Brussels opens ‘discussion’ on broker pay with CEIOPS

The Commission has requested advice from the Committee of European Insurance and Occupational Pensions Supervisors (CEIOPS) on how the matter could be settled as part of its review of the Insurance Mediation Directive (IMD). Karel Van Hulle, Head of Unit at the Insurance and Pensions Unit at DG Internal Market told Commercial Risk Europe: “No decisions have been taken yet. It is, however, clear that the issue of remuneration has received renewed attention following the financial crisis. Once we have received CEIOPS’ advice on this we will decide how to proceed. The questions to CEIOPS have been raised so as to start the discussion.” FERMA is in talks with BIPAR, the European brokers’ association, to try and find a market solution as reported in last month’s issue.hideThe Commission said that it was concerned about the remuneration of brokers and potential conflicts of interest in September 2007, when it published the findings of its Business Insurance Sector Inquiry. It was suggested, however, by the Commission and national financial regulators that formal action could be avoided if the market could find an industry solution. Over two years later such a solution has still not emerged and the IMD review is now fully underway. In a letter written by Jörgen Holmquist to Gabriel Bernadino, Chairman of CEIOPS, the Director General of the Directorate General Internal Market and Services suggested that time may be running out for a market solution. The IMD is mainly focused on the retail financial market and, as part of its revision, the Commission says that it is keen to adopt clear conflicts of interest and transparency rules that regulate the distribution of investments that are packaged as life insurance policies. But, Mr. Holmquist also said that he would like to receive advice from CEIOPS on how conflicts of interest could be avoided and transparency improved in the wider market, including non-life and corporate insurance markets. How the transparency of remuneration in the sale of policies could be improved for all those involved, taking into account the need for a level playing field. Peter den Dekker, President of FERMA and risk manager for Dutch-based aerospace company Stork, told CRE that he still believes a market solution can be found for the corporate insurance sector at least and that the presentation he gave to about 80 representatives of European broker associations at BIPAR early last month to kick-start the process had gone well. “We want to agree principles at a high level between FERMA and BIPAR on behalf of the members’ association members. These should not conflict with any national laws or anti-competitive rules and will prevent the creation of some complex, bureaucratic approach. The agreement would be followed by local agreements between national associations once the IMD has been implemented,” he explained. “There are a number of key issues that we would like to agree upon. First, BIPAR members should manage any potential conflicts of interest. They can do this by being transparent and through the disclosure of all revenue types. By doing this, BIPAR members can manage any conflicts of interest and individual members of FERMA will be able to review that,” continued Mr. Den Dekker. “There are two types of disclosure requirements. First, the financial information on all remuneration related to the placement and purchase of business insurance. This is not new as this already is required in a number of countries. Second, there would be a disclosure of the source in a general description of the type of remuneration the brokers receive from insurers when it is not directly related to servicing. That is, revenue received from an insurer based on anything other than a transaction. This revenue could be based upon the volume of business placed or profit- based and we, the buyers, do not necessarily know, and we need to know,” he added. Mr. Den Dekker said that he would hold further talks with BIPAR and is hopeful that progress could be made quite quickly. During the recent AMRAE conference in Deauville, France, a number of insurance company executives told CRE that they believe insurance companies should be at the table for any serious discussion about broker pay. Ms. Koller told CRE that the association would comment if requested, but, does not feel the insurers should force their way into the debate uninvited: “We were not informed of this discussion [between FERMA and BIPAR]. If they invite us we would give it serious consideration as we are open to discuss any topics.”

Brussels opens ‘discussion’ on broker pay with CEIOPS

Want to read this article?

Read Next

Global data breaches double in 2023 driven by extortion and third-party software attacks

Social inflation set to continue driving US liability rates: AM Best

Zurich appoints Adriana Scherzinger group head of captives

Marsh McLennan achieves ‘Autism Confidence’ status

New management liability policy from digital MGA Aurora

Global data breaches double in 2023 driven by extortion and third-party software attacks

Social inflation set to continue driving US liability rates: AM Best

Zurich appoints Adriana Scherzinger group head of captives

Marsh McLennan achieves ‘Autism Confidence’ status

New management liability policy from digital MGA Aurora

Want to read this article?

Read Next

Global data breaches double in 2023 driven by extortion and third-party software attacks

Social inflation set to continue driving US liability rates: AM Best

Zurich appoints Adriana Scherzinger group head of captives

Marsh McLennan achieves ‘Autism Confidence’ status

New management liability policy from digital MGA Aurora

Related Articles