The European Insurance and Occupational Pensions Authority (EIOPA) published today its fifth annual report on administrative sanctions and other measures imposed during 2023 by National Competent Authorities (NCAs) under the Insurance Distribution Directive (IDD).
In total, NCAs across 20 Member States imposed 1,510 sanctions in 2023. Sanctions based on the IDD are being imposed in an increasing number of Member States. In particular, the report shows that since 2021, there has been a rise in the number of sanctions relating to product oversight and governance (POG) requirements as a result of higher supervisory scrutiny at the national and European level. The report also highlights a continuous increase in sanctions imposed related to general conduct of business requirements, such as the provision of advice.
After five years of application of the IDD, EIOPA observed the following trends related to the use of specific sanction tools:
- Registration withdrawals and administrative fines are the most common tools used, especially to tackle breaches related to registration and training & competence requirements in the IDD. More than 8,000 withdrawals of registration and over 3,800 fines have been imposed in the European Economic Area (EEA) over the past five years.
- Orders to cease and desist, which are mainly used prior to the official launch of a sanction, have been successful in limiting or resolving issues before they would become detrimental to consumers.
Finally, the report includes a case study on how a core principle of the IDD, namely that insurance distributors should always act honestly, fairly and professionally in accordance with the best interests of their customers, is implemented in practice by an NCA and can lead to sanctions in case of breach of that principle.
Sanctions are an essential tool to dissuade firms from misconduct, but, given that they are generally targeted at individual companies or individuals, other measures can also be an efficient and effective tool to address broader market failures. Conclusions regarding the effectiveness of the supervision of the IDD, therefore, should not be drawn based solely on the number of sanctions imposed in that Member State.
Background
This report is based on Article 36(2) of the IDD, which states that NCAs shall provide EIOPA annually with aggregated information regarding all administrative sanctions and other measures imposed and that EIOPA shall publish the information in an annual report.