Response to consultation on Professional Indemnity Insurance (PII) for mortgage credit intermediaries
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For example, according to Article 51 paragraph 4 of the German Federal Lawyers' Act, the minimum insurance cover for lawyers amounts to EUR 250 000 per case. Policyholders who assess their risk to be higher, agree to higher insurance premiums, which are tailored to the individual risk. Such a flexible combination of legal liability insurance sum and individual adjustment has proven to be feasible in many areas of insurance. It appropriately allows for the protection of consumers and also takes into account that risks are different. This prevents that the policyholder must pay high insurance premiums for high insurance sums that are not required.
We therefore propose a minimum coverage amounting to EUR 250 000 for each case. The coverage for losses per year should be limited to 1.5 times or 2 times the amount of the minimum sum insured.
Do you agree that, of the four options presented, option 4 (i.e. setting the minimum amount at the average of the amounts used in Member States) is the option the EBA should pursue, resulting in a minimum amount of EUR 584 000 per claim, and EUR 886 000 per year?
Yes. However, it is common practice and preferable to express the annual aggregate limit by a factor of the sum insured per claim. We propose an annual aggregate limit of EUR 584 000 multiplied by the factor of 1.5. This would result in an annual aggregate limit of 876,000 EUR.Do you consider the number and the compensatable loss of compensation claims arising from the activity of mortgage intermediation to be lower than, the same as, or higher than those arising from insurance intermediation? Please explain your reasoning.
In our view, the risk of liability of the residential mortgage credit intermediary is significantly lower than that of the insurance intermediaries. The risk of a total loss for the customers seems to be quite low.Do you know of options other than those listed in this consultation paper that the EBA should consider when deciding on the minimum amount of coverage?
Even a sum insured amounting to EUR 584 000 per claim and EUR 886 000 per year is likely to be very high for the average mortgage credit intermediary. For far more exposed risks that are subject to compulsory insurance, significantly lower minimum levels of insurance apply. These minimum levels can be individually increased, if necessary.For example, according to Article 51 paragraph 4 of the German Federal Lawyers' Act, the minimum insurance cover for lawyers amounts to EUR 250 000 per case. Policyholders who assess their risk to be higher, agree to higher insurance premiums, which are tailored to the individual risk. Such a flexible combination of legal liability insurance sum and individual adjustment has proven to be feasible in many areas of insurance. It appropriately allows for the protection of consumers and also takes into account that risks are different. This prevents that the policyholder must pay high insurance premiums for high insurance sums that are not required.
We therefore propose a minimum coverage amounting to EUR 250 000 for each case. The coverage for losses per year should be limited to 1.5 times or 2 times the amount of the minimum sum insured.