FDATA responds to EBA insurance consultation
The Financial Data and Technology Association has submitted a response to the EBA consultation “Guidelines on the criteria on how to stipulate the minimum montary amount of the professional indemnity insurance under PSD2”.
There were seven questions, which can be seen below along with FDATA’s answers:
Question 1: Do you agree with the requirement that competent authorities require undertakings to review, and if necessary re-calculate, the minimum monetary amount of the PII or comparable guarantee, and that they do so at least on an annual basis, as proposed in Guideline 8?
FDATA agrees with the principle behind this proposal. It is good for all market participants that operators are adequately insured, and we support the concept of competent authorities being in control of that regime.
However we would stress the need to minimise the administrative burden on the operators, especially in the case of start-ups who have little resource for such tasks. If the administrative burden is significant it could be seen as a barrier to entry to the market.
Question 2: Do you agree with the formula to be used by competent authorities when calculating the minimum monetary amount of the PII or comparable guarantee as proposed in Guideline 3? Please explain your reasoning
We have applied the proposed formula to some theoretical companies of different sizes, and we believe that the financial outcome tends to be fair. However whilst the outcome seems reasonable, we have concerns that the formula itself is overly complicated.
We would therefore encourage more work to investigate whether the same equitable outcome could be achieved through a less complicated formula.
Question 3: Do you agree with the indicators under the risk profile criterion and how these should be calculated, as proposed in Guideline 5? Please explain your reasoning.
As we noted in answer to question two, we generally support the indicators and the result they produce. However we are concerned that some companies, start-ups in particular, will find the system onerous and complicated. The EBA needs to be satisfied that a similar outcome cannot be achieved through a less complicated formula.
Question 4: Do you agree how the indicators under the type of activity criterion should be calculated, as proposed in Guideline 6? Please explain your reasoning.
See answer to question 3.
Question 5: Do you agree how the indicators under the size of activity criterion should be calculated, as proposed in Guideline 7? ? Please explain your reasoning
See answer to question 3.
Question 6: Do you think the EBA should consider any other criteria and/or indicators to ensure that the minimum amount is adequate to cover the potential liabilities of PISPs/AISPs in accordance with the Directive? Please explain your reasoning.
We do not believe the EBA need consider any other criteria or indicators to set a minimum amount, however we would encourage the EBA to consider criteria which would enable the setting of a maximum amount of adequate cover.
Question 7: Do you have any other comments or suggestions that you think the EBA should consider in order to ensure that the minimum amount is adequate to cover the potential liabilities of PISPs/AISPs in accordance with the Directive? Please explain your reasoning.
We believe that it is important that the EBA consults with the insurance industry to ensure that the calculations correspond with the current insurance industry assessment of risk for AISPs and PISPs.