EIOPA publishes changes to the minimum amount of professional indemnity insurance cover and financial capacity intermediaries need under IDD

The European Insurance and Occupational Pensions Authority (EIOPA) has published today its draft Regulatory Technical Standards (RTS) adapting the base euro amounts for the professional indemnity insurance (PII) cover and financial capacity of intermediaries under the Insurance Distribution Directive (IDD).

The IDD prescribes that changes to the minimum amounts shall be based on the rate of inflation. As the Harmonised Index of Consumer Prices (HICP) rose by 20.32% between 1 January 2018 and 31 December 2022, the new base amounts would be as follows:

• The base PII amount applying to each claim is to increase from EUR 1 300 380 to EUR 1 564 610 [+ EUR 264 230]
• The base aggregate PII amount per year is to increase from EUR 1 924 560 to EUR 2 315 610 [+ EUR 391 050]
• The base financial capacity amount is to increase from EUR 19 510 to EUR 23 480 [+ EUR 3 970]

Read the Final Report

Background and notes

EIOPA is required under Article 10(7) of the IDD to review the minimum amounts for PII and financial capacity every five years. Following the first review in 2018, EIOPA carried out this exercise for the second time and submitted the new set of draft RTS to the Commission on 30 June 2023.

EIOPA ran a public consultation from 9 February 2023 to 6 May 2023 on its proposed draft RTS. While most stakeholders expressed their support, some raised concerns about the methodology used in the IDD for adjusting the minimum amounts and underlined the need to have sufficient time to adjust a large number of PII contracts to ensure that the required insurance cover will be available in time. These are issues which would need to be addressed either in the future review of the IDD or as part of the European Commission’s development of the implementing legislation.

EIOPA’s feedback statement to the public consultation and a resolution table for the consultation paper are included in the Final Report which can be found here.

Professional indemnity insurance is a form of liability insurance that helps insurance intermediaries cover the cost of compensating policyholders for claims, legal fees or legal remedies arising from the professional negligence of insurance intermediaries. PII strengthens the protection of consumers by increasing the funds available to insurance intermediaries to meet customer claims.