AFM clarifies the application of DORA to insurance intermediaries

The Netherlands Authority for the Financial Markets (AFM) has recently issued a publication that clarifies key developments, experiences and important considerations of the Digital Operational Resilience Act (DORA) and addresses the question of when insurance intermediaries fall within DORA’s scope, which had been a topic of uncertainty. 

The European Supervisory Authorities (ESAs) provided clarification on this in Q&As on the EIOPA website: Q&A DORA099 and Q&A DORA237. 

The AFM publication outlines the key clarifications arising from the ESAs’ Q&As.

Exemption for small and medium-sized insurance intermediaries

Small and medium-sized insurance intermediaries are exempt from the scope of DORA. This concerns insurance intermediaries with fewer than 250 employees and an annual turnover of less than EUR 50 million and/or a balance sheet total of less than EUR 43 million. Since insurance mediation constitutes only a limited part of the activities of some insurance intermediaries, questions arose as to how these criteria should be applied to entities with primary activities that did not include insurance mediation. In addition, it was uncertain how the number of employees, annual turnover and total balance sheet should be calculated for insurance intermediaries that are part of a group.

Insurance mediation not the primary activity

According to the AFM, Q&A DORA237 indicates that figures for the undertaking as a whole should be considered when assessing the thresholds. Where, however, insurance mediation activities are only of limited significance (i.e. very limited activity/resources), in accordance with the principle of proportionality only the activities and resources dedicated to those insurance mediation activities should be considered.

Insurance intermediaries that are part of a group

In addition, according to the AFM, the Q&As provide clarification on the calculation of the thresholds for insurance intermediaries that are part of a group. In this respect, it must first be determined whether the group is a financial group or a non-financial group. Where an undertaking forms part of a non-financial group, only the individual undertaking should be assessed. For undertakings that are part of a financial group, consideration must be given to the participation they hold in other undertakings or the participation that other undertakings hold in them.

Where an undertaking holds between 25% and 50% of the shares or voting rights of another undertaking, the other undertaking is classified as a partner entity. In such cases, the partner entity’s number of employees, annual turnover and total balance sheet must be included on a pro rata basis when calculating the relevant thresholds.

In the case of linked entities, where there is a majority shareholding or control, the linked entity’s number of employees, annual turnover and total balance sheet must be included in full when calculating those thresholds.

Conclusion

The published Q&As provide insurance intermediaries and their groups with a more concrete framework for determining whether they fall within DORA’s scope. Insurance intermediaries where insurance mediation constitutes only a limited part of their activities, or are part of a group, are advised to assess their position in light of the recently published Q&As. The AFM publication can be consulted here.

Contact

For more information on the application of DORA or the implications of these Q&As, contact your CMS client partner or the CMS experts who contributed to this article.