EBA reviews its RTS on Professional Indemnity Insurance for mortgage credit intermediaries

The European Banking Authority (EBA) published today a Report on the review of the Regulatory Technical Standard (RTS) specifying the minimum monetary amount of the professional indemnity insurance (PII) or comparable guarantee for mortgage credit intermediaries. The EBA assessed the information obtained from national authorities, from a sample of intermediaries and through desk-based research and concluded that no amendments to the RTS are currently required.

In this Report, the EBA provides an overview of the legal basis of its work, the methodological approach used and its assessment on whether to amend the RTS at this point in time. Based on this assessment, the EBA concludes that there is currently no evidence that would suggest that the PII minimum monetary amounts would need to be amended.

In reaching this conclusion, the EBA stresses that its mandate laid down in the MCD only refers to the threshold amounts themselves. The mandate does not extend to the EBA assessing, for example, the extent to which the usage of the minimum payout amounts prescribed in the RTS are potentially impeded by specific clauses in PII contracts; the nature of the comparable guarantee(s) that may be used in the market; or what should be understood as a “comparable guarantee” at all. The EBA, therefore, did not analyse those elements or conducted any thorough assessment of the contents of the insurance contracts.

Legal basis and next steps

This Report has been developed in accordance with Article 29(2)(a) of Directive 2014/17/ EU on credit agreements for consumers relating to residential immovable property (MCD), which mandates the EBA to review, and if necessary, develop draft RTSs to amend the minimum monetary amount of the professional indemnity insurance or comparable guarantee, for submission to the EU Commission by 21 March 2018 and every two years thereafter. Given the late transposition of the MCD in some Member States, the EBA decided in early 2018 to postpone the review by two years, from 2018 to 2020.

In order to fulfil the above mandate, the EBA assessed the responses to a survey sent by National Competent Authorities (NCAs) to the ten largest credit intermediaries in their respective jurisdiction, intelligence gathered from national authorities themselves, and desk-based research.

The RTS on PII were published in the Official Journal in October 2014 as Delegated Regulation (EU) No 1125/2014, set the minimum monetary amount of the PII or comparable guarantee for mortgage credit intermediaries by specifying an amount for each individual claim (EUR 460,000) and an aggregate amount per calendar year for all claims (EUR 750,000).

The EBA will review the RTS on PII every two years.