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European Insurance and Occupational Pensions Authority

2436

Q&A

Question ID: 2436

Regulation Reference: (EU) No 2016/97 - Insurance Distribution Directive

Topic: Definitions (Art. 2 IDD)

Article: 1(6) and 2

Status: UnderReview

Date of submission: 16 May 2022

Question

Where the policyholder is an EU entity and/or EU individuals and the risks are exclusively registered in the EU, then such policies would be considered in scope of the IDD and any insurer or intermediary in the chain would need to have the necessary EU authorisation to be able to operate in the EU. However we would understand due to the nature of the policies identified in the background (marine), such policies would be considered out of scope of the IDD and EIOPA’s Recommendation 9 would not apply to the insurers and intermediaries in the chain. As a consequence the Maltese broker would not need to obtain the necessary permissions to be able to operate within the EU before distributing such a product. We would be grateful if you could kindly confirm or otherwise our understanding.

Background of the question

We have come across a matter relating to a Maltese broker which writes insurance products covering a range of areas from cyber risk, political risks, transactional risks, professional indemnity and Marine under Binding authority agreements “binders” on behalf of various insurers, in the UK, USA and EU. The query relates to marine insurance and its application to EU/EEA internal market. We understand that Article 1 of the IDD states that the IDD does not apply to distribution activities in relation to risks and commitments located outside the Union. Furthermore, Recommendation 9 of Recommendations for the insurance sector in light of the United Kingdom withdrawing from the European Union, issued in February 2019, states the following: ‘Competent authorities should ensure that all intermediaries carrying out distribution activities which target EU27 policyholders and for EU27risks shall fall under the scope of the IDD’. The insurance broker in question handles binding authorities which cover Kidnap & Ransom / Piracy Loss of Hire and Marine Hull & Machinery War / Loss of Hire, which provide insurance for risks whilst at sea. The policyholder is normally the ship owner(s) and/or operator(s). Additionally, the policy may have multiple beneficiaries and cover vessels with different owners and operators. All entities involved in ownership and operations will be named in the policy. In determining the risk location for policies covering a fleet of specified vessels, the Maltese broker uses the following one or more criteria:  Physical location of the vessel (place of operation)  Jurisdiction in which the vessel is registered  Location of the insured’s residence or business establishment The policies in the majority, cover fleets of vessels that have blue-water capabilities which are oceangoing fleets able to operate on the high seas far from their home port of their owners’ nationality. The physical location of the vessel in terms of risk location is worldwide and therefore might not necessarily fall within the insurance distribution of the IDD.