Product oversight and governance arrangements (Art. 25 IDD)

From a practical implementation perspective of the amended POG Delegated Regulation 2017/2358 (hereafter the “POG Delegated Regulation”), both concepts of “sustainability-related objectives” of the target market and “sustainability factors” can be distinguished. On the one hand, the purpose of the “sustainability-related objectives” concept is to capture how insurance undertakings and insurance intermediaries should take into account sustainability aspects as part of the objectives of the group of customers in the identified target market during the product approval for insurance products with a sustainability-related profile. On the other hand, the sustainability factors concept, defined in Article 2, point (24) of REGULATION (EU) 2019/2088 of the European Parliament and of the Council of 27 November 2019 on sustainability‐related disclosures in the financial services sector as “environmental, social and employee matters, respect for human rights, anti‐corruption and anti‐bribery matters”, is used in the POG Delegated Regulation for a specific reason.  The POG Delegated Regulation requires insurance undertakings and insurance intermediaries manufacturing insurance products to “consider sustainability factors in the product approval process of each insurance product and in the other product governance and oversight arrangements for each insurance product that is intended to be distributed to customers seeking insurance products with a sustainability-related profile” (see recital 5 of the Commission Delegated Regulation (EU) 2021/1257 and Article 5(1)).  In this light, in the context of the product approval process to which refers Article 5(1) of the amended POG Delegated Regulation, the consideration of the sustainability factors in the product approval phase means that insurance undertakings and insurance intermediaries manufacturing insurance products should ensure that the integration of sustainability factors in the product is, firstly, consistent with the sustainability-related objectives of the customers belonging to the target market, and, secondly, they should also consider sustainability factors more broadly. That does not mean that the product should have additional sustainability-related features, nonetheless, insurance undertakings and insurance intermediaries manufacturing insurance products should assess whether the product has such features.  In particular, for insurance-based investment products, insurance undertakings and insurance intermediaries manufacturing insurance products should consider whether the product makes sustainable investments as defined in Article 2, point (17), of Regulation (EU) 2019/2088 of the European Parliament and of the Council (the Sustainable Finance Disclosure Regulation), environmentally sustainable investments as defined in Article 2, point (1), of Regulation (EU) 2020/852 of the European Parliament and of the Council (the European Taxonomy), and whether it considers principal adverse impacts on sustainability factors.  In addition, insurance undertakings and insurance intermediaries manufacturing insurance products should ensure that the information in products is “presented in a transparent manner to enable insurance distributors to provide the relevant information to their customers or potential customers” (see recital 8 of the Commission Delegated Regulation (EU) 2021/1257).