Despite the updated rules for the Markets in Financial Instruments Directive (MiFID II) having only received a plenary vote from the European Parliament in mid-April and its full implementation not expected until 2016, some countries have already introduced measures in preparation.
One such country is Belgium, which reinforced its regulatory supervision to insurance products as of May this year. The country follows in the footsteps of The Netherlands, which banned commission payments by fund providers to retail banks as of January this year.
While providers in Belgium are still working out exactly what the full impact of the tighter new rules is, a recent PwC report said the changes “represent a major challenge for insurance companies”.
According to the new so-called Twin-Peaks II law, which came into effect on the 1st of May, insurance providers are required to show a full breakdown of costs, including the amount of commission paid. Secondly, Belgian insurers are from now on legally required to check whether the product they sell is suitable for the client.
PwC concluded: “It will impact relations with clients and intermediaries and also lead to changes in internal organisation, in the controls framework and in reporting obligations.”
One provider which has decided to temporarily cease business in Belgium due to the regulatory change is Old Mutual Wealth Company, Skandia.
Phil Oxenham, head of international marketing proposition at Skandia International, said: “Due to the decision taken by the Belgium authorities to implement their MiFID II rules from 30 April this year, rather than the scheduled deadline of early 2016, we have taken the decision to temporarily place a hold on accepting new business and top-ups in Belgium.
“We have made this choice to ensure we stay compliant and therefore reduce risk for advisers and customers. Any applications received up to 30 April will still be processed and we will let advisers know when we are accepting new applications.”
A number of other businesses however, have decided to continue operating in the country, including SEB Life, which told International Adviser: “The process is one of “MiFIDisation” in that many of the requirements of MiFID now apply to insurance mediation in relation to conflicts of interest, provision of pre-contractual information, disclosure of commissions and any other benefits, etc.
“The majority of the new requirements affect the intermediary and not the insurer (unless selling direct) and so our products generally do not need any alteration.
“We are assisting intermediaries with the additional information needed so that they can comply with their obligations.”
The decision by Skandia to stop selling new products, albeit on a temporary basis, will be seen as another set-back for advisers operating in the country which have already seen permanent exits from larger life companies in recent years.
David Pearce, a Belgium-based adviser working for AES International, said that “regulation is getting tighter” in Belgium and Europe, particularly for insurance companies.
Pearce added however, that while the life companies are withdrawing, he is building stronger relationships with private banks.