Brokers Russia Association of Professional Insurance Brokers (APIB) Switzerland Fédération Suisse des Agents Généraux d'assurances (SVVG/FSAGA) Swiss Insurance Brokers Association (SIBA) Turkey Turkish Association of Insurance Brokers Ukraine Federation of Insurance Intermediaries of Ukraine (FIIU) Page 88 BIPAR Annual Report