A review has been launched into market conduct in the insurance industry across the European Union.
According to a Reuters
report, Europe’s insurance watchdog is examining insurers offering unit-linked life insurance policies, which are deemed to be high risk.
The review will incorporate around 60% of each national market and will examine how payments by asset managers to insurers could potentially influence their investment choices – and whether or not these decisions then have influence on policyholders.
The investigation will be carried out by the European Insurance and Occupational Pen
sions Authority (EIOPA) with chairman Gabriel Bernandino stating that the watchdog has identified relations between asset managers and insurers which could possibly be deemed as a detriment to consumers.
“(A review) will build a coordinated understanding of the market practices, point at potential problems and how widespread they are,” he remarked.
Typically, life insurers will invest clients’ premiums and then pay out the capital plus investment returns on the maturity of the policy. With standard funds a certain capital return is guaranteed – and this is usually invested into low-risk fixed-income assets that have low yields.
However, with unit-linked products the investment risks fall on the policyholders with life insurers also generally earning higher fees for unit-linked funds than they would with guaranteed return funds.
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