Updated European Union rules on financial markets have been broadly welcomed but there are concerns that the insurance industry has been left in the lurch.

New European Union financial regulations have been broadly welcomed – with caveats – by the bloc’s wealth management sector but an investment group is concerned that the insurance industry has been overlooked.

The European Fund and Asset Management Association says the updated MiFID (Markets in Financial Instruments Directive) set of rules don’t sufficiently cover the insurance sector. (Insurance products sometimes include structures used in wealth management, such as private placement insurance.)

"While we applaud the EU for having concluded its widest reform of the European financial markets since 2007, we are disappointed that not all financial products have been treated equally. We believe that it is in the best interests of the investor that the same rules apply across the board. We therefore call on European co-legislators to use IMD II to rectify this and ensure that moving forward there is a level playing field for all,” Peter de Proft, director general of the organisation, said in a statement last Friday.

IMD II refers to the Insurance Mediation Directive, another rule that is meant to cover insurance but discussions about it have hit a roadblock. As a result, there is a gap in the European rulebook where insurance is concerned, creating uncertainty, he later told this publication in a phone call.

The association is urging lawmakers and EU governments to “immediately restart the stalled negotiations on the review of the Insurance Mediation Directive to ensure that end investors are ultimately afforded the same level of protection and transparency across the whole range of financial products”.

A statement from the European Commission last week said the updated MiFID regime will protect investors more effectively and introduces “some rules for insurance-based insurance products”.

New rules

The updated MiFID regime is designed, its framers say, to widen investor protection while maintaining a competitive financial market. Some aspects of it have prompted controversy. The regime requires Swiss banks marketing services to EU clients to set up offices in the bloc – a move criticised by the Swiss banking industry as adding to costs and hitting jobs in the Alpine state. (To see more on this issue, click here.)

Trade organisations appear broadly happy with the reformed MiFID. There are some concerns, however, that the UK’s Retail Distribution Review programme of reforms on wealth advisors may have to be updated again to deal with the updated European rules. RDR took effect a year ago.

The Wealth Management Association, the UK body, said: “But for the UK, in many ways the hard part starts here. MiFID and the RDR have different definitions of independent and restricted services, which could mean that the UK has to change its rules again barely a year after a significant overhaul. The agreed MiFID appears to permit an override by national regulators to enable them to continue to impose their own rules, but whether that means the RDR survives is unclear."

“Does this mean that RDR will continue, unaffected by this EU-wide agreement? And if it does will it put UK firms at a disadvantage to continental ones covered by a different and less onerous régime?" it asked in conclusion. The updated MiFID is designed to close loopholes and applies to investment firms, market operators and services providing post-trade transparency information in the EU.

EFAMA represents through its 27 member associations and 62 corporate members about €15 trillion in assets under management.