Amendments to Delegated Regulation (EU) 2017/2358
Delegated Regulation (EU) 2017/2358 is amended as follows:
(1)
in Article 4(3), point (a), point (i) is replaced by the following:
‘(i)
it takes into account the objectives, interests and characteristics of customers, including any sustainability-related objectives;’;
(2)
Articles 5 and 6 are replaced by the following:
‘Article 5
Target market
1. The product approval process shall for each insurance product identify the target market and the group of compatible customers. The target market shall be identified at a sufficiently granular level, taking into account the characteristics, risk profile, complexity and nature of the insurance product, as well as its sustainability factors as defined in Article 2, point (24), of Regulation (EU) 2019/2088 of the European Parliament and of the Council ( *1 ) .
2. Manufacturers may, in particular with regard to insurance-based investment products, identify groups of customers for whose needs, characteristics and objectives the insurance product is generally not compatible, except where insurance products consider sustainability factors as referred to in paragraph 1.
3. Manufacturers shall only design and market insurance products that are compatible with the needs, characteristics and objectives, including any sustainability-related objectives, of the customers belonging to the target market. When assessing whether an insurance product is compatible with a target market, manufacturers shall take into account the level of information available to the customers belonging to that target market and their financial literacy.
4. Manufacturers shall ensure that staff involved in designing and manufacturing insurance products has the necessary skills, knowledge and expertise to properly understand the insurance products sold and the interests, objectives, including any sustainability-related objectives, and characteristics of the customers belonging to the target market.
Article 6
Product testing
1. Manufacturers shall test their insurance products appropriately, including scenario analyses where relevant, before bringing that product to the market or significantly adapting it, or in case the target market has significantly changed. That product testing shall assess whether the insurance product over its lifetime meets the identified needs, objectives, including any sustainability-related objectives, and characteristics of the customers belonging to the target market. Manufacturers shall test their insurance products in a qualitative manner and, depending on the type and nature of the insurance product and the related risk of detriment to customers, quantitative manner.
2. Manufacturers shall not bring insurance products to the market if the results of the product testing show that the products do not meet the identified needs, objectives, including any sustainability-related objectives, and characteristics of the target market.
( *1 ) Regulation (EU) 2019/2088 of the European Parliament and of the Council of 27 November 2019 on sustainability-related disclosures in the financial services sector ( OJ L 317, 9.12.2019, p. 1 ).’;"
(3)
in Article 7, paragraph 1 is replaced by the following:
‘1. Manufacturers shall continuously monitor and regularly review insurance products they have brought to the market, to identify events that could materially affect the main features, the risk coverage or the guarantees of those products. They shall assess whether the insurance products remain consistent with the needs, characteristics and objectives, including any sustainability-related objectives, of the identified target market and whether those products are distributed to the target market or are reaching customers outside the target market.’;
(4)
in Article 8, paragraph 3 is replaced by the following:
‘3. The information referred to in paragraph 2 shall enable the insurance distributors to:
(a)
understand the insurance products;
(b)
comprehend the identified target market for the insurance products;
(c)
identify any customers for whom the insurance product is not compatible with their needs, characteristics and objectives, including any sustainability-related objectives;
(d)
carry out distribution activities for the relevant insurance products in accordance with the best interests of their customers as prescribed in Article 17(1) of Directive (EU) 2016/97.’;
(5)
in Article 10, paragraph 2 is replaced by the following:
‘2. The product distribution arrangements shall:
(a)
aim to prevent and mitigate customer detriment;
(b)
support a proper management of conflicts of interest;
(c)
ensure that the objectives, interests and characteristics of customers, including any sustainability-related objectives, are duly taken into account.’;
(6)
Article 11 is replaced by the following:
‘Article 11
Informing the manufacturer
Insurance distributors becoming aware that an insurance product is not in line with the interests, objectives and characteristics of the customers belonging to its identified target market, including any sustainability-related objectives, or becoming aware of other product-related circumstances that may adversely affect the customer, shall promptly inform the manufacturer and, where appropriate, amend their distribution strategy for that insurance product.’.
Amendments to Delegated Regulation (EU) 2017/2359
Delegated Regulation (EU) 2017/2359 is amended as follows:
(1)
in Article 2, the following points (4) and (5) are added:
‘(4)
“sustainability preferences” means a customer’s or potential customer’s choice as to whether and, if so, to what extent, one or more of the following financial products should be integrated into his or her investment:
(a)
an insurance-based investment product for which the customer or potential customer determines that a minimum proportion shall be invested in environmentally sustainable investments as defined in Article 2, point (1), of Regulation (EU) 2020/852 of the European Parliament and of the Council ( *2 ) ;
(b)
an insurance-based investment product for which the customer or potential customer determines that a minimum proportion shall be invested in sustainable investments as defined in Article 2, point (17), of Regulation (EU) 2019/2088 of the European Parliament and of the Council ( *3 ) ;
(c)
an insurance-based investment product that considers principal adverse impacts on sustainability factors where qualitative or quantitative elements demonstrating that consideration are determined by the customer or potential customer;
(5)
“sustainability factors” means sustainability factors as defined in Article 2, point (24), of Regulation (EU) 2019/2088.
( *2 ) Regulation (EU) 2020/852 of the European Parliament and of the Council of 18 June 2020 on the establishment of a framework to facilitate sustainable investment, and amending Regulation (EU) 2019/2088 ( OJ L 198, 22.6.2020, p. 13 )."
( *3 ) Regulation (EU) 2019/2088 of the European Parliament and of the Council of 27 November 2019 on sustainability-related disclosures in the financial services sector ( OJ L 317, 9.12.2019, p. 1 ).’;"
(2)
in Article 3, paragraph 1 is replaced by the following:
‘1. For the purposes of identifying, in accordance with Article 28 of Directive (EU) 2016/97, the types of conflicts of interest that arise in the course of carrying out any insurance distribution activities related to insurance-based investment products and which entail a risk of damage to the interests of a customer, including his or her sustainability preferences, insurance intermediaries and insurance undertakings shall assess whether they, a relevant person or any person directly or indirectly linked to them by control, have an interest in the outcome of the insurance distribution activities, which meets the following criteria:
(a)
it is distinct from the customer’s or potential customer’s interest in the outcome of the insurance distribution activities;
(b)
it has the potential to influence the outcome of the distribution activities to the detriment of the customer.
Insurance intermediaries and insurance undertakings shall proceed in the same way for the purposes of identifying conflicts of interest between one customer and another.’;
(3)
Article 9 is amended as follows:
(a)
in paragraph 2, point (a) is replaced by the following:
‘(a)
it meets the investment objectives of the customer or potential customer in question, including that person’s risk tolerance and any sustainability preferences;’;
(b)
paragraph 4 is replaced by the following:
‘4. The information regarding the investment objectives of the customer or potential customer shall include, where relevant, information on the length of time for which the customer or potential customer wishes to hold the investment, his or her preferences regarding risk taking, the risk profile, the purposes of the investment and, in addition, his or her sustainability preferences. The level of information gathered shall be appropriate to the specific type of product or service being considered.’;
(c)
paragraph 6 is replaced by the following:
‘6. When providing advice on an insurance-based investment product in accordance with Article 30(1) of Directive (EU) 2016/97, an insurance intermediary or insurance undertaking shall not make a recommendation where none of the products are suitable for the customer or potential customer.
An insurance intermediary or insurance undertaking shall not recommend insurance-based investment products as meeting a customer’s or potential customer’s sustainability preferences where those insurance-based investment products do not meet those preferences. The insurance intermediary or insurance undertaking shall explain to the customers or potential customers the reasons for not doing so and keep records of those reasons.
Where no insurance-based investment product meets the sustainability preferences of the customer or potential customer, and the customer decides to adapt his or her sustainability preferences, the insurance intermediary or insurance undertaking shall keep records of the decision of the customer, including the reasons for that decision’;
(4)
Article 14 is amended as follows:
(a)
in paragraph 1, point (b), point (i) is replaced by the following:
‘(i)
the customer’s investment objectives, including that person’s risk tolerance, and whether the customer’s investment objectives are achieved by taking into account his or her sustainability preferences;’;
(b)
in paragraph 4, the following subparagraph is added:
‘The requirements to meet the sustainability preferences of customers or potential customers, where relevant, shall not alter the conditions laid down in the first subparagraph.’.
Entry into force and application
This Regulation shall enter into force on the twentieth day following that of its publication in the Official Journal of the European Union .
It shall apply from 2 August 2022.
