Q&A

Question

IDD, is this applicable for captives – could you outline the reasons why and where this is noted in the Directive?.

Have some European regulators specifically removed Captives from the scope of this Directive in their transposition.

There is confusion in industry here and its application to reinsurance and captives.

One opinion is that it applies to captives as Re/Insurance undertakings and therefore re/insurance distributors as customers includes consumers and commercial entities, and on this basis the management/directors of captives would be required to comply with Reg 20 i.e. F&P & CPD requirements. However the Central Bank have discretion to adjust its requirements where appropriate in respect of knowledge and ability.

Another opinion is that the following exemption mostly applies and so most not captured Information exemptions and flexibility clause

35. (1) An insurance distributor carrying out distribution activities in relation to the insurance of large risks is not required to provide the information required under Regulations 31, 32 and 34. ‘Large risks’ as defined in the Solvency II Directive include: marine, aviation, transport classes and contracts with commercial policyholder of certain size (more than 250 employees, with turnover of more than €12.8m or balance sheet over €6.2m).  

The Central Bank of Ireland won't provide any comment on its application. Is it a case that we  might need to lobby to have captives removed from scop/exemption for captives with the Central Bank of Ireland, has any other EU country done similar?

EIOPA answer

The answer to this question is provided by the European Commission.

Following Article 1(1) of the Directive (EU) 2016/97 (Insurance Distribution Directive – IDD) the directive lays down rules concerning the taking-up and pursuit of the activities of insurance and reinsurance distribution in the EU. According to Article 1(2) IDD the directive applies to any natural or legal person established in a Member State involved in the distribution of insurance and reinsurance products.

Article 22(1), first subparagraph IDD provides that the information referred to in Articles 18, 19 and 20 IDD need not be provided when the insurance distributors carries out distribution activities in relation to the insurance of large risks1 . Furthermore, Article 25 IDD does not apply to insurance products, which consist of the insurance of large risks. Besides these rules, Article 22(1), second subparagraph IDD gives Member States the option to decide that the information referred to Articles 29 and 30 IDD need not to be provided to a professional client as defined in point (10) of Article 4(1) of Directive (EU) 2014/65. As results from Article 1 IDD, reinsurance activities are, in principle, covered by the Directive, unless specific provisions refer explicitly to insurance activities. The IDD makes no reference to the concept of captive insurance nor does it provide specific requirements for captive insurance undertakings. This means that the legislator did not have the intention to make any distinction between insurance undertakings and captive insurance undertakings on the one hand and reinsurance undertakings and captive reinsurance undertakings on the other hand. Consequently, the provisions of the IDD apply fully to captive insurance and reinsurance undertakings. Article 30(2) IDD deals with the assessment of appropriateness, which has to be applied in cases where the customer has, in accordance with the applicable national law, waived the right to obtain full advice. In such cases, an insurance intermediary or insurance undertaking asks the customer or potential customer to provide information regarding his or her knowledge and experience in the investment field relevant to the specific type of product or service offered or demanded to enable the insurance intermediary or the insurance undertaking to assess whether the insurance service or product envisaged is appropriate for the customer.



The disclaimer provided by the European Commission:

The answers clarify provisions already contained in the applicable legislation. They do not extend in any way the rights and obligations deriving from such legislation nor do they introduce any additional requirements for the concerned operators and competent authorities. The answers are merely intended to assist natural or legal persons, including competent authorities and Union institutions and bodies, in clarifying the application or implementation of the relevant legal provisions. Only the Court of Justice of the European Union is competent to authoritatively interpret Union law. The views expressed in the internal Commission Decision cannot prejudge the position that the European Commission might take before the Union and national courts.