Product Oversight Governance Arrangements Policy


INTRODUCTION

The directive (EU) 2016/97 of the European Parliament and of the Council of 20 January 2016 on insurance distribution (hereinafter “IDD”), transposed into the Luxembourg law of 7 December 2015, establishes specific requirements on insurance distributor. The new requirements have entered into force on 1 October 2018.

In accordance with article 295-15 of Luxembourg law of 7 December 2015 as amended, the purpose of this Product Oversight Governance Arrangements (hereinafter “POG” or the “Policy”) policy is to describe the operating model of Gatsby & White S.A. (hereinafter “GW” or the “Firm”) and its affiliated companies as an insurance distributor.

Insurance distributors shall have in place a POG containing appropriate measures and procedures ensuring that insurance products offered meet the defined needs of target market and also preventing and mitigating the risk of mis-selling. Therefore, distributors shall obtain from the manufacturers all appropriate information on the insurance products they intend to offer to their customers and to fully understand those insurance products. Distributors shall consider the level of complexity and the risks related to the products as well as the nature, scale and complexity relevant for their own business.

In addition, the policy determines the role of GW and its responsibilities in dealing with partners involved in the distribution process.

As a principle, GW either sells directly or through the service of sub-brokers or co-brokers. Regarding the latter, the application of the provisions further described in the Policy will be detailed in the co-brokerage agreement(s).

This policy is accessible for all employee of GW, sub-brokers and co-brokers via our website or upon request at compliance@gatsbyandwhite.com.

I.              Regulatory context

1.    Scope

This policy applies to GW distribution business meaning the activities of advising on, proposing, or carrying out any other task prior to the conclusion of contracts of insurance, of concluding such contracts, or of assisting in the administration and performance of such contracts.

All employees of GW and any sub-broker, duly registered with the competent authority and involved in one activity of the distribution process, shall respect the principles set in the policy.

The principles defined in the policy apply to all European Economic Area resident clients. Therefore, it will not apply to non-EU clients.

All insurance products distributed after the October 1st 2018 are covered by the principles described in the policy. Therefore, the principles set hereinafter do not apply to insurance products and insurance policies distributed before this date, except in the event of circumstances described in section 2.2 Suitability assessment.

The list of products offered to customers is defined in the appendix 1 entitled “Products list”. The aforementioned appendix is an integral part of the POG policy. The Legal & Compliance Dpt. of GW endorses new product distributed by GW according to the procedure defined by the “Product committee”. The Legal & Compliance Dpt. also endorses the collaboration with new insurance partners by signing the distribution agreement with a « Directeur agréé de société de courtage d’assurances » of GW.

2.    Governance

The Board of Directors endorses the establishment, the implementation and the review of the POG. The Board of Directors also ensures continued internal compliance with the POG framework.

However, from an operational point of view, Legal and Compliance department is in charge of the monitoring and ongoing review of the POG framework further detailed in section   Monitoring and ongoing review.

Any request related to the exercise of the POG shall be communicated to Legal and Compliance department without delay.

Whilst the primary responsibility to deal with POG matters is vested in Legal & Compliance, any employee of GW and sub-broker, shall collaborate with Legal & Compliance for the collection and processing of necessary information.

II.            Organisation – Processes – Controls

1.    Exchange of information

a.         Information to receive from insurance companies

As a preliminary step and before offering the insurance product to the customers, GW shall receive relevant information on the product from the insurance company within one month following the:

  • Signature of a new partnership with an insurance company;
  • Notification of a change in the product from the insurance undertaking.

The Relationship Client & Partners Services or Legal & Compliance should receive, monitor and keep up-to-date the relevant information.

Relevant information from insurance companies shall encompass the following information:

  • Product information:
  • Technical information:

Insurance companies shall provide GW with the information allowing them to understand the product meaning its main characteristics, risks associated and costs (including implicit costs) as well as circumstances, which may cause a conflict of interest to the detriment of the customer.

  • Marketing information:

Insurance companies shall provide GW with the marketing documentation presenting the product to the customer such as KIID/KID or IPID. This obligation should be defined in the distribution agreement.

  • Target market:

Insurance undertakings shall provide GW with the information related to the target market identified for the product meaning the group of customers to whom the insurance product shall be distributed. The target market shall define criteria such as characteristics (e.g. nationality, country of residence or fiscal residence, investment horizon etc.), objectives, risk profile of the compatible customers according the complexity and nature of the insurance product.

Insurance undertakings can also provide GW with a negative target market meaning the group(s) of customers whose interests, objectives and risks appetite are not compatible with the product.

In the event GW considers a product to be adequate for a prospective policyholder out of the target market defined by the insurance company, GW requires the prior approval of the company.

  • Distribution strategy:

Insurance undertakings shall provide GW with the distribution strategy determining how to reach the target market identified for the insurance product.

As a principle, GW decides to rely on the distribution strategy defined by the insurance undertakings for each insurance product offered to its customers.

In the event GW decides to adopt its own distribution strategy, the firm shall ensure that the strategy implemented remains in line with the one adopted by the insurance undertakings and the target market identified. To that extent, Legal & Compliance Dpt. should be responsible for verifying the alignment.

In case GW does not receive one of the above information in due time, the Legal & Compliance Dpt. will contact the insurance company. If after 15 days, the insurance company has not provided GW with the agreed information, the firm will notify the insurance undertaking that it is not able to offer the product to its customer.

b.         Information to provide to the insurance companies

GW will provide insurance companies with the information requested by them or with the information defined by the distribution agreement.

  • Information on sales

GW shall provide the insurance undertakings with all relevant information related to the sale of the insurance products.

  • Target market related information

GW shall provide the insurance undertakings with all relevant information related to the target market. This report shall include information related to distribution made out of the target market identified by the insurance company.

GW shall also report to the insurance undertaking any problem identified regarding the definition of the target market for a specific product or service. The Firm will also inform the insurance company if a given product or service no longer meets the circumstances of the identified target market.

c.         Communication

  • Format, means of communication and medium

The frequency, format and medium of the information exchange will be defined in the distribution agreements entered with product manufacturers.

GW will use any mean of communication available such as paper, mail, website, email to obtain or provide information.

  • Request from insurance companies

Legal & Compliance Dpt. is the contact point for any inquiry related to the policies linked to products sold.

For the report mentioned in section II.1 b. Information to provide to the insurance companies, Relationship Client & Partners Services will collect the data. Legal & Compliance Dpt. will control the data and will provide them to the insurance undertakings according to the terms agreed in the distribution agreement.

2.    Suitability assessment process

As an insurance broker established in the Grand Duchy of Luxembourg, GW is required to provide advice before the sale of any insurance product. GW provides independent advice to clients as it bases its advice on an impartial and personal analysis of a sufficient number of contracts that are representative of the market. In order to recommend the best product for the prospective policyholder/to meet prospective policyholder’s demands and needs, GW has implemented a suitability assessment process.

A.    Initial suitability assessment

In the pre-contractual phase of the sales process, the expression of client’s needs and demands is collected through the document “Questionnaire d’adéquation” which is an integral part of the “Mandat de courtage”. The questionnaire must be completed in order to propose an insurance product to the prospective policyholder.

No product shall be recommended without the proper completion of the questionnaire.

The Relationship Client & Partners Services will control the completeness of the questionnaire. In the event the questionnaire is not complete, the competent insurance distributor (sub-broker, co-broker, broker, sub-agent,..) will be contacted by the Relationship Client & Partners Services for remediation.

To present the consistent insurance(s) product(s) identified through the assessment, and as mentioned in section II.1.a. Information to receive from the insurance companies, GW will use the marketing documentation provided by the insurance company. The product recommended shall be in adequacy/consistent with the prospective policyholder’s demands and needs.

The sales representative (or competent authorised insurance distributor) shall ensure that the prospective policyholder understands the information presented in order to take the most informed decision.

In case the product is not suitable, GW will inform the prospective policyholder to that extent. Such warning shall be documented within the suitability statement.

The prospective policyholder’s acknowledgement and will to subscribe the insurance product shall also be documented in the suitability statement.

B.     Periodic suitability assessment

As a principle, GW will not offer policyholder to conduct a periodic suitability assessment. However, at any time, policyholder will have the possibility to demand GW to review the suitability of his insurance contract.

C.     Triggered suitability assessment

An operation or a transaction/movement (e.g. top-up, switch on the underlying, withdrawal, change of asset manager or custodian bank, modification of the death cover) shall trigger the performance of a new suitability assessment.

Any action related to the suitability assessment shall be kept for audit purposes. For further details, please refer to section V. Record keeping.

III.           Monitoring & review

1.     Monitoring and ongoing review

Legal & Compliance Dpt. is responsible of ensuring the compliance of the POG with the regulatory requirements.

The Board of Directors delegates to Legal & Compliance the conduct of the monitoring and ongoing review of the POG.

Considering the size of the firm and current characteristics of the activities (markets, clients and products), the review shall be conducted every year and for the first time during the first quarter of 2020.

Any significant regulatory change or modification in the distribution-operating model of the firm will trigger a review of the POG.

To conduct the review, Legal & Compliance Dpt. will assess at minimum the completeness and adequacy of the target market and the distribution strategy for each insurance product offered to customers.

Legal & Compliance Dpt. shall duly document any action related to the review/update of the POG. Retention measures are further described in section V. Record keeping.

2.     Reporting to the Board of directors

Legal & Compliance Dpt. shall report, at least annually, the results of the POG monitoring to the Board of Directors as the latter is responsible for endorsing the outcomes of the review and the related actions.

The results of the report shall be minuted during the Board of Directors meetings and must include the steps/actions taken by Legal & Compliance Dpt. to conduct the review.

IV.          Registration and training

  1. Registration

All intermediaries distributing insurance product to customers shall be registered with the local authority in charge of supervising regulated distribution activities.

Gatsby & White S.A. is duly registered with the Commissariat Aux Assurances under the license nr. « 2013CM006 » as an insurance brokerage company. As well, each affiliated company operating directly in the insurance distribution channel will be duly registered by the local insurance control authority.

Before signing any distributor or sub-distribution (such as sub-brokerage or sub-agency) agreement, Legal & Compliance Dpt. shall obtain confirmation that the distributor or sub-distributor possesses all the required capability such as a valid brokerage’s license.

Legal & Compliance Dpt. will ensure on a yearly basis that employees, distributors and sub-distributors are still registered with the ability to sell in the market(s) where they operate. Such verification shall be documented.

In the event that an employee, a distributor or a sub-distributor does not possess the required capacity, Legal & Compliance Dpt. will inform the latter. As a conservative measure, the employee, the distributor or the sub-distributor will no longer be entitled to take part in the distribution process until possessing the required capacity.

Throughout this process, a notification will be made to the competent authority.

  1. Training

Employees shall possess appropriate knowledge and ability in order to perform their duties adequately and to protect the customers’ best interest. This requirement concerns all employees directly involved in the distribution activity.

According to the « Règlement du Commissariat aux Assurances » dated February 26th 2019 on the Distribution of insurance and reinsurance, a training program shall be defined over a reference period of three years based on the three pillars (i.e legislation, products and “soft skills”).

As well, each affiliated company operating directly in the insurance distribution channel will duly respect local training regulation at the least, as well as eventual internal training sessions necessary for the harmonization and coordination of the GW Group.

The person in charge of training, formally appointed, shall be responsible for developing/monitoring a training framework that is in line with the requirements and adapted to GW operating model. This person is responsible for ensuring that the employees or distributors fulfil the mandatory requirements in term of continuing professional training and development. This person must ensure to possess relevant proof/evidence documentation thereon. This person shall also inform the employee or distributor about the specific program such employee or distributor is called to follow in order to guarantee its adequacy to his target markets and clients according to procedure described here under point IV.2.i Appropriate knowledge and ability.

The person in charge of training is also responsible for reporting to the Board of Directors any non-compliance with the requirements described above. GW has to report to the Commissariat Aux Assurances the list of distributors in breach with the requirements.

A.     Appropriate knowledge and ability (‘Fit and Proper’ rule)

In terms of training program, GW employees benefit from external and internal trainings.

In January of each year, the Group Business Development Committee shall inform Legal & Compliance Dpt and the person in charge of training about the target markets of each distributor of GW. The person in charge of training will ask each distributor to follow specific annual training requirement accordingly.

All trainings attended by an employee or distributor are registered according to GW internal process.

B.     Monitoring

If an employee or distributor does not possess the level of knowledge expected or required by the regulation, GW will provide the latter with the necessary training sessions.

V.           Record keeping

Any action related to the POG shall be kept/documented for audit purposes. GW makes available those records to the competent authorities upon request, if needed for supervisory purposes.

 

v. CI _2019_11_28