Insurance Law Alert

Brexit: Italian measures for UK insurers and intermediaries

The Italian Government approved a draft law decree aimed at ensuring financial stability and market integrity in the event of hard Brexit (the “Decree”). The final version of the Decree is expected to be issued soon and will enter into force upon the publication on the Official Journal. Amendments in the final version of the Decree cannot be excluded at this stage, but significant deviations from the below are not expected as the Decree was presented and approved on the same day.

1. Cancellation from the Italian IVASS Registers and business interruption

In relation to UK insurance undertakings and intermediaries, these are the main provisions of the draft version of the Decree examined by the Government yesterday:

UK insurance undertakings and intermediaries that are allowed to carry out business in Italy under freedom of services and right of establishment will be required to interrupt any activity in Italy upon hard Brexit save for, respectively, a 18-month run-off period (unless IVASS grants an extension upon specific and motivated request to be submitted in advance) and a 6-month run-off period. In these periods insurance undertakings and intermediaries respectively are only authorized to manage the existing business and insurance covers, without the power to underwrite/distribute new business.

2. Disclosure requirements to existing policyholders, insured and beneficiaries

Within 15 days from the entry into force of the Decree, UK insurance undertakings and intermediaries must inform policyholders, insured persons and beneficiaries about their operational regime in place and of any actions taken to ensure the orderly closure of the existing contractual relationships, even if they already communicated to IVASS the contingency plan they intended to adopt in compliance with the previous regulatory requirements and guidelines.

3. Communication to IVASS

Within 90 days from the entry into force of the Decree, UK insurance companies must file with IVASS an action plan for the effective management of the insurance policies in place during the transitory period, including the payment of claims.

4. Right of withdrawal from existing contracts

Starting from the date of the exit of the UK from the EU, Italian policyholders of insurance contracts issued by UK insurance undertakings are allowed to withdraw from their policies having a duration longer than 1 year without any penalty, by sending a written communication to the insurer. Tacit renewal clauses will no longer be effective as of that date.We remain at your disposal for any clarification you may need.

New IVASS Regulation on transparency, advertising and creation of insurance products from 2019

Following the incorporation into Italian national laws of the Directive (EU) 2016/97 of the European Parliament and of the Council of 20 January 2016 on insurance distribution IVASS (the Italian insurance regulator) has issued the new Regulation no. 41 of 2 August 2018 on disclosure, advertising and creation of insurance products matters (the “Regulation”), applicable from 1 January 2019.

The Regulation is aimed at reviewing and amending the regulatory provisions contained in IVASS Regulation no. 35/2010, and provide a standardised base pre-contractual document for each insurance product category that will replace the standard Informative Note (Nota Informativa) as follows:

  1. the IPID (Insurance Product Information Document) for non-life products;
  2. the so called Life DIP (Documento Informativo Pre-contrattuale Vita) for life risk insurance products (provided by the Italian Insurance Code as an Italian peculiarity); and
  3. the KID (Key Information Document) for insurance based investment products as provided by the EU regulations.

In addition, IVASS introduces a supplementary standardized pre-contractual document to be delivered to potential customers together with the base documents, the so called Supplementary DIP (“DIP Aggiuntivo”) aimed at collecting information which is supplementary and complementary with respect to the information contained in the base documents, in order to ensure a more detailed knowledge of the product and to guide the client toward an informed decision on contractual rights and obligations.

New Rules on Insurance distribution from 2018

Following the approval of the Directive (EU) 2016/97 of the European Parliament and of the Council of 20 January 2016 on insurance distribution (recast) it is now time to assess the aim of such Directive, taking into account that EU countries shall incorporate it into national law by 23 February 2018.

In detail, it aims to improve the way insurance products are sold so that they will bring real benefits to consumers and retail investors in the EU.

Under the new directive on insurance distribution, consumers and retail investors buying insurance products or insurance-based investment products will benefit from greater transparency of insurance distributors with regard to the price and the costs of their products, so that it is clear to consumers what they are paying for.

In addition, consumers should benefit from a better and more comprehensible information, so that consumers can take more informed decisions, with a simple, standardised Insurance Product Information Document (IPID) for non-life insurance products.

Furthermore, where insurance products are offered in a package with another good or service, for example when a new car is sold at a bargain price together with motor insurance, consumers will have the choice to buy the main good or service without the insurance policy.

New rules on transparency and business conduct should prevent consumers from buying products that do not meet their needs. These rules now also apply when a product is bought directly from an insurance company, and not only (as in the past) when products are bought via intermediaries such as agents or brokers.

There are stronger safeguards for the sale of life insurance products with investment elements, such as unit-linked life insurance contracts. Insurance distributors selling such products have to make sure that the product is suitable with regard to the customer’s financial situation, investment objectives and experience in the investment field.

Insurance distributors will benefit from fair competition on a level playing field and an improved legal framework for cross-border business.

The directive recasts and replaces Directive 2002/92/EC on insurance mediation with effect from 23 February 2018.

The Directive applies from 22 February 2016.

New IVASS Regulation on simplification measures for contractual relationships

Following the public consultation launched on 18 March 2014, IVASS published the Regulation No. 8 of 3 March 2015 concerning measures to simplify the administration of contractual relationships between insurance undertakings, intermediaries and clients. The Regulation implements Article 22, paragraph 15-bis of Law Decree No. 179 of 18 October 2012, as converted into law which required IVASS to enact measures aimed at reducing the paper format requirements and promoting the use of digital documentation. Below are the main relevant provisions set out by the new Regulation.

Italian and EU insurance undertakings and intermediaries are required to foster the use of advanced electronic signature, qualified electronic signature and digital signature for the execution of the insurance agreements.

Furthermore, with an aim at promoting the use of traceable means of payment, insurance undertakings and intermediaries must allow clients to pay insurance premiums by means of electronic payment instruments.

In addition, before the execution of the agreement or the signing of the proposal, insurance undertakings and intermediaries may obtain the client’s consent – also through voice recordings or email – to the electronic transmission of the relevant documentation during both the pre-contractual and contractual phase of the relationship with the client.

Insurance undertakings and intermediaries must adopt a documentation management system aimed at avoiding requests to clients of documentation which is not necessary or which has been already obtained in relation to previous relationships with the same client.

Italian insurance undertakings and intermediaries must obtain a certified e-mail account (“Posta Elettronica Certificata” or “PEC”) and indicate the PEC address in any communication addressed to the public and on their website. However, it is worth noting that this obligation already apply, upon registering with the Companies’ Register, to companies (Law Decree 185/08, converted into Law no. 2 of 28 January 2009) and sole traders (art. 5 of Law Decree no. 179 of 18 October 2012).

Insurance undertakings and intermediaries will have 6 months from the entry into force of the Regulation (which shall occur 30 days from publication in the Italian Official Gazette) to comply with the new provisions regarding the PEC address and the establishment of the above-mentioned documentation management systems.

The Regulations apply to the promotion, distribution and management by companies and intermediaries of life and non-life insurance contracts. Instead the distribution of insurance products pursuant to the IVASS Regulation No. 34 of 19 March 2010 would remain excluded from the scope of the Regulation.

The return of the Italian mandatory mediation procedure

On 24 October 2012, the Italian Constitutional Court declared invalid the provision of Legislative Decree n. 28 dated 4 March 2010 which had implemented the mandatory mediation procedure for the resolution of certain disputes.

Article 87 of the Italian Decree Law No. 69 of 21 June 2013 reintroduced the mandatory mediation for cross-border and domestic disputes, which had been covered by Italian Legislative Decree No. 28 of 4 March 2010.

The mediation procedure includes disputes on insurance matters (with the exception of motor third party liability litigation), medical and hospital liability.

Furthermore, among other changes it has been introduced Section 185 bis into the Italian Code of Civil Procedure, which requires the Court to “(…) formulate a proposal for amicable settlement or arrangement to the parties (…)”, also specifying that “(…) the rejection of the proposal made by the Court, without a justified reason, shall constitute conduct that may be considered (…) for the purposes of the ruling”.

The new provisions concerning the mandatory mediation shall enter into force on 21 September 2013.

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