Order on Liability Insurance, Guarantee Provision, and Handling of Client Funds by Insurance Intermediaries, Reinsurance Intermediaries, and Accessory Insurance Intermediaries

Pursuant to Section 3, subsection 6, and Section 42, subsection 7, of the Act on Insurance Mediation, cf. Act Consolidation No. 806 of 21 June 2024, the following is prescribed:

Scope of Application

Section 1. This Order applies to:

1. insurance intermediaries,
2. reinsurance intermediaries, and
3. accessory insurance intermediaries.

Liability Insurance or Guarantee Provision

Section 2. An intermediary must have liability insurance or a corresponding guarantee from an insurance company or a credit institution, subject to subsections 3 and 4. The liability insurance or corresponding guarantee must meet the following conditions:

1. The liability insurance or guarantee must ensure that the insurance company or credit institution is immediately liable to the injured party for the liability for damages incurred by the intermediary due to negligent conduct by the intermediary or anyone for whom the intermediary is liable.
2. The liability insurance or guarantee must cover the intermediary's activities in countries within the European Union and countries with which the Union has concluded agreements in the financial area.
3. The liability insurance or guarantee must include coverage for the reinstatement of the coverage amount in the event that it is exhausted as a result of one or more claims in an insurance year (policy-covered reinstatement).
4. The liability insurance or guarantee must cover claims brought and reported no later than 3 years after the termination of the liability insurance or guarantee, to the extent that no new liability insurance has been taken out with another insurance company or a new guarantee provided by another credit institution for the intermediary with full retroactive coverage.

Subsection 2. If an intermediary ceases operations, e.g., by transferring the client portfolio to another company, the acquiring company's insurance company or credit institution may declare to the Danish Financial Supervisory Authority that the existing liability insurance or guarantee is extended to cover claims from the transferring intermediary's clients regarding a right to compensation received before the transfer and brought and reported no later than 3 years after the transfer.

Subsection 3. An intermediary is exempt from the requirement in subsection 1, first sentence, if the intermediary is covered by liability insurance or a corresponding guarantee from the insurance or reinsurance company on whose behalf the intermediary acts or is authorized to act. An intermediary is also exempt from the requirement in subsection 1, first sentence, if the intermediary is covered by liability insurance or a corresponding guarantee from another intermediary on whose behalf the intermediary acts or is authorized to act.

Subsection 4. An accessory insurance intermediary is exempt from the requirement in subsection 1, first sentence, if the accessory insurance intermediary is covered by another corresponding statutory liability insurance or guarantee.

Coverage Amount for Liability Insurance or Guarantee Provision

Section 3. The liability insurance or corresponding guarantee, cf. Section 2, must have a coverage amount of at least 1,564,610 EUR per claim and at least 2,315,610 EUR for all claims per insurance year, subject to subsection 2.

Subsection 2. If the liability insurance or corresponding guarantee for an individual intermediary is established as part of a collective scheme covering several cooperating companies or as a member of a trade association, the coverage amounts mentioned in subsection 1 apply to each participating company.

Termination of Liability Insurance or Guarantee

Section 4. A liability insurance or corresponding guarantee, cf. Section 2, may be terminated earliest one month after the Danish Financial Supervisory Authority has received notice from the insurance company or credit institution regarding this.

Declaration of Liability Insurance or Guarantee Provision

Section 5. An intermediary must have a declaration from an insurance company or a credit institution stating that the company is covered by liability insurance or a corresponding guarantee meeting the conditions in Section 2, or that an intermediary is covered by Section 2, subsection 3, of this Order.

Subsection 2. The declaration must be provided on a form prepared by the Danish Financial Supervisory Authority and submitted to the Danish Financial Supervisory Authority simultaneously with the submission of the application for permission to conduct insurance mediation or the request for registration as an accessory insurance intermediary, cf. Sections 3 and 4 of the Act on Insurance Mediation.

Client Funds

Section 6. If an intermediary receives client funds in connection with insurance mediation, these must be deposited in a separate account at a credit institution (client account), which is covered by a guarantee, cf. Section 13.

Subsection 2. An insurance intermediary or reinsurance intermediary must, simultaneously with the application for permission to the Danish Financial Supervisory Authority, or if permission has been granted, when such funds are received, submit proof of the establishment of the client account.

Subsection 3. An accessory insurance intermediary that receives client funds must submit proof of the establishment of the client account to the Danish Financial Supervisory Authority in connection with the accessory insurance intermediary's request for registration, or when the client account is established.

Section 7. Amounts, including premiums and insurance payments as well as commissions pursuant to Section 16, subsection 1, no. 2, of the Act on Insurance Mediation, which the intermediary receives in connection with insurance mediation, must be deposited in the client account, subject to subsections 2 and 3.

Subsection 2. Amounts covered by a release certificate from an insurance company may not be deposited in the client account.

Subsection 3. Commissions, including advances thereon, and other remuneration that an intermediary receives in connection with insurance mediation may not be deposited in the client account.

Section 8. A client account must be established in the intermediary's name and is subject to the intermediary's disposal.

Section 9. A client account may only be established at a credit institution that has committed not to set off, or otherwise dispose of, amounts in a client account that are necessary to cover the intermediary's liability to third parties for client funds.

Subsection 2. The credit institution must declare compliance with subsection 1 to the Danish Financial Supervisory Authority on a form prepared by the Danish Financial Supervisory Authority.

Section 10. All client funds must be deposited in the client account no later than the next banking day after receipt, including amounts paid to the intermediary for the customer's security deposit.

Subsection 2. Exempt from this are amounts that are immediately used after receipt for payment on behalf of the entitled party.

Section 11. An intermediary must keep an overview of client funds. The intermediary must have established a procedure ensuring correct registration of client funds.

Section 12. The Danish Financial Supervisory Authority may at any time order an intermediary, within a time limit set by the Danish Financial Supervisory Authority, to submit a declaration of audit of the client account from an approved auditor.

Subsection 2. If an intermediary's overview of client funds, cf. Section 11, has been deficient, or if the company has otherwise violated the rules on the handling of client funds, the Danish Financial Supervisory Authority may order the company, for a period set by the Danish Financial Supervisory Authority, or until further notice, to submit the client account declaration, cf. subsection 1, every quarter or at another interval set by the Danish Financial Supervisory Authority.

Guarantee Provision for Client Funds

Section 13. It is a condition that an intermediary may receive client funds that there is a declaration from an insurance company or a credit institution (guarantor) stating:

1. that the guarantor, as primary debtor, guarantees claims for payment of client funds that may be directed against the intermediary in connection with the exercise of insurance mediation,
2. that the guarantee, by its content, gives the insured a direct claim against the guarantor,
3. that the guarantee must cover claims regarding client funds from and including the date the guarantee enters into force until it is terminated (guarantee period), cf. Section 16, and
4. that the guarantee is not subject to other restrictions than those permitted by this Order.

Subsection 2. If the guarantee provision for an individual intermediary is established as part of a collective scheme covering several companies, the guarantor may be an independent foundation or association, provided that the foundation's or association's commitment is covered such that, after a concrete assessment by the Danish Financial Supervisory Authority, there is at all times considered to be equivalent security as after subsection 1.

Section 14. The guarantee provision may be limited in amount, so that all claims regarding each individual year of the guarantee period are only covered with a certain amount. This amount must, however, amount to at least 2,505,531 DKK per intermediary.

Subsection 2. The amount limit in subsection 1, second sentence, is not reduced, even if the guarantee is provided for a period shorter than 1 year.

Section 15. The guarantee provision may be limited in time, so that it only covers claims brought against the guarantor no later than 3 years after the completion of the task that triggers the claim.

Subsection 2. The time limit in subsection 1 is suspended by the insured's legal action against the intermediary.

Section 16. The guarantee provision may only be terminated at the request of the guarantor with effect from a specific date, which cannot occur earlier than one month after receipt of the request by the Danish Financial Supervisory Authority. The guarantor may, however, demand that the guarantee provision be terminated on the day after the receipt of the request by the Danish Financial Supervisory Authority if the request is justified by the intermediary's fraudulent conduct.

Section 17. The guarantee declaration pursuant to Section 13 must be prepared by the guarantor. The guarantee declaration must be provided on a form prepared by the Danish Financial Supervisory Authority.

Subsection 2. The form must be submitted to the Danish Financial Supervisory Authority simultaneously with the application for permission as an insurance or reinsurance intermediary, cf. Section 3 of the Act on Insurance Mediation, or simultaneously with the request for registration as an accessory insurance intermediary, cf. Section 4 of the Act on Insurance Mediation.

Penalties

Section 18. An insurance intermediary who violates Section 2, subsection 1, Sections 3, 5-7, Section 9, Section 10, subsection 1, Section 11, Section 13, subsection 1, and Section 14, subsection 1, second sentence, is punishable by a fine.

Subsection 2. Companies, etc. (legal persons) may be subject to criminal liability according to the rules in Chapter 5 of the Criminal Code.

Entry into Force and Transitional Provisions

Section 19. This Order enters into force on 9 October 2024.

Subsection 2. Order No. 696 of 26 May 2020 on liability insurance, guarantee provision, and handling of client funds by insurance intermediaries, reinsurance intermediaries, and accessory insurance intermediaries is repealed.

Section 20. The amounts mentioned in Section 3, subsection 1, for the coverage amounts of the liability insurance and guarantee provision are increased every fifth year. The revision is carried out according to regulations issued by the European Commission in accordance with Article 10, subsection 7, of Directive (EU) 2016/97 of the European Parliament and of the Council of 20 January 2016 on insurance distribution. The most recent adjustment is based on Delegated Regulation 2024/896 of 5 December 2023.

Subsection 2. From 9 October 2024, all existing declarations regarding liability insurance for insurance intermediaries, reinsurance intermediaries, and accessory insurance intermediaries will be given the same legal effect as declarations provided in accordance with this Order, including the increased coverage amounts pursuant to subsection 1, cf. Section 3, subsection 1.

The Danish Financial Supervisory Authority, 30 August 2024

Louise Caroline Mogensen / Ulla Brøns Petersen