Launch of Public Consultation on the Regulation of Insurance and Reinsurance Distribution

The Central Bank of the Republic of San Marino announces that it has initiated the public consultation procedure on the draft "Regulation on insurance and reinsurance distribution ".

The measure aims primarily to align sector regulations with the reform of Chapter II, Title V, Part I of the LISF (notably Articles 26, 27, and 28), introduced by Article 19 of Law No. 132 of 15 September 2023, effective from January next year.

By shifting from insurance intermediation to insurance distribution - encompassing even insurance companies when they market their own products directly without intermediaries - the new Regulation replaces the current Insurance Intermediation Regulation (Reg. 2007-02, Agg. XI) and supplements the Life Insurance Business Regulation (Reg. 2008-01, Agg. XII).

As outlined in the heading of the aforementioned Article 19, the extensive regulatory reform was driven by the overarching goal of incorporating the Insurance Distribution Directive (IDD) (EU Directive 2016/97) into San Marino’s legal framework, along with its implementing regulations. These include Implementing Regulation (EU) 2017/1469 (standardized format for the pre-contractual information document – DIP), Delegated Regulation (EU) 2017/2358 (requirements on product governance and oversight – POG), and Delegated Regulation (EU) 2017/2359 ( disclosure obligations and conduct rules for the distribution of insurance based investment products – IBIPs). This reform is fully aligned with the Central Bank’s broader strategy of progressively harmonizing domestic regulations with the EU acquis, a process that has gained further momentum in light of the opportunities and commitments arising from the forthcoming Association Agreement.

Given the established and evolving interconnection with the Italian insurance market and intermediary system, the reform has naturally taken the Italian transposition model as the primary comparative benchmark and, where feasible, an alignment reference. This approach aims to minimize operational impacts for intermediaries in San Marino who distribute Italian insurance products, already subject to the distribution rules imposed by intermediate insurance companies.

Based on the aforementioned regulatory framework and in pursuit of the stated objectives, a comprehensive measure has been introduced, which, among other provisions, includes:

1. a new, complete, and updated set of definitions;
2. a comprehensive overhaul of the Insurance and Reinsurance Intermediaries Register, maintaining its three-section structure but introducing a functional classification (A – agency firms, B – brokerage firms, C – financial firms) with a vertical approach. This distinguishes entities based on operational responsibility, differentiating between intermediaries (direct registration) and their responsible officers or off-site collaborators/employees (indirect registration);
3. a tightening of integrity requirements, now extended to in-house distribution staff, alongside enhanced professional competence standards, which - though applicable only to those in charge (RAD) - require passing an evaluative test;
4. stronger disclosure obligations regarding ownership structures and close links;
5. defined minimum requirements for the commencement of operations across all three categories of intermediaries;
6. a new regulatory framework, aligned with established standards, addressing the following areas: documentation retention obligations; collective contract arrangements; tied selling practices; conflict of interest; remuneration and incentive systems; disclosure of remuneration; pre-contractual information and associated models; advertising regulations; assessment of client requests and needs; off-premises offerings and remote communication techniques; specific provisions for distance selling; comparison services; and promotion and distribution via the internet or call centers;
7. foreign insurance companies authorized under Article 75 of the LISF are allowed to distribute their products in San Marino. These companies must be registered in the Register of Authorized Entities instead of the specific List. They may do so not only indirectly (through intermediaries registered in San Marino), but also directly (by establishing a presence in the territory or using distance communication techniques). However, such activities must always be authorized in advance by the supervisory authority of the home country;

8. the reference to the applicable European sources that are in effect at any given time, including specific provisions that are directly applicable within the EU, as well as the standardized forms published on this website;

9. the addition of two new annexes to Regulation 2008-01: Annex H concerning the governance and control of insurance products, and Annex I addressing pre-contractual information, advertising, and the implementation of insurance products.

Given the extensive scope of the intervention, the consultation period is extended until January 8, 2024.

Any contributions to the consultation may be submitted to the following email address: dipartimento.vigilanza@bcsm.sm with the subject line: “Consultation on the Insurance Distribution Regulation.”