EIOPA 4th annual report on administrative sanctions and other measures under the Insurance Distribution Directive (IDD)

Closely following the publication of its Report on the application of the IDD (see previous post), EIOPA issued its 4th annual report on administrative sanctions and other measures under the IDD, giving a detailed overview of sanctions imposed in 2022 by supervisory authorities on insurance undertakings or intermediaries for breaches of national provisions implementing the IDD, with comparative data going back to its introduction in 2018. In a majority of Member States a pattern emerges of a broadly similar number of sanctions being imposed each year; there is only one (Germany) in which there has been a consistent (decreasing) trend. In addition, the no. of sanctions has been particularly high in two Member States (Germany and Portugal), in accordance with the supervisory approach taken there, accounting for the majority since 2018 (> 80 % for each reporting period). The trend at EU/EEA level thus shows an upward tendency: from 335 (2018-2019) and 380 (2020), to 498 (2021) and 491 (2022). These mainly related to infringements of the professional and organisational requirements in Article 10 IDD, mainly of the requirements for professional indemnity insurance (PII) for intermediaries (Article 10(4) IDD), with sanctions relating to knowledge/training requirements (Article 10(1) and (2)) a close second – this was also the case for Belgium. The absence of the necessary PII cover often triggers an automatic process: e.g. in Belgium, the FSMA is required to first warn the intermediary and only ultimately to withdraw the registration. Both steps result in an IDD sanction: an order to cease and desist, followed by withdrawal of registration. The considerably higher amount of the former compared to the latter demonstrates that the issue is mostly resolved without the need to withdraw the registration. Belgium systematically ranks high in terms of sanctions imposed, implying that we have a very active supervisory authority (i.e. the FSMA): while our (re)insurance undertakings represent a 3,3 % share of the total in the EEA area, with a 1,1 % share of registered intermediaries, we account for 7,3 % of IDD-based sanctions in 2022. Germany consistently tops the list, but considering the size of the insurance markets and the number of intermediaries (around 20 x higher), the figures are not out of proportion.

Other rising trends relate to product oversight and governance (POG) requirements (from one breach and sanction in 2021, to 10 sanctions across five Member States from 47 breaches in 2022 in relation to this relatively new policy tool), as well as breaches linked to the additional requirements applying to insurance-based investment products (IBIPs): 299 more in 2022, with a majority occurring in Belgium (220 breaches).

See https://www.eiopa.europa.eu/eiopa-publishes-annual-report-sanctions-under-insurance-distribution-directive-2022-2024-01-17_en.

Questions? Please contact our Insurance expert, Sandra Lodewijckx (sandra.lodewijckx@lydian.be).