The European Commission has written to the Committee of European Insurance and Occupational Pensions Supervisors (CEIOPS) requesting advice on how the Insurance Mediation Directive (IMD) might be revised.

The IMD sets out the principles of the single European passport and basic standards of consumer protection in the area of insurance intermediation. Its aim is to facilitate the freedom of establishment and the freedom to provide services in relation to intermediaries.

European Member States had until 15 January 2005 to transpose the Insurance Mediation Directive. Although the UK implemented on time, a number of EU countries took several years to introduce the new regime. In April 2006 the Commission was obliged to take action against Germany, France, Malta, Spain and Portugal for failure to implement the IMD.

As the Commission acknowledges in its letter to CEIOPS, minimum harmonisation requirements have resulted in wide divergence in how the IMD has been implemented across the EU. Furthermore, certain Member States' "gold-plating" of implementation requirements (such as those introduced under the FSA regime), as well as the different national requirements applied under the "general good" provisions, have created obstacles to the functioning of the single market for insurance and reinsurance intermediaries.

The aim of the revision of the IMD (which the Commission calls "IMD2") is to improve legal certainty and clarity.

The Commission has requested that CEIOPS provide advice on whether the revised directive should be a Lamfalussy framework directive, allowing greater regulatory flexibility. In addition, the Commission has asked CEIOPS to consider the scope of IMD2 so that a distinction might be made between the selling of investment products packaged as life policies and more general insurance products.

CEIOPS will also consider the extent of harmonisation in terms of professional qualifications for those selling insurance products and how the notification system for those selling insurance on a cross-border basis might be improved. The review will have to consider how "general good" provisions currently operate across the EU. This principle allows additional regulatory measures to be imposed by a host state if they serve a "general good".

Following on from the insurance business sector inquiry undertaken in 2006/2007, the Commission has also asked CEIOPS to consider remuneration transparency. As the Commission plans to adopt clear rules on conflicts of interest and transparency in relation to the distribution of investments packaged as life insurance policies, CEIOPS is requested to propose high level principles for the effective management of conflicts, taking into account differences between investment and general insurance products. In addition, CEIOPS should consider how greater transparency can be introduced in the manner in which non-investment product intermediaries are remunerated.

Further, the Commission has asked CEIOPS to consider ways to reduce the administrative burdens caused by the implementation of the IMD and to consider whether there are any areas of the current regime which have proved to be too costly compared with the intended objective and benefits.

On 18 January 2010, the Norton Rose Group published the results of its latest survey tracking market sentiment in relation to the global financial crisis. The big question that we face at this time is whether we can now put the global financial crisis behind us?

The mood of respondents in our fifth survey is noticeably more upbeat by comparison to previous surveys and the sense of optimism that pervades the survey suggests that many believe that we have indeed reached a turning point in the crisis. This is tempered with an appreciation that the aftermath of the crisis is continuing to be felt across the globe and that the possibility of a double dip recession remains.

Whilst the highest percentage of respondents predicted that the recovery will be long and shallow, there was a clear consensus that overall, the financial sector is preparing for a return to economic growth. A key requirement for sustainable economic growth is a return of liquidity to the global banking system. Two thirds of respondents believed that liquidity is back or will resume within nine months. Thirty-five per cent of respondents felt that liquidity would return between March 2010 and September 2010 whilst 29 per cent of respondents reported that liquidity had already returned.

The survey also showed a strengthening belief in the power of the Asia Pacific economies. More than three-quarters of respondents believe that the region will lead the global recovery. In addition, 68 per cent of respondents expect a permanent shift in economic power from West to East.

Apart from bankers, regulators have borne the main criticism for the financial crisis. One of the clear policy developments has been the move by regulators towards establishing global regulatory standards. However, as one respondent said, it makes no sense to try and set up a supranational regulator as long as the lenders of last resort remain national. This echoes the telling comment from the Governor of the Bank of England, that global banks are global in life but national in death.

It is almost certainly true that the situation is now more stable than it was 12 months ago and in the UK the Bank of England has decided against further quantitative easing. However, as recent events in Greece have shown sustained European recovery is not just around the corner. A huge amount of work now has to be done to rebalance the system in Europe.

The Norton Rose Group survey, Financial institutions in the future: Global financial recovery can be found here

Just before Christmas the UK Government published an important paper entitled Reforming OTC Derivative Markets - A UK perspective. As mentioned in the previous alert on it, this paper effectively set out the UK's view on the measures needed to be implemented to address systemic shortcomings in OTC derivative markets.

Since then the Committee on Payment and Settlement Systems and the Technical Committee of the International Organisation of Securities Commissions (CPSS-IOSCO) have launched a comprehensive review of their existing standards for financial market infrastructures such as payment systems and central counterparties (CCPs). Effectively in their review the Committees will revise three key sets of standards:

The Committees have stated that revised drafts of the standards will be available for public consultation in early 2011.

Back in the UK Lord Myners (Financial Services Secretary, HM Treasury) recently gave a speech at the AFME Market Liquidity Conference and effectively restated the UK Government's position as set out in the December paper. In particular Myners called on CCPs to be subject to "high global standards" and supported the CPSS-IOSCO review. He also urged the European Commission to align its proposals on the CPSS-IOSCO standards when it publishes the draft Markets Infrastructure Directive later this year.

One area that Myners wanted to see strengthened was the level and quality of CCP's capital. In the UK, CCPs and central securities depositories (CSDs) are currently required to hold sufficient capital to enable them to complete an orderly closure or transfer of their activities, which broadly equates to six months operating costs. According to Myners this could be adapted to explicitly cover operational, business and legal risks and to reflect the systemic importance of CCPs/CSDs.

Once revised standards are agreed they need to be consistently applied across the globe to avoid regulatory arbitrage. Myners reiterated the UK position that supervisory responsibility and authorisation should remain with the home state. However, there will need to be some confidence in the application of common standards across the globe. How this will be achieved in a meaningful way is a difficult question to answer.