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IVASS Regulation No 47 of 27 April 2021: provisions on recovery plans and financing plans of (re)insurance undertakings

Wed, 26 May 2021 11:28:24 +0200

On 27 April 2021, IVASS published Regulation No 47 on recovery and financing provisions pursuant to Title XVI of Legislative Decree No 209 of 7 September 2005 - Private Insurance Code ("CAP"). With this Regulation, the Authority has provided detailed rules on the content of both individual and group recovery and financing plans, in implementation of Article 223-ter of the CAP (which required IVASS to issue rules concerning, in particular, the data and information to be provided in the recovery plan referred to in Article 222 and in the financing plan referred to in Article 222-bis).IVASS sets forth the rules for the implementation of the safeguards, recovery and winding-up measures envisaged in the CAP, both in terms of content and procedure, for (i) insurance and reinsurance undertakings with registered office in Italy; (ii) insurance undertakings with registered office in a third State with secondary office in Italy; and (iii) the last Italian parent companies [1].More specifically, the Regulation governs the contents and procedures for drawing and approving the recovery plan and the financing plan, as well as for submitting the relevant reports on the measures taken and the implementation of the plans to the Authority.The full text of the Regulation and the Report are available on the IVASS website: https://www.ivass.it/normativa/nazionale/secondaria-ivass/regolamenti/2021/n47/index.html This article is for information purposes only and neither is nor can be considered as a professional opinion on the topics covered. For further information, please contact Michele Zucca, Anthony Perotto and Guido Foglia. [1] It is made clear that where such companies are themselves controlled either by insurance and reinsurance undertakings, an insurance holding company or a mixed financial holding company established in a Member State, the provisions of Reg. 47/2021 will only apply where IVASS has ordered supervision at the level of a national sub-group national sub-group level.

Legislative Decree No 187/2020 entered into force: significant amendments to the Private Insurance Code concerning insurance distribution

Fri, 12 Feb 2021 09:01:39 +0100

On 9 February 2021, Legislative Decree No. 187 of 30 December 2020 (the "Decree") entered into force. The Decree, adopted to integrate the provisions implementing Directive (EU) 2016/97 (the "IDD"), introduces a number of amendments to the Private Insurance Code (the "Code"), with specific regard to the distribution of insurance products.

New definition of (re)insurance distribution activities

Among the main changes introduced by the Decree there is, under Article 106 of the Code, a new definition of insurance and reinsurance distribution activities.The new definition, compared to the previous version, expressly states that the advice activity, which falls within the group of activities constituting insurance distribution, concerns advice as defined in Article 1 paragraph 1, letter m-ter) of the Code, i.e., "the activity consisting in providing personalised recommendations to a customer, at the customer's request or at the distributor's initiative, in relation to one or more insurance contracts".The new version of Article 6 also includes in paragraph 2 a specific definition of reinsurance distribution activities, as a distinct one from insurance distribution, which lacked in the original one.

Training duties of ancillary insurance intermediaries

Through the amendment of Article 109-bis, the revised Code provides for the extension to ancillary intermediaries of the professional training obligations (which will however be defined by a forthcoming IVASS decree).The regime provided for in Article 119, paragraph 3 of the Code is also extended to ancillary intermediaries: they therefore become liable for the intermediation activity carried out by the subjects assigned to it, such as their employees, collaborators and other appointees engaged in insurance distribution and registered in section E of the Italian Register of Intermediaries.

Remunerations

The Decree also amends Article 119-bis, paragraph 1 of the Code. The previous language reads as follows "shall not receive remuneration and shall not offer remuneration to their employees and shall not evaluate their services in a manner contrary to their duty to act in the best interests of the contracting parties as provided for in paragraph 1". The new version, perhaps in order to avoid possible uncertainties, no longer includes the expression "and shall not value their services".

Good reputation requirements

The Decree also provides that the natural person responsible for insurance distribution for an intermediary registered under letter D of the Consolidated Register of Intermediaries “Registro Unico Intermediari” must meet the requirements of professionalism and honorableness identified by IVASS regulation.

Cross-selling

Furthermore, the new wording of the Code requires distributors engaged in the cross selling of insurance products to always provide an adequate description of the different components, regardless of whether the policyholder decides to purchase the components of the package offered separately.This is in contrast with the previous version, which required a description of the characteristics of the various components only if the components of the package offered to the customer were purchased separately.A further important novelty in the area of cross-selling is the possibility for IVASS to apply the cautionary and interdictory measures set out in Article 120-quinques paragraph 5 of the Code regardless of whether the ancillary element relates to insurance or to the service or product other than insurance. IVASS intervention is therefore permitted even where the main product is a non-insurance product (or service) (and the policy is ancillary to such product).

Advertising material and IVASS powers

Paragraph 3 of Article 182 of the Code, which provided for the possibility for IVASS to request, albeit not systematically, the transmission of advertising material used by undertakings and intermediaries, is then abrogated.

Obligations of companies during the execution of contracts

The new Article 183 of the Code (as amended by the Decree) provides that the obligations of conduct incumbent on companies (i.e., the duty to behave with diligence, fairness and transparency; the obligation to identify and avoid conflicts of interest; and to implement independent, sound and prudent financial management) also apply to the phase of offering contracts (in addition to the phase of executing them).

Alternative dispute resolution procedures

The Decree also introduces a link between the dispute resolution system provided for by the Code (the so-called insurance arbitrator) and the mediation and assisted negotiation procedures.In particular, such so-called alternative dispute resolution systems will be considered as mutually alternative.

Sanctions

Lastly, several amendments are made to the provisions on administrative pecuniary sanctions. In particular, the sanctions set out in Articles 324 and 324-bis of the Code are extended to conduct relating to the stage of manufacturing of the insurance product.By amending Article 324-quinquies, it is specified that there is a repetition of the breach when “within five years following the commission of an administrative breach, ascertained by an enforcement measure, the same person commits another breach of the same nature”.Finally, it is clarified, in Article 325-bis of the Code, that in the event that the turnover (on the basis of which the penalty is calculated) cannot be determined, the applicable penalty is between a minimum of € 5,000.00 and a maximum of € 5 million. This article is for information purposes only and is not, and cannot be intended as, a professional opinion on the topics dealt with. For further information please contact Michele Zucca, Anthony Perotto or Guido Foglia.

IVASS publishes Provisions no. 108/2021 and 109/2021, which envisage the extension of the deadlines for the temporary suspension of unrealized losses in short term financial assets and the deadlines for the application of the EU International Financial Re

Fri, 29 Jan 2021 11:03:56 +0100

With Provision No. 108/2021 of 27 January 2021, IVASS amended Regulation No. 43/2019 by aligning the insurance regulatory framework with the new provisions laid down in the Decree of the Ministry of Economy and Finance of 17 July 2020, providing for the extension of the temporary suspension of unrealized losses in short term financial assets in local GAAP financial statements.In consideration of the unusual circumstances that the financial markets are experiencing at this time, insurance companies may exercise the option, also in relation to the closing of the financial year as at 31 December 2020, to evaluate short-term assets of the portfolio at booked value of the last approved financial statements or, for assets not present at that date, to value them at acquisition cost. It should be noted that this option is not extended to long-term unrealized losses.It should be noted that this amendment to Regulation No. 43/2019 does not constitute any alteration in relation to the provision: (i) of the additional information to be provided to IVASS; (ii) of the provision of the profits arising from the exercise of the option to an unavailable reserve; (iii) of the public disclosure requirements. Furthermore, in order for the company to exercise the option provided for in this Provision for the financial year 2020, it is required, as for the previous financial year 2019, that this decision be adopted by resolution of the administrative body, in consideration of a specific report signed by the heads of the risk management and actuarial functions.

Again with regard to the accounting standards and financial statements of companies that carry out insurance and reinsurance activities, on 27 January 2021, IVASS, with Provision No. 109/2021, implemented in the Italian secondary legislation the amendments introduced by EU Regulation 2020/2097 to the European discipline on the accounting standards to be adopted for the purposes of preparing the consolidated financial statements, in particular with regard to International Financial Reporting Standard 9 (IFRS 9 Financial Instruments).In accordance with the new EU rules, this Provision extends the deadline for the application of IFRS 9, previously set for 1 January 2021, to 1 January 2023. This article is for information purposes only and is not, and cannot be intended as, a professional opinion on the topics dealt with. For further information please contact Antonia Di Bella, Michele Zucca, Anthony Perotto and Guido Foglia.

IVASS Provision No. 107 of 12 January 2021: amendment to the definition of "portfolio" as set forth by ISVAP Regulation No. 14/2008 (effects on the transfer and management of a portfolio in run-off of insurance contracts)

Mon, 18 Jan 2021 03:12:40 +0100

With provision No. 107/2021, IVASS amended the definition of "portfolio" provided by article 2, paragraph 1, letter f) of ISVAP Regulation No. 14/2008 (by deleting the words: "the portfolio may not be composed of claims only"), in order to remove the specific prohibition to transfer portfolios of claims only, which was expressly excluded in its original wording.As part of its analysis of the impact of this measure, IVASS noted, in particular, that this amendment (aimed at permitting the transfer of portfolios of claims only) is justified by the change in the economic-financial conditions that characterise the market, which requires a higher degree of flexibility. Furthermore, the Authority observed that this exclusion within the Italian regulatory framework "could be detrimental to companies operating in Italy, in terms of competitiveness, since this type of portfolio transfer and run-off management are permitted in other European countries". This article is for information purposes only and is not, and cannot be intended as, a professional opinion on the topics dealt with. For further information please contact Avv. Michele Zucca, Avv. Anthony Perotto or Avv. Guido Foglia.

IVASS, with order no. 101 of 2020, anticipates to 5 February 2021 the entry into force of simplification measures, foreseen by Provision no. 97/2020, in favour of intermediaries

Mon, 21 Dec 2020 02:22:49 +0100

By order No. 97 of 4 August 2020, IVASS completed the implementation in Italy of the rules on distribution of insurance investment products, aimed at pursuing the rationalisation and simplification of the regulations on the matter.In particular, the aforementioned Provision abrogated the obligation for intermediaries registered in sections A (agent), B (broker) or F (ancillary intermediary) of the Italian Register of Intermediaries, to certify, by means of a communication submitted to IVASS by 5 February each year, the renewal of the third-party liability insurance contract or, in the case of a multi-year contract, the confirmation of the effectiveness of the relevant policy.Provision no. 97/2020 will enter into force on 31 March 2021, in order to provide insurance and reinsurance operators with a reasonable period of time to adapt to the new regulatory provisions.However, within the broader framework of the measures adopted to support the activities of companies and intermediaries following the health emergency due to the COVID-19 pandemic, IVASS - with provision 101/2020 - has exempted, as from the next deadline of 5 February 2021, intermediaries A, B and F from the aforementioned obligation to communicate the renewal of the liability policy.The fulfilment of the obligation to take out a third party liability policy is still a requirement for registration in the Register of Insurance Intermediaries, also on an ancillary basis, as well as for the maintenance of operations and the establishment of so-called horizontal cooperation relationships, on the basis of the the Private Insurance Code and its implementing provisions.For further information, please consult the IVASS website: https://www.ivass.it/normativa/nazionale/secondaria-ivass/normativi-provv/2020/provv_101/index.html This article is for information purposes only and is not, and cannot be intended as, a professional opinion on the topics dealt with. For further information please contact Avv. Michele Zucca, Avv. Anthony Perotto, Avv. Guido Foglia.

Infection contracted during surgery. Health professionals are not liable if they follow the protocols.

Wed, 29 Apr 2020 04:36:52 +0200

The Judge in charge of preliminary enquiries (Giudice delle Indagini Preliminari) of the Criminal Court of Cosenza, with order issued on 26 March 2020, following the request of the Public Prosecutor, dismissed the charges against some doctors for their alleged liability deriving from the fact that, during an ophthalmic surgery, a patient contracted an infection.The technical experts appointed by the Public Prosecutor had ascertained that the patient was a high risk patient (considering her old age and her pre-existing medical conditions) and that the health professionals had followed the guidelines of the Italian Society of Ophthalmology (SOI), the Italian Association of Ophthalmologists (AIMO) and the Italian Association of Cataract and Refractive Surgery (AICCER), considering that they had adopted all the preventive measure provided for therein (disinfection of the surgical field, correct antibiotic prophylaxis, check-up appointments following the surgery, etc.).In line with the technical experts’ view, the Judge in charge of preliminary enquiries dismissed the charges, excluding any liability of the health professionals.According to art. 5 of the so-called Gelli Law, health professionals, while carrying out their activities, must comply with the recommendations contained in the guidelines, subject to exceptions in some specific cases.The guidelines are drafted by means of a constant review of the relevant literature and of experts’ opinions and they are developed by multidisciplinary teams. Such guidelines give an extensive definition of best professional practice, considering that they are based on analysis, appraisals and clarifications of scientific evidence.Art. 6, par. II, of the so-called Gelli Law, provides that health professionals are not liable “… when the recommendations provided for in the guidelines as defined and published in accordance with the law, or, in the absence of the guidelines, the best clinical-care practices, are complied with, subject to the guidelines’ recommendations being adequate to the specificities of each individual case”.Reference to the guidelines is made also in art. 7 of the Gelli Law (relating to civil liability of health professionals and facilities). Article 7 provides that the Court, in determining compensation for damages, must consider the conduct of the health professional pursuant to art 5 of the Gelli Law and to Article 590-sexies of the Italian Criminal Code, introduced by art. 6 of the Gelli Law.This judgment appears to give food for thought in relation to the current emergency due to the outbreak of Coronavirus (COVID-19). Indeed, even in the case a patient contacts the virus during hospitalization, Courts may potentially reach the same conclusions and exclude any liability of the health professionals, in case the latter have complied with the guidelines that will be provided for by law or, in the absence of such guidelines, with the best clinical-care practices.To this regard, the Higher Institute of Health (ISS) has drafted some “Recommendations for health professionals” to tackle COVID-19 cases. Those directions are also available on the Ministry of Health website. This Article is for information purposes only and should not be regarded as a legal opinion. For further details and information please Anthony Perotto, Guido Foglia, Michele Zucca or Guglielmo Boursier Niutta.

INSURANCE | Coronavirus and measures adopted by the supervisory authorities

Mon, 23 Mar 2020 07:09:15 +0100

Below are the main measures taken in response to the Coronavirus emergency, with reference to the insurance sector.

1. “Cura Italia” (“Healing Italy”) Decree (Law Decree No. 18 of 17 March 2020)

Article 103, paragraph 1 of the so-called “Cura Italia” decree provides for the suspension of time-limits for administrative proceedings pending as of 23 February 2020 or commenced after that date.As confirmed by IVASS (the Italian Institute for the Supervision of Insurance), said provision also applies to administrative proceedings or stages of administrative proceedings falling within IVASS' jurisdiction, whose time-limits are therefore suspended by law from 23 February to 15 April 2020.In this respect, IVASS has also specified that it has “organisational measures capable of ensuring that in any case the principles of efficiency, effectiveness and reasonable duration of administrative proceedings are safeguarded, with particular regard to urgent proceedings, also in order to protect the rights of the parties concerned”.

2. Measures adopted by IVASS

Moreover, IVASS has adopted some “first measures in support of the activities of businesses and intermediaries”a) Distribution Activities: assessment exam of professional training coursesAssessment exams of professional training courses for personnel in charge of distribution activities of intermediaries or enterprises may be carried out at a distance (by derogating the provision of Article 90, paragraph 5, of IVASS Regulation 40/18).In particular, assessment exams shall be carried out with the procedures set forth in Articles, 91, 92, 93 and 94 of said IVASS Regulation 40/18 and namely via video-conference, webinar or e-learning.b) Extension/amendment of deadlines:i. Home insurance: the deadline imposed to enterprises for the mandatory establishment of the so-called “internet reserved areas” (see Article 42 and ff. of IVASS Regulation 40/18) originally scheduled on 1 May has been extended until 1 July 2020. In this respect, it should be noted that IVASS Regulation 41/18 has been endorsed in full in the list of general interest rules drawn up by IVASS (with reference to EU insurers operating in Italy both under the freedom to provide services and under the freedom of establishment and with the exclusion of Articles 42, 43, 44, 45 and 46 for insurers operating business segments other than third party car insurance).ii. Claim Reports: the deadline for transmitting the Report on Claims and the relevant documents to IVASS (see Article 9 of IVASS Regulation 24/08) has been extended until 29 March 2020.For this purpose, please note that Article 9 applies also to EU insurers that receive a number of claims higher than 20 per year.iii. Distribution Network Report: the deadline for transmitting the Report on Distribution Network to IVASS (Article 46 of IVASS Regulation 40/18) has also been extended until 29 March 2020. In this regard IVASS had already specified that the formality provided for by Article 9 of IVASS Regulation 40/18 shall be applicable also to EU insurers operating in Italy under the freedom of establishment.iv. Complaints Management / Information Request: IVASS has amended the following terms:- 75 days (instead of 45 as provided for in Article 8 of IVASS Reg. 24/08) to respond to the complaint;- 35 days (instead of 20 as provided for in Article 7 of IVASS Reg. 41/18) to respond to requests for information from customers.In this respect, IVASS encourages companies to make every effort to assist users of insurance services in the shortest time and in the best way possible.

3. EIOPA statement

On 17 March 2020, EIOPA issued a statement concerning the measures to be adopted in order to mitigate the impact of the Coronavirus outbreak emergency on the EU insurance sector (“EIOPA statement on actions to mitigate the impact of Coronavirus/COVID-19 on the EU insurance sector”; the “Statement”).In the Statement, EIOPA sends two key messages:i. Business continuity: according to EIOPA, it is important that insurers are able to continue to provide their services to their clients. Hence, insurance companies must be ready to adopt the measures required for business continuity.The competent national authorities are required to adopt a flexible approach with respect to the timing concerning reporting and public disclosure obligations for the year 2019 incumbent on Companies.In its turn EIOPA – besides limiting requests to the market to information strictly necessary – has already extended the deadlines for transmitting the Holistic Impact Assessment 2020.ii. Solvency and capital position: in acknowledging the good capitalization of European insurers, EIOPA states to be ready to adopt the necessary instruments to mitigate effects on the insurance sector. Nevertheless, EIOPA requires EU insurers to maintain their financial position, following prudent policies concerning the allocation of dividends and variable remuneration.Last, but not least, EIOPA shall continue to monitor the circumstances and to adopt or suggest to the European Institutions the necessary measures to mitigate the effects of market volatility on the stability of the sector.

4. Further EIOPA's declarations and subsequent IVASS's recommendations

On 20 March, EIOPA issued some recommendations to national authorities (“Recommendations on supervisory flexibility regarding the deadline of supervisory reporting and public disclosure”; the “Recommendations”).These are, in particular, 3 Recommendations, whereby EIOPA encourages the competent national authorities to allow companies to submit, respectively, the Regulator Supervisory Report (RSR), the Quantitative Reporting Template (QRT) and the Solvency and Financial Condition Report (SFCR) with a delay of 8 weeks (or 2 weeks in the case of certain information indicated in the Recommendations).The Recommendations also consider the current emergency as a “major development” (“sviluppo importante”, as defined in Article 54(1) of the Solvency II Directive) and therefore stress the need for insurers to provide adequate information on the effect of Coronavirus/COVID-19 in their reports.So, in line with the Recommendations, IVASS has decided to grant companies an extension of the deadlines for the fulfilment of certain requirements related to Solvency II reporting.In particular:

8 weeks for Regular Supervisory Reports, both at individual and group level;
8 weeks for the Annual Quantitative Reporting Templates, for individual reporting, except for the following templates: Content of the Submission, Basic Information, Balance-sheet, Cash-Flow projections for life business, LTG, Own funds and SCR calculation, for which a 2-week extension is allowed;
8 weeks for Annual Quantitative Reporting Templates, at group level, except for the following templates: Content of the Submission, Basic Information, Balance-sheet, LTG, Own funds, SCR calculation and Undertakings in the scope of the group, for which a 2-week extension is allowed;
8 weeks for Solvency and Financial Condition Report (SFCR) at individual and group level, except for Balance-sheet, LTG, Own funds, SCR calculation, for which a 2-week extension is allowed;
1 week for Q1-2020 Quantitative Reporting Templates and Quarterly Financial Stability reporting, at individual and group level, except for the Derivatives Transactions template for which a 4-week extension is allowed;
ORSA report: individual: 30 June 2020; group: 15 July 2020;
30 days for Quarterly report of the situation of controlling and significant shareholdings held; Information on the Reinsurance cession plan; transmission to IVASS of the annual report on the management of internal funds, which can be sent via PEC at vigilanzacondottadimercato@pec.ivass.it; letters to the market of 7 and 10 February 2020 - Request for data on non-life business products broken down by intermediary; letter to the market of 7 February 2020 - Request for information on the insurance activity carried out in order to assess the risks of money laundering and financing of terrorism within the life business; prospectuses on assets covering actuarial reserves; transmission to IVASS of information on Card claims; IPER first quarter 2020;
60 days for Quarterly reports and new codes for the types of assets associated to unit-linked and index-linked policies; gross premiums accounted for in the non-life and life business, new insurance products issued in the life business and contributions to open and negotiated pension funds relating to the first quarter of 2020; direct and indirect business premiums acquired by Italian companies abroad and by foreign subsidiaries relating to the end of 2019; report on anti-fraud activities pursuant to IVASS Regulation No. 44; transmission of the report on the organisation of claims settlement structure; information on medical malpractice insurance cover relating to risks within the Italian territory; transmission, for collective health insurance policies, of premiums accounted for in the year 2019; transmission, for collective health insurance policies, of claims charges for the year 2019 at the end of financial year 2019 and number of risk units for the year 2019.

This article is for information purposes only and is not, and cannot be intended as, a professional legal opinion.For further information, please contact Anthony Perotto, Guido Foglia or Michele Zucca.

Regulation (EU) 2019/2088: new information duties for ‘Green’ insurance‐based investment product

Mon, 02 Mar 2020 09:08:45 +0100

On 9 December 2019 Regulation (EU) 2019/2088 was published, which introduced new sustainability‐related duties to disclosure in the financial services sector.Such Regulation also applies to insurance undertakings and insurance intermediaries (not on an ancillary basis) that provide insurance advice on insurance investment products (IBIPs) (the “Financial Advisers”), as well as insurance undertakings that make available such IBIPs (the “Financial Market Participants”).The Regulation does not apply to insurance intermediaries that, irrespective of their legal form, employ fewer than three persons. However, Member States are not prevented from applying the Regulation also to such intermediaries.Aim of the Regulation is to strengthen the protection of the end investor, by improving the duties to disclosure, on the assumption that, in order to address "the catastrophic and unpredictable consequences of climate change, resource depletion and other sustainability‐related issues", "urgent action is needed to mobilise capital not only through public policies but also by the financial services sector" (recital 8).Therefore, the Regulation establishes new information duties for Financial Market Participants and Financial Advisers on how sustainability risks - defined as any "environmental, social or governance event or condition that, if it occurs, could cause an actual or a potential material negative impact on the value of the investment", so-called ESG factors - are integrated into the investment decision‐making process and whether principal adverse impacts of investment decisions on sustainability factors are considered.In particular, the Regulation provides for a series of disclosure requirements, also in the pre‐contractual phase, to the end investor, which supplement those already laid down by the Directive 2016/97 (“IDD”). In summary, Financial Markets Participants and Financial Advisers shall:

publish and maintain on their website information about their policies on the integration of sustainability risks in their investment decision‐making process and in their insurance advice (art. 3);
include in their remuneration policies information on how those policies are consistent with the integration of sustainability risks, and shall publish that information on their websites (art. 5);
include in the pre-contractual information to be provided to the end investor information on how sustainability risks are integrated into their investment decisions and the results of the assessment of the likely impacts of sustainability risks on the returns of the financial products they make available or they advise on (art. 6);
communicate, for each financial product, whether and, if so, how a financial product considers principal adverse impacts on so called "sustainability factors"; i.e. environmental, social and employee matters, respect for human rights, anti‐corruption and anti‐bribery matters (art. 7);
publish and maintain on their website as well as in their periodic reports, a description of the environmental or social characteristics or the sustainable investment objective promoted by each financial product, as well as information on the methodologies used to assess, measure and monitor such characteristics (art- 10).

Art. 15 of the Regulation also requires insurance intermediaries to communicate information to the end investor in accordance with art. 23 of IDD (that is at least in a clear and accurate manner, comprehensible to the final investor, and free of charge).By 30 December 2020, the European Supervisory Authorities (ESAs) - namely the European Banking Authority (EBA), the European Securities and Markets Authority (ESMA) and the European Insurance and Occupational Pensions Authority (EIOPA) – shall also develop draft regulatory technical standards to further specify the content of sustainability information.The provisions of the Regulation will be directly applicable in all Member States from 10 March 2021. This article is for information purposes only and is not intended as a professional opinion.For further information, please contact Anthony Perotto, Guido Foglia, Michele Zucca or Valentina Barba.

Brexit: the Withdrawal Agreement between the United Kingdom and the European Union and its effects on UK insurers carrying on business in Italy

Mon, 10 Feb 2020 09:51:57 +0100

On the 1st February 2020, the Withdrawal Agreement between the United Kingdom and the European Union entered into force.The Withdrawal Agreement provides for a transition period (until the 31st December 2020) during which European Regulations will still be applicable in the UK (as if it were a Member State).The transition period may be extended if so agreed between the United Kingdom and the European Union.The United Kingdom and the European Union released also a declaration in the context of the withdrawal agreement, stating their intention to conclude agreements on trade and investment services, including financial services, based on the European Union's free trade agreements. To this purpose, the declaration also includes the intention of both parties to start the formal negotiation process as soon as possible after the withdrawal of the United Kingdom from the European Union so that such agreements might enter into force by the end of 2020.At the end of the transition period, if the parties have not reached an agreement on cross-border regulation of insurance services, UK insurance undertakings will be considered as third state insurers (and will no longer be entitled to carry on business in Italy under the freedom to provide services or the right of establishment).Finally, it should be noted that, as also clarified by the Italian Ministry of the Economy in a press release dated the 31st January 2020, the ratification of the Withdrawal Agreement makes inapplicable the provisions in the Legislative Decree no. 22 of the 25th March 2019, by which the Government had established the measures applicable to insurance companies in the event of withdrawal by the United Kingdom from the European Union with no agreement. This article is for information purposes only and is not intended as a professional opinion.For further information, please contact Anthony Perotto, Guido Foglia, Michele Zucca or Matteo Marabini.

News from IVASS

Thu, 16 Jan 2020 10:12:53 +0100

I. IVASS has published document no. 5/2019, concerning the IVASS regulation scheme about whistleblowing reporting system procedure, pursuant to articles 10-quater and 10-quinquies of the Private Insurance Code ().The document is now subject to comments from market players.Such regulation - which will be applicable (at least according to the current wording subject to comments from the market) also to EU insurers and intermediaries operating in Italy under right of establishment - will implement whistleblowing provisions set out by the Private Insurance Code.II. Through a specific Q&A, IVASS has also clarified - pending the "public consultation" phase of IVASS document no. 2/19 - the time framework for the application of art. 46, Reg. IVASS 40/18 (which provides, in particular, the obligation for insurers to implement a distribution management and control policy, as well as the obligation to draft an annual report on monitoring, detected criticalities and solutions proposed in application of such policy).It should be noted that art. 46 of Reg. IVASS 40/18 is also applicable to EU insurers carry on business in Italy under right of establishment or the freedom to provide services regime. This article is for information purposes only and is not intended as a professional opinion.For further information, please contact Anthony Perotto, Guido Foglia, Michele Zucca or Matteo Marabini.

Insurers may raise a time-limitation objection of the claimant’s action

Fri, 20 Dec 2019 05:22:46 +0100

With judgement n. 31071 of 28 November 2019, the Italian Court of Cassation ruled on the insurer’s right to raise a time limitation objection as regards the claim brought forward by a third party against the insured. According to a previous case law, the time limitation objection raised by a third party (e.g. a third party liability insurer) could not lead to the rejection of the claimant’s request against the defendant who had expressly waived his right to raise such objection, but merely to the rejection of the defendant’s claim against the third party.Whereas, in the above-mentioned decision, the Court of Cassation established that the insurer of (non-compulsory) civil liability, when joined into the proceedings by the insured, is entitled to raise the a time-limitation objection as regards the right claimed brought forward by a third party against the insured. This objection, if grounded, leads to the rejection of the claimant’s request against the insured, even though such objection was not timely raised by the latter.The Court reaches this conclusion by way of interpretation of article 2939 of the Italian Civil Code, which provides that time limitation can be objected by any interested party, when the party against which the claim is brought does not raise it. According to the Court, the civil liability insurer joined in the proceedings falls within the “interested parties” of article 2939 of the Italian Civil Code, considering that the fact that the claim brought against the insured is not declared time barred would cause a prejudice to the insurer. The insured’s liability is indeed the legal ground on which the insurer’s indemnity obligation is based.More specifically, according to the Court, if the insurer is joined in the proceeding and appears before the court not only denying insurance coverage but also challenging the insured liability, the judgement that condemns the insured may be invoked against the insurer. The insured, if ordered to pay damages in favor of the third party, will have the right to seek insurance coverage on the basis of the policy, requesting to be indemnified by the insurer. Hence the insurer’s interest to raise a time limitation objection pursuant to art. 2939 of the Italian Civil Code, to challenge not only the insured’s indemnity claim against insurers but also the claim brought by the third party against the insured. This article is for information purposes only and is not intended as a professional opinion.For further information, please contact Anthony Perotto, Guido Foglia or Michele Zucca.

Goods in transit and cargo insurance: the clause requiring surveillance of the vehicle is lawful and not vexatious given that it aims at limiting the subject matter of the policy

Wed, 11 Dec 2019 05:56:53 +0100

With judgement n. 21758 of 2019 the Court of Cassation has again addressed the lawfulness of the clause contained in an insurance policy that makes coverage of the risk deriving from theft of goods subject to the adoption by the carrier of special safety devices or to the observance of substantive obligations, such as, inter alia: uninterrupted surveillance of the vehicle by the driver or by another person designated by the carrier during parking and stopping, custody of the vehicle in controlled-access spaces or spaces closed with appropriate means or areas protected by effective enclosures.In particular, the Court excluded the vexatious nature of such clauses according to article 1341 of the Italian Civil Code, given that those clauses are not aiming at limiting the consequences of the insurer’s negligence or breach of contract, nor they are aiming at excluding the risk covered. In line with the most recent Court of Cassation case law, the Court confirmed that such clauses are instead intended to delimit the contract’s subject matter, given that they relate to the content and limits of the insurance coverage and, therefore, to specify the risk covered (and thus the scope of the coverage). This article is for information purposes only and is not intended as a professional opinion.For further information, please contact Anthony Perotto, Guido Foglia or Michele Zucca.

News from EIOPA: European Insurance Overview 2019

Thu, 05 Dec 2019 08:50:47 +0100

In 19 November 2019, EIOPA published the second annual bulletin “European insurance overview”, containing various statistical data processed by the Authority on the basis of the information published by European insurance undertakings in compliance with their obligations under the Solvency II directive. Various elements of interest emerged in relation to the Italian market. In particular EIOPA highlights that:

in general, the insurance Italian market shows high levels of undertakings’ concentration: the 10 major insurance undertakings collected, in relation to life and damages lines of business, more than 60% and 70% of the gross written premiums (“GWP”) in 2018. The German market appears way more competitive, considering that the GWP of the main 10 insurance undertakings reach around 50% both in the life and in the damages lines of business;

in general, there has been an increase in premiums collection in the life line of business, and Italy, together with the UK, France and Germany are the largest life insurance underwriters (in Italy, such premiums collection has slightly increased and reached over 100 million euro of GWP). In particular, in Italy, premium collection concentrated in the area of insurance with profit participation (more than 60% of the GWP collected) and, for the remaining part, of unit-linked policies;

also in relation to the damages line of business, premiums collection has increased in Italy (with over 35 million euro GWP). This data is significantly lower than those of Germany, France and the United Kingdom, that have premiums for over 120 million euro;

in general, the most dominant non-life lines of business are motor vehicle liability insurance, fire and other damage to property insurance and medical expense insurance, accounting for 55% of business in the non-life insurance market. In Italy, instead, the most dominant non-life insurance business is motor vehicle liability insurance, accounting for around 40% of business in the non-life insurance market;

the data relating to the Solvency Capital Requirement (SCR) of insurance undertakings is positive, with a medium European value between 150% and 250%. At the extreme ends we have Latvia (the only country with an average value lower than 150%) and Germany (with an average value higher of 300% and the lowest quartile higher than 200%);

as regards insurance undertakings’ investments, such investments concentrate in government securities (28,5%) and corporate bonds (27,0%), followed by investment funds (19,3%) and equity securities (11,8%). In particular, undertakings invest mainly in government securities issued by Germany, Italy, Spain and United Kingdom (75% of the total). As regards corporate bonds and equity securities, there is a significant investment in French undertakings, for a quota, together with English and German undertakings, for a percentage of 40% and 45% of the securities purchased respectively.

The bulletin can be downloaded at the following link on EIOPA website.

This article is for information purposes only and is not intended as a professional opinion.For further information, please contact Anthony Perotto, Guido Foglia or Michele Zucca.

EIOPA travel insurance thematic review: a warning to the travel insurance industry

Fri, 18 Oct 2019 10:25:49 +0200

In a report published on 9 October 2019 – called “Thematic Review on Costumer Protection Issues in Travel Insurance” – EIOPA expressed its concerns regarding several consumer protection issues detected in the European travel insurance market.In particulars, such concerns regards the rising commission applied by insurance intermediaries, the exploitation of behavioral biases when selling online travel insurance policies and the potential erosion of product value and features. Also insufficient cover, denied claims, unclear and conflicting terms and conditions have come to light as general trends in disfavor of consumers.EIOPA detected that such risks have been increasing also due to new market players selling travel insurance products online as an ancillary activity (such as airline and ferry companies, price comparison websites, websites, aggregators, banks, supermarkets…).In addition, EIOPA found a significant risk that high number of consumers could be harmed by the potential high degree of dismissed claims due to no pre-contractual medical screening. In this regard, the report estimates that around 70% of insurers do not include pre-existing medical conditions in the coverage of travel insurance products.A Warning to Insurers and Insurance Intermediaries to Tackle High Commissions for Their ProductsAs a result, EIOPA issued a warning to the travel insurance industry as a supervisory response on the issues found. In particular, EIOPA expects all market participants to fully comply with the IDD; accordingly they are asked to:

review their business model which were found not consistent with the fundamental principles set out by the IDD, due to the “disproportionately high commissions” taken by insurance intermediaries across all distribution channels and the “very low claims ratio”;
assess their distribution agreements to ensure that they are capable to act fairly and professionally in compliance with the best interest of their customers;
ensure that, even where travel insurance is sold through an ancillary insurance intermediary exempted from the scope of the IDD, basic conduct of business requirements under the IDD are complied with (including always acting in the best interest of their customers, avoiding conflicts of interest related to remuneration and on offering products that take into account the demands and needs of the customer).

In this regard, EIOPA and NCAs will increase their risk-based supervision of insurance undertakings and insurance intermediaries, in particular in the national markets where risks are identified, including monitoring the market for ancillary insurance products.In particular, NCAs will, if necessary, exercise their supervisory powers, including investigatory powers and powers to impose sanctions for failures to comply with the conduct of business requirements set out in the IDD including the duty to act in the best interest of customers and to not pay or receive remuneration that conflicts with this duty.EIOPA has based its report and warning on research it conducted by issuing a questionnaire to 201 insurance undertakings operating in 29 European Countries. The NCAs distributed the questionnaire to undertakings representing approximately 60% of the total gross written premiums of the travel insurance line of business in the national market. EIOPA also collected input from industry and consumer associations.The EIOPA report and warning can be downloaded at the following link on the EIOPA website. This article is for information purposes only and is not intended as a professional opinion.
For further information, please contact Anthony Perotto, Guido Foglia or Michele Zucca.

Medical malpractice insurance: Draft Decree setting up the new minimum requirements for Insurance Policies covering the risks connected to health care activities

Thu, 17 Oct 2019 04:07:45 +0200

Last August the draft decree (hereinafter the “Draft Decree”) that should regulate coverage minimum requirements and general conditions of insurance policies underwritten by public or private healthcare and social-health facilities, and by healthcare professionals, was circulated, in implementation of article 10, paragraph 6 of Law n. 24 of 3 March of 2017 (better known as “Gelli Law”). It is still a provisional text that will have to be issued by the Minister of Economic Development in conjunction with the Minister of Health and the Minister of Economy and Finance, with the prior agreement at the permanent Conference for the relations between the State, the Regions and the autonomous Provinces, after consultation with Ivass, Ania and the major institutions representing the healthcare sector and the respective trade union organizations.The Draft Decree aims at regulating: (a) the minimum coverage requirements for insurance policies covering public and private healthcare and social-health facilities and health professionals’ liabilities, provided for in Article 10, paragraphs 1, 2 and 3 of Gelli Law; (b) the minimum requirements and the general operational conditions of the measures for the direct, full or partial assumption of the risk by the healthcare facility; (c) the rules regarding risk transfer in the event of a contractual takeover of an insurance undertaking; (d) the provisions requiring healthcare facilities to establish in the financial statement a specific risk fund and a claims reserve fund.Although, as mentioned, this is a provisional draft, some provisions deserve particular attention.Article 1 of the Draft Decree contains a list of definitions that- most likely - will affect the wording of the insurance policies that will be issued in implementation of Gelli Law and the above mentioned decree. In particular, the definition of claim expressly excludes hypotheses such as the request of the medical record, the execution of autopsy / judicial autopsy / autopsy referred to in Presidential Decree no. 285 of 1990, the lawsuit and the notice of investigation.First paragraph of Article 3 provides that insurance policies must guarantee coverage to public and private healthcare and social health facilities for cases of contractual liability pursuant to Articles 1218 and 1228 of the Italian Civil Code deriving from material and non-material damages caused, willfully or with gross negligence, to third parties and employees by personnel operating in any capacity at the facility. It is moreover provided that these policies shall provide coverage for non-contractual liability (pursuant to art. 2043 of the Italian Civil Code) of health professionals, even in the event such professionals are chosen independently by the patient and not employed by the facility.Article 1, letter f, also outlines the definition of "healthcare professional", namely "the professional who, by virtue of a qualifying title, carries out prevention, diagnosis, care, assistance and rehabilitation activities."With regard to insurance coverage of the healthcare professional’s administrative liability, article 3, paragraph 3 of the Draft Decree provides an obligation for Insurers to hold the doctor harmless from any administrative liability, recovery or subrogation actions brought against him pursuant to Article 9, sections 5 and 6 of Gelli Law, as well as from any direct action of the damaged party against the Insurer.The aforementioned paragraph also provides that in the event of administrative liability, Insurers’ recovery action may be brought against the Insured if the doctor has not regularly fulfilled the training and updating requirements for the three-year training period preceding the date of the event giving rise to liability.It is questionable whether (i) of the failure of the doctor to comply with the training obligation constitutes a condition of "admissibility of the application" and whether (ii) the proof of non-compliance with the training obligation constitutes probatio diabolica for the insurer.Article 3, paragraph 6, provides that in the event of joint and several liability of the insured, the insurance must cover the whole damage, without prejudice to the right of the insurer to subrogate in the recovery right against the parties who are jointly and severally liable.After having identified the subject matter of the insurance coverage, attention should be put on its temporal effectiveness.To this regard, art. 5 of the Draft Decree establishes that coverage is provided in the “claims made” form, thus confirming the timing requirements already provided for by art. 11 of Gelli Law and also providing that in the event of a series of claims the insurance policy will be triggered by the claim notified with the first claim.The Law also provides that in case of “definitive termination of the health professional’s working activity”, including the self-employed professionals, a period of ultra-activity of the Policy is provided for in relation to claims notified for the first time within 10 years after the termination of the working activity and related to events giving rise to liability that occurred during the period of effectiveness of the policy, including the retroactivity period.It should also be noted that the last paragraph of art. 5 in partial derogation to the provision of art. 1913 c.c., provides that, in the event of a claim, the insured must notify Insurers within 30 days from the date the claim was received by the insured or from the date in which the insured became aware of it.Articles 5 bis, under the heading “Insurer’s right of withdrawal”, and 7, under the heading “Objections that may be raised”, also deserve particular attention.More specifically, article 5 bis provides that Insurers may withdraw from the contract only in the event of a repeated gross negligence conduct on part of the health professional, that is ascertained by a final decision leading to payment of compensation for damages. However, considering civil justice case-handling time, it is questionable whether this provision might be effectively applied to the short-term insurance policies.Article 7 introduces a specific rule in relation to the objections that may be invoked by the insurer against the damaged party, and that can be raised only if expressly approved in writing by the insured.More specifically the objections relate to: (a) harmful events deriving activities that are not covered by the policy; (b) events giving rise to liability that occurred and claims notified outside the period of effectiveness referred to in art. 5; (c) the policy limits in terms of quantum, such as the relevant deductibles or Self Insurance Retention (SIR) and; (d) the failure to pay the premium.Interestingly, art. 4 of the Draft Decree provides a list of the policy limits, identified on the basis of the different risk classes and draws a distinction according to the type of activity carried out by the social-health facility or by the health professional.The mentioned article indicates in relation to each risk class the minimum policy limits to be provided for each claim and insurance year [1].In order to determine the annual limit, the criterion of three times the limit for each claim indicated in the relevant risk class applies.The last paragraph of article 4 appears quite cryptic, where it states that the limits regulated by the mentioned article "are restated in relation to the performance of the Guarantee Fund for damages deriving from medical malpractice as regards the hypotheses referred to in art. 14, paragraph 7, letter a)" of the Gelli Law.The Draft Decree does not provide any indication as to (i) the criteria to be followed to restate the limits on the basis of the Fund’s performance and the (ii) frequency that should characterize the mentioned restatement.Title III of the Draft Decree regulates other means to cover third party and employers’ civil liability, that health facilities may adopt as an alternative form - in whole or in part - to insurance coverage, such as the establishment of a specific risk fund and of a claims reserve fund (i.e. direct assumption of the risk).The Decree also regulates the takeover by the insurance companies in the management of the risks assumed by the healthcare facilities. To this regard, the healthcare facility will cover the risk directly assumed, i.e. the risk that is not covered by insurers until claims are closed.Moreover, art. 16 of the Draft Decree provides that insurance companies and healthcare facilities will have to comply with the provisions of the decree that will be issued, within 12 months from its entry into force.The Draft Decree, as said, merely constitutes - as of today - a "draft" and as such it will be subject to further interventions and amendments. Unfortunately we are not aware of when the Decree will be issued, but it can be assumed that, given the number of different institutions involved in the final text drafting process, it will still be necessary to wait a few more months if not next year. This article is for information purposes only and is not intended as a professional opinion. For further information, please contact Anthony Perotto, Guido Foglia or Michele Zucca. [1] The limits for each claim vary from a minimum of 1 million euro to a maximum of 4 million euro.

IVASS News | Healthcare liability risks in Italy (2010-2018)

Tue, 15 Oct 2019 09:59:22 +0200

On 4 October 2019, IVASS announced the results of the last statistical survey on the coverage of healthcare liability risks for the period 2010-2018. Many interesting elements have come to light. In particular:

the amount of premiums collected for medical liability insurance is increasing, being equal to a total amount of € 612 million (+ 3.7% compared to 2017). In particular, such growth has been driven by insurance coverage underwritten by private healthcare facilities (18.7% of the total premiums collected) and by health personnel (38% of the total premiums collected). Instead, the coverage underwritten by public health facilities is still decreasing (-22.6% compared to 2017), in accordance with a long-term trend, pursuant to which the total amount of the premium collected in 2018 decreased by more than half compared to 2010;

non-Italian companies have confirmed their significant role in collecting premiums at public and private facilities (90.1% and 32.9% of the total premiums collected, respectively). The collection of premiums by Italian companies is also increasing (103 million in premiums, against 81 in the previous year);

market concentration among insurance companies remains significant, the five largest companies accounting for (respectively) 93.5%, 82.1% and 64.7% of the premiums paid by public and private health facilities and healthcare personnel;
brokers have confirmed their key role in the distribution of policies to public and private healthcare facilities (69.7% and 66.6% of the premiums collected, respectively);
in 2018, insurance companies have been notified of 17,262 claims (–9.7% compared to 2017), in accordance with a constant downward trend started in 2012. The 4% of these claims appear to have been solved without payout. Such percentage increases up to more than half if claims notified before 2017 are considered;
in general, a quarter of the claims notified in the reference period have been disputed. It seems that the recourse to the dispute is increasing in the period between 2017 and 2018, concerning 14.4% of the claims notified in 2018, against only 6.3% of those notified in the previous year;
it has also emerged a general trend of the insurance sector to settle the claims slowly, giving priority to those less complex and characterized by lower amounts: in this regard it was found that only 6.3% of claims reported between 2017 and 2018 appears to have been paid off (for a total amount of € 50,776,000, corresponding to 2.2% of the total compensation paid in the reference period);
considering, instead, the loss ratio recorded in the period, it has been detected a situation of systematic loss considering to risks related to public health facilities. On the other hand, providing coverage for private healthcare facilities and health personnel is resulted as having positive profit margins;
in relation to the risks of public health facilities, the use of “auto-ritenzione” is increasing, with designated funds amounting to € 1,952.3 million at the end of 2017. Accordingly, during 2017, provisions were made for a sum of € 592 million (equal to more than double the premiums paid by the same public health structures to obtain a “traditional” insurance policy).

The full article on “Healthcare Liability Risks In Italy (2010-2018)” can be freely downloaded on IVASS website. This article is for information purposes only and is not intended as a professional opinion.
For further information, please contact Anthony Perotto, Guido Foglia or Michele Zucca.

News from IVASS: Public consultation phase of the new regulation on the products governance and oversight of insurance (POG) and IBIPs distribution

Fri, 27 Sep 2019 05:56:35 +0200

On 23 September, IVASS published two consultation documents nn. 1/2019 and 2/2019 on its website.By the first of the document, IVASS submits to the market the regulation scheme by which "new provisions regarding POG are introduced in order to increase the effectiveness of the national and European standards already in force and align the regulatory provisions to the new regulatory framework with particular reference to insurance investment products".Document n. 2 aims, in particular, at introducing some revisions concerning the distribution of insurance investment products as well as the additional changes necessary for coordination and alignment of the relevant regulations for all distribution channels and all insurance products (specifically, to IVASS Regulations 38/2018, 40/2018 and 41/2018). The Document also contains amendments to IVASS Regulation 23/2008 (regarding the transparency of premiums and the contract conditions in the motor-vehicle third party liability insurance) and to IVASS Regulation 24/2008 (concerning complaints), requested by the market or by the regulatory analysis.In both cases, IVASS allows market players to submit comments, comments and / or proposals by 31 October 2019. The consultation document 1/2019 can be downloaded at the following link on the IVASS website.The consultation document 2/2019 can be downloaded at the following link on the IVASS website. This article is for information purposes only and is not intended as a professional opinion.For further information, please contact Anthony Perotto, Guido Foglia or Michele Zucca.

IVASS News: IVASS Statistics on complaints: annual data 2018

Tue, 17 Sep 2019 12:01:24 +0200

Statistics on complaints: annual data 2018

On 4 June 2019, IVASS published the last statistics relating to the complaints received by insurance companies in 2018, where it emerges, in the aggregate, a significant reduction of the complaints in life and third party liability lines of business and a small increase in damages and vehicle liability lines of business.Moreover, the statistics interestingly shows the reduction of complaints against Italian companies (in life and damages lines of business), and a significant increase of complaints against foreign companies (EU).Below is a chart showing the nature of complaints received by insurance companies in 2018:The full article as regards complaints statistics: annual data 2018 can be downloaded on IVASS website. This article is for information purposes only and is not intended as a professional opinion.For further information, please contact Anthony Perotto, Guido Foglia or Michele Zucca.

News from the Supreme Court: Coverage denials of insurance policies

Tue, 17 Sep 2019 11:54:19 +0200

Coverage denials of insurance policies

The Court of Cassation, with judgement n. 18742 of 12 July 2019, confirmed that in relation to civil liability insurance, the objection that policies do not operate, does not strictly constitute an objection under the law, but it represents a mere defense or argument to challenge the counterparty’s request. Such objection cannot therefore technically be dismissed by the party, even when it is not brought forward in its final requests.Instead, as clarified by the Supreme Court, such objection may be raised by the party for the first time also in the appeal phase and proprio motu by the Court even in the absence of a specific objection in this sense by the party, when the relevant facts are in any case emerging from the documents filed in the proceedings. In the case at stake, Insurers raised only in the appeal phase the objection that the policy operated at second risk. This article is for information purposes only and is not intended as a professional opinion. For further information, please contact Anthony Perotto, Guido Foglia or Michele Zucca.

IVASS news: Natural disasters and insurance cover: risk assessment and policy options for Italy

Tue, 17 Sep 2019 11:49:33 +0200

Natural disasters and insurance cover: risk assessment and policy options for Italy

On 30 July 2019, IVASS published Working Paper n. 13 (curated by Riccardo Cesari and Leandro D’Aurizio) focused on the analysis of the risks connected to natural disasters, the proper assessment of such risks and the possible insurance cover available on the market.In an era in which Italy has been exposed to countless (and somehow unexpected) natural disasters (earthquake, flooding, etc.), that caused substantial damages and unfortunately also many human losses, a system of compensation for damages mainly managed by the state appears ineffective and hardly sustainable from a financial perspective.Therefore, to face such difficulties, new forms of insurance to cover such risks, not yet developed in Italy, are more and more needed.This interesting Working Paper analyses the main sources of natural risks in Italy (earthquake and flooding) and makes some proposals for the introduction of new techniques to assess seismic risk, also, but not only, to better manage natural risks.In this perspective, therefore, the Paper gives a simulation of the insurance protection costs in relation to the earthquake and flooding risks and the possible solutions (with its pro and cons) that are currently available for policy-makers. Working paper n. 13 can be downloaded on IVASS. This article is for information purposes only and is not intended as a professional opinion. For further information, please contact Anthony Perotto, Guido Foglia or Michele Zucca.

Guidelines for clear and simple Insurance Policies

Wed, 18 Apr 2018 11:43:53 +0200

I. The Guidelines’ approval and IVASS letter to the market

The Italian Insurance Regulator (“IVASS”) brought to the insurers’ attention the need to simplify insurance contracts and wordings.Following IVASS suggestion, the Italian Insurers Association (“ANIA”), some Italian Consumers Associations, the Italian Brokers Association (AIBA) and the Italian Antitrust Authority drafted a set of guidelines on the structure and language of insurance policies wording (the “Guidelines”).By letter dated 14 March 2018 (the “IVASS Letter to the market”), IVASS exhorts the insurers to comply with the Guidelines.According to IVASS Letter to the market, insurers should comply with the Guidelines within the following timeframe:

(i) for new insurance products, from the 1st of January 2019.

(ii) for the main products currently marketed, by the end of 2019.

Moreover, according to IVASS Letter to the market, the cover of the reviewed/new products shall mention the wording compliance with the Guidelines.From 1 January 2019 onwards (and later on a quarterly basis), the insurers shall inform IVASS about which products have been reviewed in accordance with the Guidelines (such information will also be published on IVASS website).

II. Scope and content of the Guidelines

IVASS Letter to the market is expressly addressed only to (i) Italian insurers and (ii) non-EU insurers carrying on business in Italy under the right of establishment.Accordingly, the Letter to the market is not expressly addressed to EU-insurers carrying on business in Italy under the freedom to provide service regime and/or the right of establishment. However, with communication on 18 April 2018, IVASS made it clear that it considers important – in order to protect Italian insureds – that also EU insurers comply with the Guidelines within the timeframe set by IVASS Letter to the market and provide quarterly information to IVASS on which products have been reviewed.The Guidelines do not differentiate between consumer and non-consumer policies, although there are hints that they may have been conceived to apply solely or primarily to consumer products.As a consequence, it seems that the Guidelines would apply to all insurance contracts.

Below is a short summary of certain principles and rules set by the Guidelines.

II.1 General provisions:

There shall be no distinction between general and special conditions. Rather, the policy shall be divided in subsections.
The policy can be in either hard copy or electronic format.
Bold, different colours, small capitals are indicated as ways to “highlight” the clauses dealt with by Art. 166, Section 2 of the Private Insurance Code (e.g. those limiting the rights of or imposing waivers on the insured).
The language of the contract shall be simplified.
The heading shall mirror the content of the clause.
“Explanatory boxes” may be included within the policy.
In case of amendments of the terms of the contract, a new policy - instead of an endorsement – should ideally be issued.

II.2 The policy structure:

The commercial name of the insurance product shall be included in the cover and shall not be misleading.
The policy cover should include the name of the insurer, its logo, the insurer’s group name, the commercial name of the contract and the number of its edition.
The policy should include a presentation page
The policy shall have a table of contents.
Pages should be numbered including the total number of the pages (e.g. 3 of 16 or 3/16).
The policy schedule should include some information (e.g. details of the insured, commercial name of the product, optional and standard coverages, premium, deductible, limit, insured good/interest).
Glossary and definitions should be included in the contract or in a separate document.
The articles of the policy which merely repeat/recall law provisions may be all included in a separate policy attachment.
Any cover shall be dealt with in a separated section and in chapters (so as the customer is able to compare different insurance offers). The scope of the cover shall be described in a clear and exhaustive way and by an easy language (avoiding – as far as possible - jargon or convoluted wordings). The Guidelines propose different solutions for the description of the coverage scope (the relevant choice shall be made also taking into the forth coming POG regulations)
The criteria for the assessment of the damages and the quantification of the indemnity shall be explained clearly.

This article is for information purposes only and is not intended as a professional opinion. For further information, please contact Anthony Perotto or Matteo Marabini.