Insurance Europe has published its response to a consultation by the European Insurance and Occupational Pensions Authority (EIOPA) on the integration of sustainability preferences in the suitability assessment.
Insurance Europe appreciates the fact that EIOPA acknowledges many of the challenges insurers face in adapting to the new regime. In particular, insurers face significant difficulties regarding access to data and incoherent timelines in the overarching legislation.
The approach taken by EIOPA is, however, considerably less flexible than that taken by the European Securities and Markets Authority (ESMA). The current Level 1 and 2 rules on the suitability assessment work well in practice: while providing robust rules on the content of the assessment, they are also sufficiently abstract to adapt to different customers, products, and situations. By contrast, overly detailed provisions can create more practical and legal difficulties than they resolve. This risk is especially high for new rules that have not yet been tested. It is essential that guidelines leave distributors enough room for manoeuvre to allow for pragmatic and efficient implementation across different EU markets. The aim must always be to help the customer, not to steer them towards specific products or objectives.
EIOPA should, therefore, reevaluate the proposed guidelines with a view to removing overly granular and prescriptive requirements to keep the assessment of the sustainability preferences as simple and accessible as possible. The aim should be to give guidance, but without detailed requirements that benefit neither insurers nor customers. Wherever possible, EIOPA should replicate the flexibility of some ESMA guidelines by using ‘could’ instead of ‘should’ if appropriate. Given the similarities in the Level 2 Regulation, divergence introduced solely at Level 3 is not justified.
At the same time, the industry wishes to highlight the difficulties it will face in implementing such extensive guidelines in such a short timeframe. Technical implementation, data availability, the classification of funds and the application to multi-option products are significant challenges that require more time. To align the guidelines with the application date of the Sustainable Finance Disclosure Regulation, they should apply from 1 January 2023, with implementation undertaken on a best-efforts basis until then.