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

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