The Spanish Insurance Distribution Act

The Spanish Insurance and Reinsurance Distribution Act implementing the Directive 2016/97 of the European Parliament and of the Council of 20 January 2016 on Insurance Distribution (the “IDD”) has been finally approved and published in the Spanish Official Gazette (“Boletín Oficial del Estado” or “BOE”) on 5 February 2020 and shall come into force on 6 February 2020.

This Act has been finally passed by the Spanish Government (together with other relevant Acts) through a Royal Decree (an urgent process) in order to avoid the imposition of a sanction by the European Union, who had already threatened Spain for its delay in the implementation of the IDD (which should have occurred by October 2018). This delay has been caused by the delay in the formation of a Government in our country.

The objectives of the Spanish Insurance and Reinsurance Distribution Act are (i) to lay down the rules concerning the taking-up and pursuit of the activities of distribution of insurance and reinsurance distribution; (ii) to regulate the conditions in which such distribution activity shall be carried out; and (iii) to establish the applicable supervision regime. The new regulation will set out the requirements that shall be complied with by the insurance and reinsurance distributors to adapt to the IDD concerning product oversight and governance requirements, conflicts of interest and transparency rules.

The main novelties introduced by the Spanish Insurance and Reinsurance Distribution Act with respect to the derogated Spanish Insurance and Reinsurance Mediation Act of 26 July 2006 are the following:

  • The new Act applies, not only to insurance and reinsurance intermediaries, but also to insurance and reinsurance undertakings when they pursue direct distribution activities. 
  • A new category of insurance intermediary (ancillary insurance intermediaries) is added to the existing categories (insurance brokers, insurance agents and bank-assurance operators).
  • The definition of insurance distribution is extended to the activity carried out by the insurance comparers, who shall be subject to the Spanish Insurance and Reinsurance Distribution Act in those cases where their activity implies the possibility for the client of entering into an insurance contract, either directly or indirectly.
  • Where advice is provided prior to the sale of an insurance product, a personalised recommendation should be provided to the customer explaining why a particular product best meets the customer’s insurance demands and needs. This obligation applies not only to brokers (like in the derogated Insurance and Reinsurance Mediation Act) but also to the rest of distributors.
  • The distributors’ information duties are reinforced, especially when it comes to insurance-based investment products.
  • Insurance intermediaries and insurers distributing insurance-based investments products must meet additional requirements (regarding prevention of conflicts of interest and assessment of suitability and appropriateness and reporting to customers).
  • In addition, those insurance distributors that provide independent advice when distributing insurance-based investments products (that is, insurance brokers distributing these kinds of products) can only be remunerated by policyholders and not by insurance undertakings. This prohibition, which has been replicated from MiFID II Directive and has not been introduced in other jurisdictions, will imply that all insurance brokers distributing insurance-based investments products (eg. Unit-linked products) shall transform into insurance agents if they want to continue to be paid by insurance companies (which is the general rule in the Spanish market).
  • For the first time, the Insurance and Reinsurance Distribution Act regulates “cross-selling”.
  • The infringements and sanctions regime is hardened, especially when it comes to the distribution of insurance-based investments products.

The Insurance and Reinsurance team in Madrid is preparing a document making Comments on the new Spanish Insurance and Reinsurance Distribution Act, which shall be published next week.


Authored by Virginia Martinez


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