The New Year is usually a time of reflection whereby each individual looks back at what has happened in the preceding 12 months and tries to identify any areas of improvement, with the hope and prospect that the upcoming year will be better than the last.
The same applies to the commercial world, with each entity setting up different strategies for the new year in order to ensure that the goals are reached, and the challenges are tackled, as effectively as possible.
One of the main headaches for insurance undertakings and insurance intermediaries in 2018 is the transposition of the Insurance Distribution Directive (IDD) into national legislation. Stakeholders have around nine months to get fully compliant with the new rules introduced by the said directive. In the meantime, the insurance industry has also to adapt to the requirements of the General Data Protection Regulation (GDPR), which comes into force on May 25 this year.
The Insurance Distribution Directive, which came into force in February 2016, will impact the distribution of insurance and reinsurance across the EU and will apply to both undertakings and intermediaries. Despite being given a two-year period to ensure compliance by the transposition date of February 23, 2018, a number of stakeholders seem to have stalled in their preparations.
For this reason, with the clock ticking and time running out, in the last quarter of 2017, 16 member states, including Malta, asked the European Parliament to propose to the European Commission to postpone the application of the directive. Five days before the last Christmas day, the European Commission issued a press release proposing to push forward the application date of the Insurance Distribution Directive by seven months to October 1, 2018.
The Malta Financial Services Authority (MFSA) will be transposing the requirements of the IDD into a number of different documents. Some of the provisions of the IDD, including the registration requirements and the organisational requirements, will be mainly reflected in the Insurance Intermediaries Act and the Insurance Business Act, together with the subsidiary legislation attaching to both acts.
The coming months will be characterised by countless hours of preparations
Last July, the MFSA consulted with the market a number of proposed amendments to the Insurance Intermediaries Act and the Insurance Business Act. No feedback on such consultation has yet been provided by the MFSA.
In addition to this, the conduct of business provisions will be transposed in a newly-introduced Conduct of Business Rulebook. This will mainly involve the transposition of areas of the MiFID II Directive for investment services licence holders and credit institutions as well as the conduct of business provisions contained in the IDD for insurance undertakings and insurance intermediaries.
Following two phases of consultation back in 2016, just before last Christmas, the MFSA issued a feedback statement together with the revised chapters of the rulebook. The date of application of the Conduct of Business Rulebook for insurance undertakings and intermediaries is still not yet known. Although the delay in the application date could indicate some breathing space, insurance undertakings and intermediaries are still facing tight deadlines in order to ensure compliance with the new rules. The provisions of the Insurance Distribution Directive are quite onerous, with various changes to information documents and sales processes required.
Insurance distributors are now facing stricter requirements surrounding conflicts of interest and remuneration disclosures, product oversight and training hours. Moreover, a number of policies have to be in place and standardised templates have to be followed when it comes to pre-contractual information documents.
The MFSA seems to go further beyond some of the requirements of the IDD, most notably by introducing the requirement on distributors to keep record of face-to-face meetings with clients in the Conduct of Business Rulebook.
As crunch time looms, the coming months will be characterised by countless hours of preparations in order to ensure the smooth running of operations post-application date.
Stefan Josef Vella is an insurance regulatory adviser at Ganado Advocates.
This article is for informational purposes only and does not contain or convey legal advice. The information contained in this article should not be used or relied upon in regard to any particular facts or circumstances without first obtaining professional advice.