Bulgarian Parliament mulls bill on implementing EU insurance directive

On 11 October 2018, a new bill on amending and supplementing the Bulgarian Insurance Code was submitted to parliament. When passed, the Bill will implement EU Directive 2016/97 on insurance distribution (“IDD”).

This draft law has been hotly anticipated in the Bulgarian market. According to the IDD, member states were required to transpose this directive into legislation by 1 July 2018, and apply it beginning 1 October 2018.

The IDD was designed to provide uniform and more stringent rules to tackle the EU's complex insurance and reinsurance distribution markets, with the goal of improving the way insurance products are sold so that they will bring real benefits to customers. Industry insiders have high hopes for the new rules since they apply to a wider range of participants – all sellers of insurance products (including intermediaries and participants selling insurance on an ancillary basis), and insurance companies that deal directly with customers.

As mandated by the IDD, the Bill increases the standards of required knowledge and qualifications that distributors of insurance products must have. It also creates three categories of intermediaries, each of whom is subject to a different level of knowledge and skills. The first category is insurance intermediaries (i.e. agents and brokers), who enjoy the highest requirements. The second is ancillary insurance intermediaries, who sell insurance related to another product or service, but are subject to registration. And thirdly, there are ancillary insurance intermediaries who are exempted from the requirement to register by virtue of a limited exemption.

The Bill provides enhanced product oversight and governance requirements for all insurers and insurance distributors.

Although the main purpose of the Bill is to implement the IDD, Bulgarian lawmakers are expected to use this opportunity to introduce other amendments to the Insurance Code, including changes mandated by Directive (EU) 2016/2341 regarding the activities and supervision of institutions for occupational retirement provision (IORPs), and by the Motor Third Party Liability Insurance Directive 2009/103/EC.

For more information on the Bill and how it might affect your business, please contact one of our resident experts: Nevena Radlova and Rosen Ivanov.