Brussels, 12 April 2007
Insurance and investment intermediaries: Commission reports on professional indemnity insurance rules
The European Commission has adopted a report to the European Parliament and Council on the continued appropriateness of the requirements for professional indemnity insurance (PII) imposed on certain financial services intermediaries under EU law. This report is required under Article 65(6) of the Directive 2004/39/EC on markets in financial instruments (MIFID).
Internal Market and Services Commissioner Charlie McCreevy said: "This report deals with an important issue for both service providers and consumers. On the available evidence we should keep the existing indemnity insurance requirements, but since it is too soon for a full assessment we will continue to monitor the situation".
Professional indemnity insurance is a liability insurance designed to cover, either entirely or in part, sums to be paid by professionals, either as damages or resulting from approved negotiated settlements, to third parties as compensation for losses arising from acts, errors or omissions committed by the professional during the conduct of its business activities.
Community law requires some investment and all insurance intermediaries to obtain such insurance as a precondition to be able to provide services. The relevant requirements are derived from two Directives:
The analysis of the information provided by Member States as well as stakeholders in response to two rounds of consultation conducted by the Commission services suggests that, on the limited evidence that is currently available, the policy reasons that motivated the PII requirements imposed under EU law remain valid, and there is insufficient evidence to indicate that those requirements are no longer appropriate.
However, it is also clear that it is too early to make a comprehensive assessment of how those requirements impact on the service providers and consumers. A proper evaluation of the continued appropriateness of those requirements cannot be made without more practical experience and data, and that will not be available until the requirements under the Directive 2006/49/EC have been implemented and applied in Member States for at least one year. Accordingly, the Commission will continue to monitor the situation if evidence of market failure emerges.
More information is available at: