Feedback from Poland about sustainable finance – obligation for insurance firms and brokers
The EU’s action plan on sustainable finance seeks to clarify the duties of financial institutions to provide their clients with clear advice on the social and environmental risks and opportunities attached to their investments.The aim is to: shift capital flows away from activities that have negative social and environmental consequences, and direct finance towards economic activities that have genuine long-term benefits for society.
Polish Chamber of Insurance (PIU) has welcomed the publication of draft delegated acts which are an important step to align incorporation of sustainability into financial institutions activities.
However PIU emphasized that the proposed amendments to the Regulation 2017/2358/EU are inappropriate. This Delegated Regulation applies to all insurance products not only to Insurance-based investment products (IBIPs). Amending product oversight and governance requirements for risk insurance (eg. home, health, motor) is unworkable in many instances. That is why references to SFDR should only be limited to products with an investment purpose (e. g. IBIP, pension products) and should not in any case be extended to other insurance products. It is necessary to amend the draft revised regulation and to align the requirements versus the stated objectives of the amendments by limiting the requirements to insurance-based investment products. In order to achieve the policy goals it is important to ensure consistency of the definitions provided within different regulations. Regarding the proposed definition insurers need a flexibility to react to the needs of their customers.
In PIU’s view IDD (and its delegated regulations) already establish appropriate criteria for determining different types of conflicts of interest. Any conflicts of interest that may arise from taking into account the sustainability objectives of customers would be captured by these criteria, with the result that they would be handled in the same way as any other conflicts of interest under the IDD. The detailed additions to the IDD regarding conflicts of interest are unnecessary. It also means the need of update of the rules, regarding assessment of customers’ needs and preferences, currently in force at national level. PIU also noted that insurance undertakings are not required to consider sustainability factors in the product approval process of all insurance products. PIU supports EIOPA’s original approach that makes clear that an insurer should only take into account the sustainability profile of the product where this is relevant with regard to the respective target market. In PIU’s view provisions on level 2 should not create legal uncertainty in this regard.
In PIU’s opinion definition of „sustainability preferences” which is understood as a customer’s or potential customer’s choice as to whether either of the following financial products should be integrated into his or her investment strategy. PIU wanted to outlined that it implies that it would refer to investment strategy defined for the financial product. It should be clarified if it is related to the client choice of investment options provided within the product or also refers to investment strategy of the insurer in relation to own funds or assets used to cover liabilities where investment risk is not carried by policyholder. The extended definition would have significant impact on asset management strategies for the insurers.
What is more in PIU’s opinion, insurance companies should not be required to consider sustainability factors in the product approval process of all insurance products, but only if the insurance product is to be advised or sold to customers with sustainability preferences.
The definition of sustainability preferences could refer to the existing categories of sustainable products in Article 8 and 9 SFDR without adding the further qualifications proposed as sub-points.
The customer's sustainability preferences should be considered also in situations where the customer would prefer a product that promotes environmental or social characteristics.
Draft of delegated regulation is available on beinsured.pl portal.