Market access
Insurance intermediaries from EU countries can structure their provision of services to the Netherlands in various ways. In many cases, no Dutch licence is required. This is because insurance distribution is regulated, amongst other things, by a European directive, the Insurance Distribution Directive (IDD). Part of the IDD is the European passport system. In short, this system – which also applies to many other types of financial enterprises – means that a licence issued in one EU country must also be recognised by other EU countries.
Essentially, there are three options for insurance intermediaries to operate in the Netherlands as MGAs. Firstly, a foreign insurance intermediary may offer cross-border services in the Netherlands from its home country. In that case, no Dutch licence is required provided the notification procedure has been correctly completed. The same applies when providing services through a branch office in the Netherlands. Providing services through a branch office differs from cross-border service provision in that there is a physical establishment in the Netherlands. The third option is to set up a Dutch company that will carry out activities in the Netherlands. That company must, however, obtain a licence from the Autoriteit Financiële Markten (AFM, the Dutch supervisory authority) before it can commence providing services. Consequently, this process takes longer and is more labour-intensive, as all licensing requirements must be met. Once the license has been granted, the authorised agent must also (continue to) comply with all relevant (supervisory) provisions. Nevertheless, it can sometimes be strategically advantageous to carry out the activities through a Dutch company.
Another point to bear in mind is that the insurer behind the authorised agent must also be authorised to offer insurance in the Netherlands. This, too, can often be achieved by submitting the correct notification to the relevant supervisory authorities.
Conduct of business supervision
The European passport system does not mean that no Dutch provisions apply to foreign insurance intermediaries. A large number of Dutch conduct of business regulations still apply, and the AFM actively supervises compliance with these rules. An insurance intermediary would be well advised to familiarise themselves with these regulations before entering the Dutch market. One example is the rules on the provision of information.
Another example of a relevant Dutch provision is the cap on the maximum variable bonus for certain staff (an issue that has recently gotten renewed attention). That cap also applies to Dutch branches of authorised agents.
Policy terms and conditions
Consideration must also be given to the terms and conditions under which the insurance product is offered. Dutch insurance law is based on freedom of contract. However, this freedom of contract is significantly restricted by provisions of mandatory law, from which the policy terms and conditions cannot deviate, or can only do so to a limited extent, but also by a wide range of self-regulatory measures.
Certain articles may not be deviated from at all in the policy conditions; other provisions may not be deviated from to the detriment of the policyholder or the beneficiary; and a number of provisions – in the context of consumer protection – may not be deviated from to the detriment of the policyholder or the insured person if the policyholder is a consumer. In addition, Dutch insurance law recognises powers that must be stipulated in the policy conditions, such as the insurer’s right to terminate the policy before its expiry. If this right is not stipulated in the policy, an insurer cannot, in principle, terminate the policy before its expiry. If this right is stipulated, the policyholder is entitled to a corresponding right. No deviation from this provision is permitted to the detriment of the policyholder or the person entitled to the benefit.
Self-regulation
In addition, the Dutch insurance sector is characterised by a comprehensive self-regulatory system comprising (at present) almost 80 codes, regulations and covenants drawn up by the Verbond van Verzekeraars (Dutch Association of Insurers), a large proportion of which are binding on members of the Verbond van Verzekeraars. Although this self-regulation is not a ‘law’, it does occupy an important position within the insurance sector. For example, compliance with the binding self-regulatory rules is assessed by the Stichting toetsing verzekeraars (Insurers’ Assessment Foundation), and the Klachteninstituut Financiële Dienstverlening (Kifid, Financial Services Complaints Institute) and the Tuchtraad Verzekeraars (Insurers’ Disciplinary Council) take these binding self-regulatory rules into account when assessing consumer complaints. Furthermore, acting in breach of the self-regulation may, under certain circumstances, give rise to liability for a tort. Insofar as the conduct constitutes a misleading commercial practice, administrative enforcement by the AFM cannot be ruled out either.
Would you like to know more?
Expanding into the Netherlands can be an attractive prospect for many reasons. Legal advice is crucial during this process. If you would like to find out more about the key considerations when entering the Dutch market,please contact us.
