Dutch logistic services providers now need a licence to arrange insurance on behalf of customers

(Court of Justice of the European Union of 29 September 2022 and the AFM memo of 14 March 2024)

Introduction

On the 29th of September 2022 the Court of Justice of the European Union (CJEU) ruled on the scope of intermediation in response to so-called preliminary questions raised by the German court. The CJEU ruled that the organization offering the possibility to take part in a group insurance through membership is considered an intermediary.[1] The question is what the consequences of this decision are for brokerage services in the Netherlands. Recently the Netherlands Authority for the Financial Markets (AFM) issued a memo with an interpretation of the decision of the CJEU. In this contribution we will discuss the consequences of the AFM memo for specific groups of companies such as freight forwarders, transport companies, moving companies and the like for their brokerage services.

Legal background

Providing brokerage services

In the Netherlands providing brokerage services (bemiddelen) is qualified as a financial service (financiële dienst), see art. 1:1 Wft. A party that provides brokerage services is considered a broker (bemiddelaar).
In principle is it forbidden to ‘provide brokerage services’(bemiddelen) without a license granted for that purpose by the AFM (see art. 2:80 Wft).

There are some exemptions on this ban and/or even on the applicability of the Insurance Distribution Directive (IDD), that regulates how products are designed and distributed in the EU. Hereafter we shall include the exemptions after which we will elaborate on ad (ii) and (iii). Please see as follows:

1. Under art. 1:21 Wft, there are some exemptions stipulated for ‘providing brokerage services’ specifically for the insurance market and under specific circumstances. We will not discuss these exemptions because these are not relevant for this contribution.
2. There is an exemption for limited premium and risks.
3. There is no general exemption stipulated for freight forwarders, transport companies, moving companies and the like as such if these companies provide brokerage services in the insurance market. However, the AFM created the so-called ‘Fenex Provision’ under which inter alia freight forwarders offer insurance to their customers in addition to their primary services that would not require a license. Summarized this regulation reads:
   
   In English:
   “If risks are placed through an existing frame work agreement, this is not mediation within the meaning of the Wft, so the forwarder does not need a Wft-license.”
   
   In Dutch:
   “Als risico’s via een bestaande raamovereenkomst worden ondergebracht dan is dat geen bemiddeling in de zin van de Wft.”

Hereafter we shall elaborate on the exemptions under (2) and (3).

2. Exemption for limited premium and risks

Pursuant to its preamble, the IDD does not apply “to persons practicing insurance distribution as an ancillary activity where the premium does not exceed a certain amount and the risks covered are limited.”[2]

More specifically, in art. 1(3) IDD is stipulated that the IDD does not apply to ‘ancillary insurance intermediaries’ carrying out insurance distribution activities if all the following conditions are met:

a. the insurance is complementary to the good or service supplied by a provider where such insurance covers;

• (the risk of breakdown, loss of, or damage to, the good or the non-use of the servicesupplied by that provider; or
• damage to, or loss of, baggage and other risks linked to travel booked with that provider[3];

b. the amount of the premium paid for the insurance product does not exceed EUR600 calculated on a pro  rata annual basis;

c. by way of derogation from point (b), where the insurance is complementary to a service referred to in point (a) and the duration of that service is equal to, or less than, three months, the amount of the premium paid per person does not exceed EUR 200.

In art. 7(1)(c) Wft Exemptionsregulation the exemption of art. 1(3) IDD is included.

Art. 7(1)(2) Wft Exemptionsregulation stipulates that the exemption only applies when the party (bemiddelaar) meets the requirements of art. 47(4) and art. 47(5) Wft. According to art. 47(5) Wft a duty to inform applies. The party (bemiddelaar) is obliged to provide the client with information on the identity and address of the insurer or the party in insurances (bemiddelaar) for which the party (bemiddelaar) provides brokerage services. Also, information on the procedure for submitting complaints, should be provided. Mentioned information should be provided before the insurance contract is established.

3. Exemption 3: the so-called Fenex Provision

The past

In the past, in relation to the question whether freight forwarders provide brokerage services (bemiddelen) as such, the AFM did create the so-called Fenex provision under which freight forwarders offering insurance to their customers in addition to their primary services would not require a license.

Notably, the Fenex provision is not an official regulation and therefore cannot be invoked without question. It is an unofficial stipulated exemption. It merely gives an idea on the way AFM interprets the legislation.

The AFM's rationale for creating the Fenex provision was that the framework agreement that the forwarder had entered with insurers is not an insurance agreement as such because the policyholder (the forwarder) itself does not run any risks covered under the insurance, while no premium is paid under the framework agreement either. However, premium is paid under the underlying insurance contract.

The Court of Justice of the European Union decision

The CJEU assumes a "broad interpretation of the concept of remuneration”.[4] In this specific situation it was relevant that TC Medical Air Ambulance Agency (TC Medical) obtained a compensation (vergoeding) from the client when the client joined the coverage under the group insurance contract. TC Medical had an economic interest to get as much clients as possible to join the insurance contract, so that the various payments finance, or exceed, the amount of the premiums which it itself pays to the insurer under the same contract.[5]

Furthermore, the CJEU concludes that the definitions of the concept ‘insurance intermediary’ of art. 2(5) IDD and 2(1)9 […] “are formulated in broad terms”. “[T]hey consist not only in the presentation and the proposal of insurance contracts, but also in the performance of other work preparatory to the conclusion of such contracts, and the and the nature of the preparatory work referred to is not limited in any way whatsoever.”[6] The activity of TC Medical is therefore to be qualified as intermediary activities.

The present

On 14 March 2024 the AFM issued a memo with regard to the interpretation of the decision of the CJEU. According to the interpretation of the AFM it looks like the Fenex Provision cannot longer be invoked in the future. As soon as there is no freedom of choice and the intermediate (the collective organizer) receives a compensation in any form a permit will be required. Although the interpretation of the AFM is not an official legal provision, in practice it will work as an official rule that should be applied by parties that provide brokers’ services such as freight forwarders, transport companies and moving companies that offer insurance on the Dutch market.

Conclusion

As a consequence of the decision of the CJEU of 29 September 2022 and the interpretation of the AFM it seems that it will no longer be possible for freight forwarders, transport companies, moving companies and the like to rely on the so-called Fenex Provision. This means that these companies need a license if they would like to provide brokerage services as they did in the past.  

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[1] Court of Justice of the European Union 29 September 2022, ECLI:EU:C:2022:733.
[2] Preamble of the IDD, see par. 15.
[3] For example travel agents or car rental companies that offer complementary insurance.
[4] Court of Justice of the European Union 29 September 2022, ECLI:EU:C:2022:733, par. 42.
[5] Court of Justice of the European Union 29 September 2022, ECLI:EU:C:2022:733, par. 42.
[6] Court of Justice of the European Union 29 September 2022, ECLI:EU:C:2022:733, par. 43.