The recast of the Insurance Mediation Directive (IMD 2) is coming to a conclusion with the adoption by the Council of the European Union of a new compromise on 28 October (the sixth since May 2014, here).

Insurance mediation: Council sets out its position on 28 October 2014

Insurance mediation: Council sets out its position on 28 October 2014 (clickable picture)

The Council has re-qualified the original proposal as the IDD 2, standing for Insurance Distribution Directive 2; one possible explanation for this wording change is to have a broader scope and to cover all channels of insurance distribution and not just intermediaries.

Unfortunately for the risk management community, large risks are still excluded from the new disclosure regime imposed on insurance distributors. The new text will be discussed with the European Parliament in January for a final approval before its publication to the Official Journal of the European Union, probably around April 2015.

Member States are then expected to implement the Directive by mid-2017 at the latest, during a two years implementation phase. The file has become a priority for the Italian Presidency of the EU that will end on 31 December 2014 when Latvia and Luxembourg take on two, six months terms of a rotating presidency for 2015.

The new disclosure regime will apply to remunerations and commissions, whether they are fees charged to insureds or commission received from premiums paid by insureds. It also extends to “variable remunerations” like sales incentives or contingent commissions paid to intermediaries by insurers on a targeted basis.

More positive

On a positive note, the Council has maintained the original annex 1 on the professional customer definition. This was not the case in the version adopted by the European Parliament in February 2014 when the annex was almost entirely carved out. This means that the possibility for a “professional customer” to benefit “on request” from the new disclosure regime is still part of the trialogue negotiations with the European Parliament., which are expected to resume in January.

Finally, in the FERMA European Risk and Insurance Report published last October, the current revision of the Insurance Mediation Directive was chosen by 34% of the respondents to the FERMA Benchmarking Survey (results here).

The European Risk Management community set as a regulatory priority for FERMA the defence of the interests of the insurance corporate buyers in Brussels. When asked about the adequate level of protection for the professional insurance buyer, 69% of the respondents opted for either a mandatory or an “on request” disclosure on remunerations and fees. Only 15% estimated that the disclosure obligations should depend on the size of the client (turnover, employees…).