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It has been almost two years since the implementation of the law on mediation in private insurance and reinsurance (IML) in Spain, which put into practice the EU Insurance Intermediaries Directive (Directive 2002/92/EU). One stated objective was to bring transparency to the market.

Although the new law has clarified many practices within the Spanish insurance market, it is fair to say that there are still many others which remain unclear at this stage. Now two years on, we will briefly refer in this article to some of these controversial sections of the law as well as to the position taken by the Spanish Insurance Supervisor (the DGSFP).

Traditionally, there have been two kinds of insurance intermediaries in Spain: insurance agents and insurance brokers. The main difference between them is that agents represent the insurer to whom they are tied by means of an agency agreement, while insurance brokers represent the policyholders, despite the fact that they also enter into agreements with insurers (through a letter of terms of business, or carta de condiciones). Insurance brokers must remain independent from the insurance companies in order to offer impartial advice to prospective policyholders/insureds. The advice must be based on a ‘fair analysis’ of the insurance contracts available in the market and checking those most suitable to the needs of the client.

The IML maintains this traditional distinction, adding some new categories of intermediaries such as tied insurance agents (agents entitled to represent several insurers; a practice forbidden by earlier regulations), and reinsurance brokers. The IML also regulates for the first time a newly-recognised category of insurance agents called bank-assurance operators, which refers to the activities carried out by the banks when acting as intermediaries for insurance sales.

In addition, the IML regulates some important additional categories which are not classified as insurance intermediaries and so cannot, for instance, take advantage of passporting rights. These categories are basically underwriting agencies and so called ‘external auxiliaries’. Underwriting agencies and external auxiliaries are not regulated in the same level of detail as insurance intermediaries. This is the main reason why, in our view, problems arise in the controversial interpretations and in the difficulties insurers and intermediaries encounter when dealing with or entering into contracts with them.

In an attempt to clarify the applicable regulations and avoid potential misunderstandings, the DGSFP has been, rightly or wrongly, issuing a large volume of guidance as a result of the queries raised by the market, not only in connection with underwriting agencies and external auxiliaries, but also relating to a broad range of queries about the IML. In our view, however, this is not the route to follow from a legal perspective given that it is for the courts to interpret the meaning of the different sections of the IML and for the legislature to modify or complete any unclear sections. In this regard, it should be noted that the guidance issued by the DGSFP is not binding although, in practice, all market participants are obviously trying to follow these criteria.

The limited regulation of underwriting agencies (coverholders) is only contained in the Third Additional Provision of the IML, which basically sets out certain duties such as supplying the DGSFP with a copy of the binding authority granted by the insurer, specifying the activities that the underwriting agency will perform, identifying itself as an underwriting agency and disclosing the name of the insurer or reinsurer it represents in all commercial documentation (i.e. letterheads, brochures, invoices, etc.). Although the content of the IML is limited to the above, the guidance issued by the DGSFP has established, among others, the following criteria:

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