As a result of the health emergency caused by the widespread outbreak of the COVID-19 virus and disease, specific measures have been adopted in Italy starting from the beginning of March 2020 in order to contain the impact thereof at various levels and sectors of the economy. In particular, the Italian Government adopted Law Decree No. 18 of 17 March 2020 (the so called “Cura Italia Decree”) which provides a number of measures to strengthen the Italian healthcare system and provide economic support for families, workers and businesses as a consequence of the epidemiological emergency and Law Decree No. 23 of 8 April 2020 (the so called “Liquidity Decree”) which provides measures concerning access to credit and tax compliance for businesses, special powers in strategic sectors, as well as the extension of administrative and procedural terms; some of these measures have an impact on the insurance sector both directly and indirectly. IVASS – the Italian Insurance Supervisory Authority – on its part, published various notes on certain measures taken to support the activities of insurance companies and intermediaries following the epidemiological emergency and also provided an outline of the main products and services offered by the Italian insurance industry to address the risks arising from COVID-19.
How are the Cura Italia and the Liquidity Decrees impacting the insurance sector?
1) Postponement of the Court hearings for civil, criminal and administrative proceedings
Specific provisions aim at containing the effects of the emergency on civil, criminal, administrative, tax, accounting and military justice and thus they have an impact on parties who are involved in ongoing proceedings before Italian Courts, including insurance undertakings and intermediaries and the latter entities and individuals which are involved in authorization/notification procedures before IVASS. It is worth to mention, among the others, the following measures:
- the postponement until after 11 May 2020 of the court hearings scheduled from 9 March to 11 May 2020 for civil and criminal proceedings pending before all courts in Italy;
- the suspension, from 9 March to 11 May 2020, of the terms for the completion of any act in civil and criminal proceedings;
- specific exceptions to the postponement of the hearings and the suspension of the terms mentioned above are provided for specific urgent and special proceedings;
- from 9 March 2020 to 30 June 2020, all acts and documents shall be filed with the Italian courts only via electronic means;
- all the terms related to administrative proceedings pending as at 23 February 2020 or commenced after that date, including administrative proceedings before IVASS, are suspended until 15 May 2020.
2) Other measures impacting the insurance sector
The Cura Italia Decree and other measures adopted at a national level also contain provisions directly impacting the insurance sector. In particular:
- possibility of keeping insurance undertakings open (despite the lockdown provisions and limitation on the free movement of people on public roads);
- until 31 July 2020, the period during which insurance undertakings are obliged to maintain valid the insurance coverage provided under insurance contracts in place regarding compulsory insurance against civil liability in respect of the use of motor vehicles until the new policy takes effect – currently lasting 15 days after the expiry of the policy – is extended by further 15 days.
- the terms provided for insurance undertakings to make to the injured party an appropriate and reasoned offer for compensation, or specifically state the reasons why it does not consider making an offer – currently set at 60 days (or 30 days in specific cases) after the receipt by the insurance undertaking of the documentation supporting the request for compensation – is extended by further 60 days. The extension only applies in the event of necessary intervention of an expert or the medical examiner for the purposes of assessing the damage to property or persons following an accident.
- immediate entry into force of the “volatility adjustment” for insurances undertakings as implementation of Article 2(1) of Directive 2019/2177 amending Solvency II Directive.
3) Golden Power extended to the insurance sector
The Liquidity Decree also aim at strengthening the current provisions governing the special powers of the State in areas of strategic importance (the so called “Golden Power“) which include, among the others, the power of the Italian Government to impose specific conditions on the acquisition of shareholdings, to prevent the adoption of certain corporate resolutions and to oppose the acquisition of shareholdings. More in detail, the Liquidity Decree extends the scope of application of the Golden Power to all sectors considered of strategic importance under Regulation (EU) 2019/452 establishing a framework for the screening of foreign direct investments into the Union. The aim is to allow the Italian Government to control corporate transactions including potential hostile climbs, not only in the traditional sectors of critical infrastructure and defence, but also in other sectors, including insurance.
In order to guarantee the maximum effectiveness of the related provisions, the reporting obligation for corporate acquisitions has been extended and the possibility for the Government to proceed with the exercise of special powers, also by its own motion, if companies do not comply with the reporting requirements has been introduced.
IVASS first measures
On 17 March 2020, IVASS published a note on its first measures taken to support the activities of insurance companies and intermediaries following the epidemiological emergency from COVID-19.
More in detail, such first set of measures regards the following:
- Insurance distribution
- By way of derogation to the provisions of IVASS Regulation no. 40/2018 on insurance and reinsurance distribution, the tests for the assessment of the knowledge gained at the end of the professional training and continued professional development courses may be carried out with non-face-to-face means (e.g. videoconference, webinar, e-learning platforms);
- The term for insurance undertakings to transmit to IVASS the annual Report on their distribution networks has been extended to 29 March 2020.
- Home insurance
The term for the mandatory adoption by insurance undertakings of the so-called reserved areas on their websites, set at 1 May 2020 under IVASS Regulation no. 41/2018, has been extended to 1 July 2020;
- Complaints handling
The term for the transmission to IVASS of the half-yearly Report on complaints and the related documents (the prospectuses and the assessments made by the administrative and audit bodies), set under IVASS Regulation no. 24/2008 at the expiry of 60 days after the relevant semester, has been extended to 29 March 2020. This requirement would apply to EU insurance undertakings provided that they receive a number of complaint higher than 20 per calendar year.
On 23 March 2020, IVASS published a second note regarding the granting to insurance undertakings of a temporary extension of the terms set under Regulations No. 24/2008 on customers’ complaints management and No. 41/2018 on transparency requirements vis-à-vis policyholders. In particular, undertakings are allowed to:
- reply to customers’ complaints within 75 days from their receipt, instead of 45 days;
- reply to requests for information from customers within 35 days instead of 20 days.
On 30 March 2020, IVASS adopted a further set of measures to enable insurance market operators to deal with the inconveniences arising from the measures adopted by the Italian Government to contain COVID-19 contagion. In line with the initiatives recently taken by the European Insurance and Occupational Pensions Authority (EIOPA) and other Authorities, IVASS extended the deadlines for compliance with Solvency II Reporting, in compliance with the Recommendations on supervisory flexibility regarding deadlines of supervisory reporting and public disclosure by insurers issued by EIOPA on 20 March 2020. The aim of such extensions is to allow insurance undertakings to concentrate their efforts on monitoring and assessing the impact of the COVID-19 emergency as well as to ensure business continuity during these difficult times and to offer operational relief in allowing for delays in reporting and public disclosure. In line with EIOPA Recommendations, IVASS also identified the current situation as a “major development” pursuant to Solvency II Directive and therefore highlighted the need for insurers to publish at the same time of publication of the information referring to the year-end occurring on 31 December 2019 or after, any appropriate information on the effect of COVID-19 in the published information.
IVASS also extended by 30 or 60 days, as the case may be, certain deadlines relating to the compliance with some of the Regulations, Circulars and Letters to the market issued thereby (e.g. 30 days for quarterly notification of the controlling and significant shareholdings held and for the request for information on the insurance business carried out in order to assess the risks of money laundering and terrorist financing in life businesses; 60 days for quarterly communications and new codes for the types of assets linked to unit-linked and index-linked policies).
IVASS also stressed the need for insurance companies and intermediaries to concentrate their efforts on ensuring business continuity, focusing on facilitating access to their services by customers and pointed out, in conclusion, that as part of the reorganization of its activities in accordance with the Government measures and recommendations, it is rescheduling its on-site inspection calendars and the procedures for carrying out its supervision, by favouring the use of electronic/telematic channels for institutional contacts and communication flows with supervised entities in order to ensure the smooth performance of its institutional mission.
On 30 March 2020, in line with EIOPA’s statement of 17 March 2020, IVASS also published a note on its website stating that – in light of the changed economic and financial environment due to the spread of the epidemiological emergency from COVID-19 which is leading to high volatility in international and European financial markets and of the circumstance that, at a national level, the spread of the pandemic and the related effects on the Italian economy make the future evolution of the risk factors to which insurance companies are exposed uncertain – a letter had been sent to insurance and reinsurance companies based in Italy asking them to be extremely prudent in the distribution of dividends and in the payment of variable remuneration to company representatives both at individual and group level.
Lastly, with note published on 3 April 2020, IVASS – among other things – recommended that supervised entities make efforts to ensure that insurance business continues to run smoothly and in the interests of consumers, despite the exceptional nature of the situation and in particular:
- to provide timely and clear information to customers on the organizational measures adopted to ensure the continuity of services and correct contractual relationships, by promptly reporting any operational changes and situations of impediment to the ordinary management of relationships;
- to keep specific evidence of any impediments to the regular performance of the activity and of the remedies adopted to safeguard the rights of customers who may be affected by delays or inconveniences in the communications addressed to them, in order to allow the assessment of their possible exempting or mitigating effect in relation to the specific cases that may occur;
- to take appropriate account of the difficulties that consumers may also encounter in fulfilling their obligations as a result of the measures adopted to contain the contagion from COVID-19.
Products and services that the Italian insurance industry is developing to address the risks arising from Covid-19
In its report containing the results of the analysis of the trends identified in the offering of insurance products and services for the second half of 2019 published on 30 March 2020, despite covering the observation period July/December 2019, IVASS also provides some anticipations regarding the products and services that the insurance sector is developing to face the risks deriving from COVID-19.
The insurance industry, in fact, has voluntarily activated a number of measures to provide support for the emergency. These include the suspension, extension and deferral of premiums for life insurance policies, non-motor damage and motor insurance coverage, the blocking of all actions to recover unpaid premiums and deductibles, the extension of existing guarantees with “tailor-made” clauses, the inclusion of daily allowances or flat-rate compensation and the offer of additional services and new products. Insurance companies then took action to counter the health emergency in various ways by reviewing offers and offering new products.
More in detail, a new policy has already been launched on the Italian market for the Italian municipalities initially affected by the epidemic, limited to the so-called “red zone”, created specifically to deal with the consequences of the spread of COVID-19. The solution designed to meet the needs of small businesses was developed in a few days and responds to the growing demand coming mainly from businesses (shops, bars, services) forced to close down and subject to the restrictive measures imposed by the health emergency. Immediate support of a specific amount per day is guaranteed for a maximum of 15 days in case of closure ordered by the authorities.
Two companies, on the other hand, have temporarily extended guarantees and services already included in their policies to their customers free of charge. The extensions are applied throughout Italy without territorial limits. One policy is intended for families and provides for a daily allowance in the event of hospitalization and the disbursement of a sum in the event of intensive care as a consequence of COVID-19 diagnosis. For entrepreneurs who have already concluded commercial policies that provide a daily allowance for business interruption (or who, if not already operating, decide to purchase the aforesaid daily allowance by 30 April 2020), a company has provided for the temporary extension of coverage free of charge, even in the case of total closure of businesses ordered by the authorities as a preventive measure against COVID-19.
With the aim of protecting the population group currently most affected by the virus, a company has extended the insurable age for health cover from 65 to 75. In addition, for proven diagnosis of COVID-19, daily allowances for hospitalization and convalescence are offered.
One company has doubled the substitutive hospitalization allowance for health customers affected by COVID-19 and is also encouraging the use of digital services in order to facilitate the reduction of travel for its customers and avoid exposure to contagion.
Initiatives other than the offer of an insurance policy have also been taken, such as:
- the offer of a “legal desk”, through an audio or videoconference contact, with first consultation free of charge. In particular, it is possible to obtain information related to smart working, teleworking and privacy, but not only. Experts also provide clarifications on the measures to support businesses and on the consequences of non-compliance with contractual conditions.
- the offer of a medical teleconsultation service and the possibility for customers to take advantage of free health cover;
- the extension, free of charge, to clients who already benefit from health coverage that provides for a hospitalization allowance, of a daily allowance also in the event that the insureds are forced to the quarantine regime, as resulted positive to the COVID-19 swab test.
In the travel sector, in some cases, guarantees have been extended for the reimbursement of costs and penalties for the loss of booked travels due to the block ordered by the airport authorities for the COVID-19 emergency.
On 9 April 2020 the Italian Senate approved the text converting into Law, with amendments, the Cura Italia Decree and the Chamber of Deputies is now to vote on its final approval.
The Liquidity Decree shall be converted into law within 7 June 2020, thus there is room for amendments and/or integrations to the measures contained therein, including those mentioned above.
IVASS, on its part, is still engaged in discussions with insurance market operators with the aim of balancing the needs of safeguarding citizens, insured and affected parties and new measures are likely to be announced in the coming days.