In depth

Deep dive into the key characteristics of the EU sustainable finance regulation

Insurance Distribution Directive (IDD)

Insurance Distribution Directive (IDD)

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The Insurance Distribution Directive (IDD – Directive (EU) 2016/97) is a Directive on insurance distribution (fully recasting the Insurance Mediation Directive (IMD Directive 2002/92/EC) on insurance mediation) introduced by the European Parliament and the Council. The objective is to strengthen the rules on the design and distribution of insurance products, and it applies to the sale of all insurance products in the EU. It intends to harmonize national provisions concerning insurance and reinsurance distribution, while not precluding Member States from maintaining or introducing more stringent provisions to protect customers.

The IDD mainly focuses on the following areas:

  • Product oversight and governance (POG) and product distribution arrangements (PDA);
  • Conflicts of interest;
  • Client’s information and conduct of business;
  • Professional training and competencies

The IDD is a minimum harmonizing directive, and its provisions are specified by two Delegated Regulations: Commission Delegated Regulation (EU) 2017/2358 on product oversight and governance requirements and Commission Delegated Regulation (EU) 2017/2359 on information requirements and conduct of business rules.

In August 2021, the Delegated Regulation (EU) 2021/1257, amending Delegated Regulation (EU) 2017/2358 and (EU) 2017/2359, integrated sustainability factors, risks and preferences into the product oversight and governance requirements for insurance undertakings and insurance distributors, as well as into the rules of conduct of business and investment advice for insurance-based investment products.

Article 2 of the Delegated Regulation (EU) 2021/1257 introduces the definition of “sustainability preferences” as a (potential) client’s choice, to be expressed in the IDD questionnaire, to integrate one or more of the following financial products into their investment:

  • A product where a minimum proportion shall be invested in environmentally sustainable investments as defined by the EU Taxonomy Regulation (EU Taxonomy (1)); and/or
  • A product where a minimum proportion shall be invested in a minimum proportion of sustainable investments as defined in Article 2, point 17 of the Sustainable Finance Disclosure Regulation (SFDR) (2); and/or
  • A product considering Principal Adverse Impacts (PAI) (3)on sustainability factors(4)

Visit the EU Taxonomy section and the SFDR section for further information.

Following the amendments to the IDD, the European Insurance and Occupational Pensions Authority (EIOPA) issued a Guidance on the integration of the customer sustainability preferences (“Guidance on the integration of the customer’s sustainability preferences in the suitability assessment under IDD”) to promote a better understanding of the new rules and facilitate their implementation.

Please note, since 2023, the IDD framework has been further amended twice, and a much larger reform is in its final legislative stages:

  • Monetary thresholds (Commission Delegated Regulation (EU) 2024/896 of 5 December 2023): recalibrates, under Article 10 of the IDD, the base amounts for professional indemnity insurance and financial capacity that insurance, reinsurance and ancillary insurance intermediaries must hold, to reflect the 20.32% rise in the European index of consumer prices between 1 January 2018 and 31 December 2022. Applicable from 9 October 2024.
  • European Single Access Point – ESAP (Directive (EU) 2023/2864 of 13 December 2023): inserts a new Article 40a into the IDD. From 10 January 2030, the information insurance intermediaries and undertakings must already make public under Article 32(1) and (2) of the IDD will also need to be made accessible on ESAP, established by Regulation (EU) 2023/2859.
  • Retail Investment Strategy (RIS): an omnibus Directive proposed by the European Commission on 24 May 2023 that will further amend the IDD (together with MiFID II, Solvency II, the UCITS Directive and the AIFMD), alongside a Regulation amending Packaged Retail and Insurance-based Investment Products (PRIIPs). The RIS introduces a value-for-money framework, requiring insurers to benchmark product costs and charges against supervisory reference levels and justify them if they run high. As of August 2026, the text has been formally endorsed by the Council and now awaits a confirmatory vote in the European Parliament’s plenary, expected in September 2026, with publication in the Official Journal anticipated in Q4 2026 / early 2027. Once published, the IDD-related changes are expected to apply from around Q2 2029, following a 24-month transposition period for Member States.

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Notes:

(1) Environmentally sustainable investment’ means an investment in one or several economic activities that qualify as environmentally sustainable under this Regulation.

(2) “Sustainable investments” are defined by Article 2, point 17 of the SFDR as investments in an economic activity that contributes to an environmental objective, as measured, for example, by key resource efficiency indicators on the use of energy, renewable energy, raw materials, water and land, on the production of waste, and greenhouse gas emissions, or on its impact on biodiversity and the circular economy. It can also be an investment in an economic activity that contributes to a social objective, in particular, an investment that contributes to tackling inequality or that fosters social cohesion, social integration and labour relations, or an investment in human capital or economically or socially disadvantaged communities, provided that such investments do not significantly harm any of those objectives and that the investee companies follow good governance practices, in particular with respect to sound management structures, employee relations, remuneration of staff and tax compliance”.

(3) “Principal Adverse Impacts” (PAI) are environmental and social-related indicators that assess the (negative) impacts that investment decisions taken by FMPs have on sustainability factors, such as environmental and social issues.

(4) “Sustainability factors” refer to environmental, social and employee matters, respect for human rights, anti‐corruption and anti‐bribery matters as defined in Article 2, point 24 of Regulation 2019/2088 on SFRD.

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