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    EIOPA on Application of Licensing and Proportionality to Insurtech

    March 27, 2019

    EIOPA published a report on best practices on licensing requirements, peer-to-peer insurance, and the principle of proportionality in the insurtech context. In EU, licensing requirements are regulated through Directives on Solvency II and Insurance Distribution.

    Taking into consideration the Fintech Action Plan of EC and the mandate of the InsurTech Task Force, EIOPA mapped current authorizing and licensing requirements and assessed how the principle of proportionality is being applied in the area of financial innovation. This includes the approach to insurtech start-ups such as peer-to-peer (P2P) insurers. The report includes an analysis of the approach to insurtech start-ups operating as peer-to-peer (P2P) insurers. It highlights the emergent best practices for national competent authorities to support a more systematic approach to insurtech licensing requirements as well as to ensure, through a common application of the proportionality principle, consistent and effective supervisory practices across Europe. The evidence gathered points to an evolving insurtech market in EU that is still in its nascency. Most national competent authorities either have limited experience with insurtech companies or do not differentiate "digital" business models from others.

    One of the conclusions is that, at this stage—also reflecting overall EIOPA stance of technological neutrality and support for establishing a level playing field for all market participants—there seems to be no need for further regulatory steps on licensing. However, national competent authorities should adapt their internal processes and know-how to reflect the impact of digital transformations and avoid diverging supervisory practices, considering the cross-border and cross-sectoral nature of some insurtech developments. Furthermore, close monitoring of developments is required, given rise of new technology driven business models (for example, P2P), the use of new technologies (such as artificial intelligence and distributed ledger technology), and the need to rise to the challenge of sound authorization and ongoing supervision of highly digitalized insurers.

    To prepare for potential associated risks, national competent authorities should further enhance cooperation and the exchange of experience among each other and with EIOPA. To this end, EIOPA will work together with national competent authorities and insurtech firms by:

    • Exploring options to develop a network of innovation facilitators for the benefit of national competent authorities and insurtech firms
    • Assessing what insurtech-related data might need to be collected systematically to support national competent authorities and EIOPA work on insurtech
    • Spearheading further work on understanding new technologies and different business models including the impact of insurtech on traditional business models on insurance companies
    • Monitoring of outsourcing and the developments in licensing insurtech companies
    • Analyzing the potential growth of the P2P insurance market


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    Keywords: Europe, EU, Insurance, Insurtech, Proportionality, P2P Insurance, License Applications, Solvency II, EIOPA

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