Following a series of meetings held between the Italian insurance supervisory authority (“IVASS”) and the market players (insurance companies and distributors, main trade associations of insurance products distributors and one of the main Italian consumer associations) and pending a broader review of IVASS Regulation No. 40/2018 on insurance and reinsurance distribution (“Regulation No. 40”), on 23 December 2021 IVASS published a further set of clarifications in response to some of the comments raised by the market.

In particular, the clarifications regard the following:

• Intermediation by means of distance communication techniques and recording of telephone conversations: also in light of the ongoing health emergency situation, IVASS has initiated a broader reflection on the rules governing telephone recordings and electronic communications, evaluating possible future regulatory interventions which will be subject to public consultation. Pending a possible regulatory revision, IVASS clarified that the obligation to record telephone conversations or electronic communications which result in the conclusion of insurance contracts provided under Article 83 of Regulation No. 40/2018 only applies in the event where the distribution of insurance policies is organised to be carried out entirely by means of distance communication, and not in cases where, for the actual organisation of the intermediary, stages of the promotion and placement process normally take place in person. The recording requirements for the distribution of Insurance-Based Investment Products (“IBIPs”) are also confirmed, including with respect to potential customers (i.e. also in the event where the telephone conversation and electronic communications do not lead to the actual conclusion of the insurance contract). In addition, IVASS clarified that in the event of failure to conclude the insurance contract, the starting date for calculating the period of time for the retention of records and communications (which shall last for the duration of the contractual relationship or such longer period as may be required by law and, in any event, at least five years after the termination of the relationship) shall be the date of the last record or electronic communication.

• Distribution organisation, management and control policies with respect to brokers: as regards the obligation provided by Regulation No. 40 which requires insurance companies to have internal policies and procedures in place in order to ensure compliance with the professional and organisational requirements, including those of good repute, provided for the exercise of distribution activities carried out directly and through distribution networks, IVASS clarified that the monitoring actions carried out by insurance companies for the purpose of verifying the correct implementation of the policies and procedures adopted and the related findings must take into account the different nature of the relationships that the distribution networks establish with the same companies. Therefore, insurance companies are not allowed to introduce pervasive procedures (such as, for example, inspections) that are inconsistent with the independence and autonomy of brokers. The control of the professionalism and good repute requirements can therefore be based on the direct assumption of responsibility by brokers by issuing self-certified declarations to insurance companies in line with Presidential Decree no. 445 of 2000 and with best practice standards in the market.

• Report on the control of distribution networks for the year 2021: the report on the control of distribution networks for the financial year 2021 shall be carried out by the compliance function of insurance companies and, pending the issuance by IVASS of the measure setting out the specific contents, modalities and timing for sending the report, IVASS Measure no. 2743 of 27 October 2009 shall continue to apply (available here in Italian only). The report shall be sent within 60 (sixty) days from the end of the calendar year.

• Delivery of pre-contractual documentation by digital means: the pre-contractual documentation of insurance products provided by IVASS Regulation No. 41/2018 may be delivered by digital means in compliance with the provisions of the same Regulation which provides that the obligations to deliver pre-contractual documentation shall be fulfilled on paper or, with the consent of the contracting party, on another durable medium. The contracting party may make the choice of method of communication also with regard to any subsequent contracts entered into with the same company, without prejudice to the possibility of changing such choice at any time. The distributor shall keep track of the choice made by the contracting party and shall inform the same of the possibility of modifying the choice made at any time.

• Certain cases in which the insurance company may terminate the relationship with the insurance intermediary: as a result of the product monitoring and review activity referred to in Article 7 of Commission Delegated Regulation (EU) 2017/2358, manufacturers are required to adopt appropriate and corrective measures which include, in more serious cases, the termination of the distribution relationship with the intermediary. IVASS clarified that such "more serious cases" must be such as to justify the measure of termination of the relationship and include, by way of example, repeated breaches by the intermediary of the rules governing the distribution of the product to the target market and, more generally, repeated breaches of the conduct rules as provided for by IVASS Regulation No. 45/2020 on product oversight and governance requirements.

• Distribution of products of EU insurance companies: pursuant to Article 11(6) of IVASS Regulation No. 45/2020 on product oversight and governance requirements, insurance intermediaries which distribute products marketed by EU insurance companies operating in Italy under right of establishment or under freedom to provide services shall adopt all the necessary measures to ensure that insurance products are distributed in accordance with the applicable IVASS and EU regulations and meet the needs, characteristics and objectives of the actual target market identified. IVASS clarified that the Italian rules referred to in such provision are those that apply to foreign intermediaries as set out in the list of general good provisions published by IVASS (available here in English). IVASS specified that the prohibition of distribution to customers who fall within the negative target market applies if the manufacturer, authorised to operate in Italy, has identified groups of customers whose needs, characteristics and objectives are not compatible with the insurance product.

• Communication of the actual target market and negative target market by the intermediary to the insurance company: in the event where the actual target market and the actual negative target market for each insurance product are the same as those identified by the manufacturer, insurance intermediaries may refrain from notifying the insurance company of the same prior to distribution, as required in general under Article 12(5) of IVASS Regulation No. 45/2020. In any case, the intermediary shall promptly inform the insurance company if, as a result of the outcome of its assessments, the actual target market and the actual negative target market should no longer coincide with those identified by the company.

• Communications to IVASS regarding shareholdings and close links: IVASS clarified that in the absence of amendments to the primary legislation (Article 109(4-sexies) of the Italian Insurance Code), it is not possible by way of regulation to eliminate the obligation for insurance intermediaries to make the relevant communications to IVASS regarding shareholdings and close links, also in cases where the intermediary does not consider that there is an impediment to the exercise of supervisory powers by IVASS. The cases of "close links" relevant for the purposes of disclosure to IVASS are by the Italian Insurance Code, and reference should be made in this regard to the clarifications on the transmission to IVASS of information relating to close links and relevant shareholdings already published on IVASS’ website (available here in Italian only).