EIOPA publishes guidance on integrating the customer’s sustainability preferences in the suitability assessment under the IDD

The European Insurance and Occupational Pensions Authority (EIOPA) published today its guidance on integrating the customer’s sustainability preferences in the suitability assessment under the Insurance Distribution Directive (IDD). The Guidance is based on Commission Delegated Regulation (EU) 2021/1257 and aims at easing the implementation of the Delegated Regulation by national competent authorities (NCAs) as well as by insurance undertakings and insurance intermediaries providing advice on insurance-based investment products (IBIPs).

EIOPA provides guidance on:

  • how to help customers better understand the concept of “sustainability preferences” and their investment choices;
  • how to collect information on sustainability preferences from customers;
  • how to match customer preferences with products, based on product disclosures under the Sustainable Finance Disclosure Regulation (SFDR);
  • what arrangements are necessary to ensure the suitability of an insurance-based investment product; and
  • the sustainable finance-related training and competence expected of insurance intermediaries and insurance undertakings who provide advice on insurance-based investment products (IBIPs).

EIOPA is mindful of the underlying complexity of the regulatory framework and has, therefore, included diagrams and flow charts in the guidance to facilitate comprehension.

The guidance is complemented by a feedback statement, which addresses the comments received from stakeholders in a public consultation on draft Guidelines on integrating the customer’s sustainability preferences earlier this year. After the consultation, EIOPA decided to pause its work on Guidelines on the topic of sustainability preferences in order to gather more information based on the implementation experience with the new legislative framework in the coming months.

Download the guidance

Download the feedback statement

Background

Commission Delegated Regulation (EU) 2021/1257 requires insurers and insurance intermediaries to integrate the customer’s sustainability preferences into the sales process when they provide advice on IBIPs. Its objective is to prevent mis-selling practices or the misrepresentation of IBIPs as fulfilling sustainability preferences where they do not (so-called “greenwashing”). It will apply from 2 August 2022.

“Sustainability preferences” are defined in a three-fold definition in the Delegated Regulation as a customer preference for:

  • a minimum proportion of EU Taxonomy-aligned investments;
  • a minimum proportion of sustainable investments (as defined under the Sustainable Finance Disclosure Regulation); or
  • the consideration of principal adverse impacts on sustainability factors.

”Insurance-Based Investment Products” (IBIPs) are life insurance products that offer a maturity or surrender value and where that maturity or surrender value is wholly or partially exposed to market fluctuations, directly or indirectly. Typical examples of IBIPs are unit-linked life insurance, with-profits life insurance and traditional life insurance products.