Is the new Insurance Distribution Law affecting your business?
On October 8th, 2018, the Romanian Official Gazette, Part I, No. 853, the Law No. 236/2018 published the insurance distribution law (“Insurance Distribution Law”).
The Insurance Distribution Law implements all provisions contained under Directive No. 2016/97/EU dated 20 January 2016 on insurance distribution (“IDD”).
In this respect, the Insurance Distribution Law mirrors in essence the provisions contained under the IDD, with certain slight deviations which in fact pertain to the general regulatory requirements imposed by other Romanian legal provisions (e.g. the regulatory attributes of the Romanian Financial Supervisory Authority).
The new set of rules implemented by the Insurance Distribution Law, have certain implications for professional and registration requirements, as well as for business processes applicable for companies on the insurance market. Moreover, the Insurance Distribution Law provides certain standards regarding the conduct and suitability of the parties participating in insurance distribution activity and also the mandatory requirements that should be taken into consideration for the alignment of business processes according to the new regulations.
Among the most relevant aspects regulated under the Insurance Distribution Law, we mention the following:
§ All parties involved in distribution of insurance products (i.e. insurance companies, insurance intermediaries, distributors etc.), must observe the regulations provided under the Insurance Distribution Law;
§ Insurance and/or reinsurance intermediaries must register and conduct their business activities under the supervisory authority of the Financial Supervisory Authority (“FSA”), further observing the mandatory regulatory conditions which are provided under the Insurance Distribution Law and certain subsequent regulations issued by the FSA;
§ Minimum competency and professional requirements not only for distributors, but also for their employees in relation to the performance of insurance distribution business activity;
§ Express regulations regarding provision of proper and accurate information to clients (i.e. individual persons and legal entities), prior to the execution of an insurance document, such as a description of the insurance product, ancillary costs and other relevant information;
§ The introduction of product oversight and governance requirements and the introduction of an insurance product information document;
§ Express regulations regarding cross-selling insurance products together with other products/services and the possibility for the consumer to separately acquire these products;
§ Stricter mandatory requirements regarding conflicts of interest;
§ The possibility for the FSA to issue further strict regulations which will amend the legal regulations currently in place under the Insurance Distribution Law.
The Insurance Distribution Law was published in the Official Gazette, Part I, No. 853 dated October 8th, 2018 and is currently in force with full legal effects.