EIOPA RELEASES ITS FIRST REPORT ON ADMINISTRATIVE SANCTIONS AND OTHER MEASURES IMPOSED UNDER THE IDD BY NCAS

This report enables players in the European Insurance industry to identify for the first time the sanctions adopted by National Competent Authorities (NCAs) against insurance distributors throughout the European Union, from the application of the IDD in 2018 until the end of 2019.

Under Article 36 (2) of the IDD, NCAs shall pro­vide EIOPA annual­ly with infor­ma­tion regar­ding all admi­nis­tra­tive sanc­tions and other mea­sures impo­sed, and EIOPA shall publish that infor­ma­tion in an annual report, in order to have an over­view of these sanc­tions. The publi­ca­tion of this report is a novel­ty ; howe­ver, it has not allo­wed EIOPA to draw gene­ral trends from it. Here are the key fin­dings of this first report :

  • The vast majo­ri­ty of sanc­tions (around 75%) were for breaches of the pro­fes­sio­nal and orga­ni­sa­tio­nal requirements.
  • In 8 Mem­ber States ((Bel­gium, Bul­ga­ria, Den­mark, France, Ger­ma­ny (1588 sanc­tions), Hun­ga­ry, Lithua­nia and Mal­ta), NCAs impo­sed a total of 1,923 sanc­tions.
  • Of the sanc­tions that were admi­nis­tra­tive pecu­nia­ry sanc­tions, these were of an aggre­ga­ted value of 945,710 EUR.
  • The most frequent sanc­tio­ning mea­sure was to with­draw the regis­tra­tion of the inter­me­dia­ry (around 50% of cases) fol­lo­wed by the use of admi­nis­tra­tive pecu­nia­ry sanc­tions (around 40% of cases).

Cer­tain aspects of the IDD sanc­tio­ning regime are sub­ject to natio­nal law, and require Mem­ber States to ensure that NCAs have the power to impose sanc­tions. Actual­ly, NCAs are not obli­ged to impose sanc­tions in all cases where an insu­rance dis­tri­bu­tor fai­led to com­ply with the natio­nal pro­vi­sions imple­men­ting IDD. Mem­ber States must apply a “gene­ral prin­ciple” which is that the use of sanc­tions must be ‘effec­tive, pro­por­tio­nate and dis­sua­sive’. The­re­fore, cer­tain types of breaches may result in a for­mal sanc­tion being impo­sed in one Mem­ber State, whe­reas the mea­sure may be com­ple­te­ly dif­ferent in ano­ther Mem­ber State.

The table below shows the num­ber of sanc­tions impo­sed for dif­ferent types of breaches of the IDD :

IDD PROVISION

NUMBER OF BREACHES

Regis­tra­tion requirements

394

Exer­cise of the free­dom to pro­vide services

1

Pro­fes­sio­nal and orga­ni­sa­tio­nal requirements –

appro­priate know­ledge and ability

64

Pro­fes­sio­nal and orga­ni­sa­tio­nal requirements –

conti­nuing pro­fes­sio­nal trai­ning and development

473

Pro­fes­sio­nal and orga­ni­sa­tio­nal requi­re­ments – good repute

107

Pro­fes­sio­nal and orga­ni­sa­tio­nal requirements –

pro­fes­sio­nal indem­ni­ty insurance

458

Pro­fes­sio­nal and orga­ni­sa­tio­nal requi­re­ments – other

499

Other orga­ni­sa­tio­nal requirements

18

Infor­ma­tion requi­re­ments and conduct of busi­ness rules

40

Addi­tio­nal requi­re­ments for IBIPs

51

Other (e.g. natio­nal spe­ci­fic provisions)

11

Total

2116

This report high­lights the fact that “Ove­rall, it is clear that the vast majo­ri­ty of sanc­tions were impo­sed for infrin­ge­ments rela­ting to the pro­fes­sio­nal and orga­ni­sa­tio­nal requi­re­ments in Article 10. Within this, infrin­ge­ments rela­ted to the trai­ning and deve­lop­ment requi­re­ments and the requi­re­ments for pro­fes­sio­nal indem­ni­ty insu­rance played a very signi­fi­cant part”.

With a total of 458 sanc­tions, this table can only remind inter­me­dia­ries of the impor­tance of taking out pro­fes­sio­nal indem­ni­ty insu­rance in order to limit the impact of poten­tial claims on their cash flow, and to avoid the risk of sanc­tions from their NCA.

Click here to read the report : EIO­PA’s first Annual Report on admi­nis­tra­tive sanc­tions and other mea­sures under the Insu­rance Dis­tri­bu­tion Direc­tive — EN.pdf