Conduct of business whats new and whats next

Conduct of business: what’s new and what’s next for you at EU level? William Vidonja Head of Conduct of Business Croatian Insurance Days Opatija, 8 November 2018

Agenda 1 European regulatory landscape 2 What’s new? 3 What’s next? 4 Key take-aways

A glimpse of the EU regulatory landscape … 5 YEARS AGO Solvency II Environmental Liability Directive Insurance Mediation Directive Anti-discrimination (Gender) Directive VAT Directive AML Directive Motor Insurance Directive ADR Directive Financial Conglomerates Directive

A glimpse of the EU regulatory landscape … 5 YEARS AGO IMPLEMENTED LEGISLATION Solvency II Environmental Liability Directive Insurance Mediation Directive IDD Anti-discrimination (Gender) Directive VAT Directive AML Directive Motor Insurance Directive IFRS ADR Directive Financial Conglomerates Directive Cybersecurity (NIS Directive) GDPR PRIIPs European Market Infrastructure Reg. Anti Tax Avoidance Directive

A glimpse of the EU regulatory landscape … 5 YEARS AGO IMPLEMENTED LEGISLATION ADOPTED LEGISLATION Solvency II AML Directive Environmental Liability Directive IFRS 9 Insurance Mediation Directive IDD IORP II Anti-discrimination (Gender) Directive VAT Directive AML Directive Motor Insurance Directive IFRS ADR Directive Financial Conglomerates Directive Cybersecurity (NIS Directive) GDPR PRIIPs European Market Infrastructure Reg. Anti Tax Avoidance Directive

A glimpse of the EU regulatory landscape … 5 YEARS AGO IMPLEMENTED LEGISLATION ADOPTED LEGISLATION PRESENTED, NOT ADOPTED Solvency II AML Directive PEPP Environmental Liability Directive IFRS 9 ESAs review Insurance Mediation Directive IDD IORP II Anti-discrimination (age & disability) Anti-discrimination (Gender) Directive SMIT VAT Directive E-Privacy AML Directive Country-by-country reporting Motor Insurance Directive IFRS MID review ADR Directive Free flow of nonpersonal data Financial Conglomerates Directive Sustainable finance Cybersecurity (NIS Directive) GDPR PRIIPs European Market Infrastructure Reg. Anti Tax Avoidance Directive Collective redress IFRS 17

A glimpse of the EU regulatory landscape … 5 YEARS AGO IMPLEMENTED LEGISLATION ADOPTED LEGISLATION PRESENTED, NOT ADOPTED IN THE PIPELINE Solvency II AML Directive PEPP SII Reviews Environmental Liability Directive IFRS 9 ESAs review Fintech/Insurtech Insurance Mediation Directive IDD IORP II Anti-discrimination (age & disability) New technologies (blockchain) Anti-discrimination (Gender) Directive SMIT Big data analytics VAT Directive E-Privacy PRIIPs Review AML Directive Country-by-country reporting Liability of new technologies (AI) Motor Insurance Directive IFRS MID review Costs & performance ADR Directive Free flow of nonpersonal data Climate change/EU adaptation strategy Financial Conglomerates Directive Sustainable finance C-ITS/connected & automated driving Collective redress Sustainable finance IFRS 17 Travel insurance Cybersecurity (NIS Directive) GDPR PRIIPs European Market Infrastructure Reg. Anti Tax Avoidance Directive IGS - insurance guarantee schemes

A glimpse of the EU regulatory landscape … 5 YEARS AGO IMPLEMENTED LEGISLATION ADOPTED LEGISLATION PRESENTED, NOT ADOPTED IN THE PIPELINE Solvency II AML Directive PEPP SII Reviews Environmental Liability Directive IFRS 9 ESAs review Fintech/Insurtech Insurance Mediation Directive IDD IORP II Anti-discrimination (age & disability) New technologies (blockchain) Anti-discrimination (Gender) Directive SMIT Big data analytics VAT Directive E-Privacy PRIIPs Review AML Directive Country-by-country reporting Liability of new technologies (AI) Motor Insurance Directive IFRS MID review Costs & performance ADR Directive Free flow of nonpersonal data Climate change/EU adaptation strategy Financial Conglomerates Directive Sustainable finance C-ITS/connected & automated driving Collective redress Sustainable finance IFRS 17 Travel insurance Cybersecurity (NIS Directive) GDPR IGS - insurance guarantee schemes PRIIPs European Market Infrastructure Reg. Anti Tax Avoidance Directive REVIEWS

Agenda 1 European regulatory landscape 2 What’s new? 3 What’s next? 4 Key take-aways

PRIIPs KID: a good idea Package Retail and Insurance -based Investment Products Key Information Document standardised disclosure format objectives, risks, costs, performance, etc. Used since 1 st January 2018

PRIIPs KID: experience Objectives ü Comparability ü Understandability ü Better informed decisions

PRIIPs KID: experience Objectives ü Comparability ü Understandability ü Better informed decisions Financial Times “FCA lambasted for ‘worst piece of financial regulation ever” (25/01/18) “Mis-selling fears erupt over ‘returns of 1 m% plus’” (14/01/18)

PRIIPs KID: experience Objectives ü Comparability ü Understandability ü Better informed decisions The Irish Times “No KIDs, no PRIIPS: paper jam stalling new product sales. ” “Rules aimed at making investment easier are actually making it harder” (04/01/18)

PRIIPs KID: experience Objectives ü Comparability ü Understandability ü Better informed decisions Het Financieele Dagblad “Insurers: we have to show too positive returns to our customers” (28/02/18)

PRIIPs KID: experience Objectives ü Comparability ü Understandability ü Better informed decisions International Adviser “EU knows Priips KID is not fit for purpose” “The Priips Kid has been almost universally derided sinception. The biggest criticism is that it could further complicate matters for investors” (24/10/18)

PRIIPs KID: experience Objectives Reality check ü Comparability ü Confusing ü Understandability ü Misleading ü Better informed decisions ü Increased compliance risk

PRIIPs KID: experience Objectives Reality check ü Comparability ü Confusing ü Understandability ü Misleading ü Better informed decisions ü Increased compliance risk Why did it failed? One-sized-fits-all approach Not fit to insurance Little consideration of impact on consumers

PRIIPs KID: experience Objectives Reality check ü Comparability ü Confusing ü Understandability ü Misleading ü Better informed decisions ü Increased compliance risk Why did it failed? One-sized-fits-all approach Not fit to insurance Little consideration of impact on consumers PRIIPs quick-fix and review?

GDPR: what does it provide for? 1995 2016

GDPR: experience Enhanced rights & obligations Legal uncertainty High penalties for noncompliance Increased compliance risk Impact on innovation 22

IDD: what does it provide for? Wider scope Enhanced professional requirements Increased consumer protection rules Disclosures (including remuneration and IPID) Advice Cross-selling Product oversight & governance Enhanced rules for IBIPs

IDD: experience Risk of information overload for consumers

IDD: experience Unfit for digital distribution

Agenda 1 European regulatory landscape 2 What’s new? 3 What’s next? 4 Key take-aways

PEPP: what is proposed? Aim: a portable pan-European pension product 3 rd pillar, personal pension, long-term saving product; provided by an EU regulated financial undertakings; and subscribed to voluntarily by an individual in view of retirement PEPP-KID based on PRIIPs KID with additional disclosures (EC proposal) Digital distribution by default

PEPP: challenges ahead? Pre-contractual disclosures: risk of information overload Online sale of a PEPP by an insurance intermediary (EC proposal) PEPP Regulation Proposal (84) Originating from PRIIPs (36) PEPP KID (51) PEPP-specific (15) Product disclosures Originating from IDD (28) Originating from IDD DAs (5) Sales disclosures GDPR (13) What about the directives on distance marketing for financial services and on ecommerce? What about the disclosures in the Solvency II directive? Distance marketing directive for financial services (27) What about disclosures overlaps? E-commerce directive (6/20) ? ? ? Solvency II (14/30) ? ? ? Total: 130 -174 Product disclosures

PEPP: challenges ahead? Pre-contractual disclosures: unfit for digital distribution Online sale of a PEPP by an insurance intermediary (EC proposal) Disclosure overload? PEPP Regulation Proposal (84) Originating from PRIIPs (36) PEPP KID (51) PEPP-specific (15) Product disclosures Originating from IDD (28) Originating from IDD DAs (5) Sales disclosures Paper as default option? GDPR (13) Distance marketing directive for financial services (27) PRIIPs KID Complaints No layered approach? E-commerce directive (6/20) ? ? ? Solvency II (14/30) ? ? ? IDD Product disclosures

Redress: what is proposed? EC “New Deal for Consumers”, April 2018 Regulation on consumer representative actions Permits qualified entities to launch collective actions Covers domestic and cross-border infringements of EU law Extends to 59 EU legislations, incl. SII, PRIIPs, IDD

Redress: challenges ahead? Shortcomings Third party litigation funding Fails to protect traders: “loser pays” principle No redress to consumers (small losses) Need for safeguards to prevent blackmail settlements & malicious claims 31

Agenda 1 European regulatory landscape 2 What’s new? 3 What’s next? 4 Key take-aways

Take-aways for EU institutions One-size-fits-all Legal uncertainty Compliance risks Increased quantity Paper-based Fit-for-purpose Consumer-tested Quality-focused Future-proof Digital & innovation friendly

Take-aways for our industry 34

Thank you! Hvala! For more information www. insuranceeurope. eu Twitter: @Insurance. Europe