Is the new Insurance Distribution Law affecting your business?
On 8 October 2018, the Romanian Official Gazette, Part I, No. 853, published Law No. 236/2018 the insurance distribution law (“Insurance Distribution Law”).
The Law implements all provisions contained in Directive No. 2016/97/EU dated 20 January 2016 on insurance distribution (“IDD”).
The Insurance Distribution Law, in essence, mirrors the provisions contained in the IDD. There are some slight differences as a result of the general regulatory requirements imposed by other Romanian legal provisions (e.g. the regulatory requirements of the Romanian Financial Supervisory Authority).
The new rules implemented by the Insurance Distribution Law, have certain ramifications for professional and registration requirements, as well as for business processes applicable to companies in the insurance market. Moreover, the Insurance Distribution Law provides for 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 with the new regulations.
Amongst the most relevant aspects under the Insurance Distribution Law, the following are worthy of mention:
- all parties involved in the distribution of insurance products (i.e. insurance companies, insurance intermediaries, distributors etc.) must observe the regulations stated under the Insurance Distribution Law;
- insurance and/or reinsurance intermediaries must register and conduct their business activities under the supervision of the Financial Supervisory Authority (“FSA”), further observing the mandatory regulatory conditions which are provided for 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 activity;
- express regulations regarding the provision of proper and accurate information to clients (i.e. individuals 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 the cross-selling of insurance products together with other products/services, and the possibility for the client to acquire separately these products;
- stricter mandatory requirements regarding conflicts of interest; and
- the possibility for the FSA to issue further strict regulations that 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 8 October 2018 and is currently in force with full legal effect.