The International dimension of insurance mediation under the EU ...

Prof. dr Pierpaolo MARANO
THE INTERNATIONAL DIMENSION
OF INSURANCE MEDIATION
UNDER THE EU DIRECTIVE ON INSURANCE MEDIATION.
PRESENT AND FUTURE
Abstract
In comparison with other European directives, the directive on insurance mediation (hereinafter:
IMD) is less prescriptive concerning the relationship with third countries. This has given rise
to the issues which are examined in this paper. The analysis also wants to explain the possible solutions
emerging from the amending process of the IMD, which has just begun.
Key words: (Re)Insurance intermediation – (Re)Insurance intermediaries – Third countries –
European Union Directives – Supervisory Authorities – Consumer protection.
The existing provisions under IMD which are related to the services offered by insurance intermediaries
1 , established in third countries, in the territory of Member States, are set out in Article
1(3) subparagraph 2, Article 2(9) and recital 14.
Article 1(3) subparagraph 2 states that IMD shall not affect a Member State's law in respect
of insurance intermediation business pursued by insurance and reinsurance intermediaries established
in a third country and operating on its territory under the principle of freedom to provide services,
provided that equal treatment is guaranteed to all persons carrying out or authorised to carry out
insurance intermediation activities on that market. According to Article 2(9) and recital 14 in conjunction
with Article 3(1), the intermediaries should be registered with “the Competent Authority
of their home Member State.” 2 Following from that, the IMD does not apply to intermediaries established
in third countries.
Therefore, third country intermediaries have to apply directly for ‘permission’ from every
Member State they want to intermediate within, otherwise the intermediation is illegal.
In addition to the above rules, Article 1(3) subparagraph 1 states that IMD shall not apply to
insurance and reinsurance mediation services provided in relation to risks and commitments located
outside the Community, while the following subparagraph 3 adds that IMD shall not regulate insurance
mediation activities carried out in third countries nor activities of Community insurance or reinsurance
undertakings 3 , carried out through insurance intermediaries in third countries.
Therefore, the intermediaries registered with the Competent Authority of their own Member State
may carry out insurance mediation in a third country, if their own State shall recognize intermediaries
of the third state to operate in its territory according to the condition of reciprocity that is characteristic
of the international law.
Università Cattolica del Sacro Cuore, Milan, email: pp.marano@unical.it.
1 According to Article 2 (3 and 5) IMD, "insurance mediation" means the activities of introducing, proposing or carrying out other work
preparatory to the conclusion of contracts of insurance, or of concluding such contracts, or of assisting in the administration and performance
of such contracts, in particular in the event of a claim, while “insurance intermediary" means any natural or legal person who,
for remuneration, takes up or pursues insurance mediation.
2 According to Article 2 (9) IMD, "home Member State" means: (a) where the intermediary is a natural person, the Member State in
which his residence is situated and in which he carries on business; (b) where the intermediary is a legal person, the Member State
in which its registered office is situated or, if under its national law it has no registered office, the Member State in which its head
office is situated.
3 Insurance and reinsurance undertakings as defined in First Council Directive 73/239/EEC of 24 July 1973 on the coordination of
laws, regulations and administrative provisions relating to the taking-up and pursuit of the business of direct insurance other than life
assurance and First Council Directive 79/267/EEC of 5 March 1979 on the coordination of laws, regulations and administrative
provisions relating to the taking-up and pursuit of the business of direct life assurance.

According to a survey conducted by the Committee of European Insurance and Occupational
Pensions Supervisors (hereinafter: CEIOPS) among Member States in 2010, only a few have registered
subsidiaries from third countries. Other than one Member, there are no branches of companies
from third countries acting within one Member State. The requests of intermediaries from third
countries concerning the registration within one Member State are significantly low.
The survey does not provide an explanation for this situation. The lack of attractiveness to
insurance intermediaries of third countries to carry out business in one or more of the Member States
may depend on several factors. The lack of legal certainty is definitely between these factors and
it is probably the most important of them. 4 In any case, it appears as the factor on which the European
Commission has focused its efforts, where it has to amend the provisions of the IMD.
With the entry into force of the Solvency II Framework Directive, a risk-based solvency regime
will be introduced for insurance undertakings. This will also affect the relationship between insurance
undertakings and policy holders. Against this background, Recital 139 of the Solvency II Directive invites
the Commission to come forward with a proposal for the revision of the IMD, in order to extend the
benefits of a risk based solvency regime and increased transparency rules to policy holders. The Commission
requested technical advice from CEIOPS on 27 January 2010, on some profiles of the IMD that
the Commission has identified as likely to evolve. 5 CEIOPS provided its opinion on 10 November
2010. 6 Then, the Commission issued a consultation document on 26 November 7 , held a public hearing
with all interested parties on 10 December in Brussels 8 and set a deadline of 28 February 2011 to gather
views on the mentioned document. As a result of this consultation, the Commission will adopt the draft
containing the proposed amendments to the IMD, expected by end 2011 as stated in the Communication
COM (2010) 301 final, 2 June 2010.
Requesting the above technical advice from CEIOPS, the Commission would like to receive
advice on the ways to improve the legal certainty of services offered by insurance intermediaries,
established in third countries, in the territory of Member States.
CEIOPS answered that the IMD is less prescriptive concerning the relationship with third
countries, in comparison with other European directives. This gave rise to the issues reported by the
CEIPOS as follows.
Article 1(3) subparagraph 2, IMD states that it does not apply to intermediaries established in a
third country. However, the statement is limited to the condition that “equal treatment is guaranteed to
all persons …”. This condition is in some way ambiguous as it is not based on the superior law of the
Treaty. According to Article 49 and 56 TFEU in conjunction with Article 54 the freedom of services
and the freedom of establishment does only apply to persons having the nationality of an EU Member
State or being established according to the law of an EU Member State without any limitation.
Therefore, CEIOPS recommends that Article 1(3) subparagraph 2, IMD be amended to clarify
the treatment of intermediaries from third countries. This amendment will have the effect of
these intermediaries having to apply directly for ‘permission’ from every Member State that they
wish to carry out insurance intermediation activities.
In addition, CEIOPS points out that Articles 15 and 63 MiFID provide a basis for treatment
of intermediaries from third countries which could be adapted for the IMD. These provisions are related,
respectively, to relations 9 and exchange of information 10 with third countries. On this basis,
4 An explanation on the obstacles to the development of a cross border trade in markets for retail financial services is provided by the
Communication COM(2009) 204, which is available at http://ec.europa.eu/internal_market/finservicesretail/docs/investment_products/29042009_impact_assessment_en.pdf
5 Paper s available at http://ec.europa.eu/internal_market/insurance/mediation_en.htm
6 The technical advice issued by CEIOPS is available at https://eiopa.europa.eu/publications/submissions-to-the-ec/index.html
7 Consultation document is available at http://ec.europa.eu/internal_market/insurance/mediation_en.htm
8 Program is available at http://ec.europa.eu/internal_market/insurance/mediation_en.htm
9 Article 15 MiFID states that:
1. Member States shall inform the Commission of any general difficulties which their investment firms encounter in establishing
themselves or providing investment services and/or performing investment activities in any third country.
2. Whenever it appears to the Commission, on the basis of information submitted to it under paragraph 1, that a third country does not
grant Community investment firms effective market access comparable to that granted by the Community to investment firms from that

CEIPOS recommends that Article 1(3), IMD might be further elaborated upon by reference to related
provisions in MiFID (Articles 15 and 63), whereby: (a) difficulties in dealing with third countries
might be drawn to the Commission’s attention; and (b) the possibility and conditions for exchanging
information with third countries could be clearly articulated. 11
Other issue addressed by CEIOPS was summarized as follows: Should there be set up some
kind of relief for those intermediaries established in third countries who are already licensed for insurance
intermediation in one Member State?
third country, the Commission may submit proposals to the Council for an appropriate mandate for negotiation with a view to obtaining
comparable competitive opportunities for Community investment firms. The Council shall act by a qualified majority.
3. Whenever it appears to the Commission, on the basis of information submitted to it under paragraph 1, that Community investment
firms in a third country are not granted national treatment affording the same competitive opportunities as are available to
domestic investment firms and that the conditions of effective market access are not fulfilled, the Commission may initiate negotiations
in order to remedy the situation.
In the circumstances referred to in the first subparagraph, the Commission may decide, in accordance with the procedure referred
to in Article 64(2), at any time and in addition to the initiation of negotiations, that the competent authorities of the Member States
must limit or suspend their decisions regarding requests pending or future requests for authorisation and the acquisition of holdings
by direct or indirect parent undertakings governed by the law of the third country in question. Such limitations or suspensions
may not be applied to the setting-up of subsidiaries by investment firms duly authorised in the Community or by their subsidiaries,
or to the acquisition of holdings in Community investment firms by such firms or subsidiaries. The duration of such measures
may not exceed three months.
Before the end of the three-month period referred to in the second subparagraph and in the light of the results of the negotiations,
the Commission may decide, in accordance with the procedure referred to in Article 64(2), to extend these measures.
4. Whenever it appears to the Commission that one of the situations referred to in paragraphs 2 and 3 obtains, the Member States
shall inform it at its request:
(a) of any application for the authorisation of any firm which is the direct or indirect subsidiary of a parent undertaking governed by the
law of the third country in question;
(b) whenever they are informed in accordance with Article 10(3) that such a parent undertaking proposes to acquire a holding in a
Community investment firm, in consequence of which the latter would become its subsidiary.
That obligation to provide information shall lapse whenever agreement is reached with the third country concerned or when
the measures referred to in the second and third subparagraphs of paragraph 3 cease to apply.
5. Measures taken under this Article shall comply with the Community's obligations under any international agreements, bilateral
or multilateral, governing the taking-up or pursuit of the business of investment firms.
10 Article 63 MiFID states that:
1. Member States may conclude cooperation agreements providing for the exchange of information with the competent authorities
of third countries only if the information disclosed is subject to guarantees of professional secrecy at least equivalent to those required
under Article 54. Such exchange of information must be intended for the performance of the tasks of those competent authorities.
Member States may transfer personal data to a third country in accordance to Chapter IV of Directive 95/46/EC.
Member States may also conclude cooperation agreements providing for the exchange of information with third country authorities, bodies
and natural or legal persons responsible for:
(i) the supervision of credit institutions, other financial organisations, insurance undertakings and the supervision of financial markets;
(ii) the liquidation and bankruptcy of investment firms and other similar procedures;
(iii) carrying out statutory audits of the accounts of investment firms and other financial institutions, credit institutions and insurance
undertakings, in the performance of their supervisory functions, or which administer compensation schemes, in the performance
of their functions;
(iv) overseeing the bodies involved in the liquidation and bankruptcy of investment firms and other similar procedures;
(v) overseeing persons charged with carrying out statutory audits of the accounts of insurance undertakings, credit institutions, investment
firms and other financial institutions,
only if the information disclosed is subject to guarantees of professional secrecy at least equivalent to those required under Article
54. Such exchange of information must be intended for the performance of the tasks of those authorities or bodies or natural or
legal persons.
2. Where the information originates in another Member State, it may not be disclosed without the express agreement of the competent
authorities which have transmitted it and, where appropriate, solely for the purposes for which those authorities gave their
agreement. The same provision applies to information provided by third country competent authorities.
11 By adhering to this approach, however, Article 177 of the Solvency II Directive could be adapted to the insurance mediation without
any prejudice to the prerogatives of each Member States. They shall inform - hypothetically - the Commission of any general
difficulties encountered by their insurance or reinsurance intermediaries in establishing themselves and operating in a third country
or pursuing activities in a third country, while the Commission shall, periodically, submit a report to the Council examining the treatment
accorded, in third countries, to insurance or reinsurance intermediaries authorised in the Community, together with any appropriate
proposals or recommendations.

CEIOPS acknowledged that Directive 2005/36/EC on the recognition of professional qualifications
does apply only to persons having the nationality of an EU Member State. 12 Therefore CEIOPS
considered the pros and cons of facilitating freedom of services and freedom of establishment for intermediaries
established in third countries already licensed by one Member States and concluded that because
of the harmonization by the IMD, Member States have the same minimum standards for insurance
intermediation as a basis for the mutual recognition of a license given to an intermediary established in a
third country. As such, CEIOPS recommends that Member States may retain the ability to apply ‘due
credit’ to an application for registration of an intermediary already registered in another Member State,
but this should be an option and not be binding on Competent Authorities in every circumstance.
The last issue considered by CEIOPS concerns the possibility that IMD contains an explicit
authorisation provision for Member States to conclude agreements with one or more third countries
to apply certain provisions of the IMD.
CEIOPS concluded that it was not necessary to introduce new provisions in IMD in respect
of agreements between Member States and third countries on the treatment of third country intermediaries,
while the Competent Authorities in each Member State is responsible for the application of
IMD provisions to intermediaries from third countries.
According to this approach, the power to negotiate agreements with a third country should
be retained by each Member State, without the Commission may act in this filed at the request of a
Member State or on its own initiative. This suggestion reflects a more general approach of CEIOPS,
which seems to consider the market of insurance products as essentially on domestic basis. This is
true with respect to the present moment, but the Commission wants to go further by removing national
barriers to create a genuine Single market.
The development of the international dimension of insurance mediation, then, is related to
the ability of the Commission to introduce a higher level of harmonization in order to also increase
the cross-border activity within the Single market. Achieving a level of harmonization in the rules
for taking up and pursuing insurance mediation, which is comparable to that achieved with respect
to insurance (and reinsurance) undertakings, is probably necessary to assume a right to negotiate
with third countries entrusted to the Commission pursuant to the Treaty.
The IMD aims to guarantee a high level of consumer protection. The Commission services
initiated an implementation check of the IMD in 2005. According to this review, Commission found
that IMD has established a legal framework, aiming at a high level of professionalism and competence
among insurance intermediaries. A centralised registration system for insurance intermediaries
provides a mechanism for the proof of professional requirements and facilitates cross border activities
by way of freedom of establishment and freedom to provide services. 13 Due to its minimum
harmonisation character, however, a patchwork of national regulations has emerged in Member States.
This has lead to significant gaps and inconsistencies as far as the activity of insurance mediation
is concerned. 14
The upcoming changes to the IMD should be directed exclusively towards overcoming national
barriers, so as to harmonize the rules in the Single market and level the playing field between
the various intermediaries regardless of their nationality. The existence of common rules allow the
Commission to negotiate with third countries similar rules, effective for all Member States, instead
of several bilateral agreements between individual States (members and third countries).
Looking at the technical advice issued by CEIOPS, however, the impression is that national
supervisors who were all members of that committee do not want to lose their regulatory powers in
12 According to Article 3(3) Directive 2005/36/EC, formal qualifications issued by a third country shall be regarded as evidence of
formal qualifications if the holder has three years' professional experience in the profession concerned on the territory of the Member
State which recognised that evidence of formal qualifications in accordance with this Directive, certified by that Member State.
13 See also CEIOPS’ Report on the Implementation of the Insurance Mediation Directive’s Key Provisions, at http://www.ceiops.eu/media/files/publications/submissionstotheec/CEIOPS-DOC-09
07IMDReport.pdf
14 See COMMISSION STAFF WORKING PAPER, Consultation document on the Review of the Insurance Mediation Directive
(IMD), at http://ec.europa.eu/internal_market/consultations/docs/2010/insurance-mediation/consultation-document_en.pdf

favor of EIOPA , which is the newly formed European Authority in Insurance. Will Member States
give up their legislative power to negotiate bilateral agreements with third countries in favor of the
EU Commission?
The upcoming draft proposal of the new IMD will be an opportunity to assess the contents
of the amendments to the current Directive, but it also seems a check-up on the health of the European
integration process.
SUMMARY
The development of the international dimension of insurance mediation needs to improve
especially the legal certainty of services offered by insurance intermediaries, established in third countries,
in the territory of Member States. The EU Commission has several options to achieve this
goal. Some of them require technical solutions, while others appear to be more dependent on political
decisions, which should settle the Commission's aspirations to a higher level of harmonization,
the latent strengths of national supervisory authorities and the nascent ambitions of a new European
technocracy.