The European Insurance and Occupational Pensions Authority (EIOPA) has issued guidelines in accordance with Article 16 of the EU Regulation 1094/2010 to revise the use of Legal Entity Identifiers (LEI).
The LEI is a code unique to the legal entity it applies to, allowing it to be identified on a global database. It is an ISO standard, a legal requirement for most companies’ part of global finance. The LEI contains the name, address, registration country, branch/parent company details of the undertaking and makes such information publicly available. Any legal entity involved in financial transactions or having its operations as part of the global financial ecosystems requires a LEI. Many mandates enforce a ‘no LEI, no trade’ order and certain EU directives have made the adoption of the LEI mandatory; it is thus crucial for companies to confirm whether they require a LEI. To date, there are over 1.8 million LEIs globally.
These updated guidelines aim to continue facilitating and promoting the use of LEIs by harmonising the identification of legal entities throughout the EU. This will ultimately be beneficial to the classification and aggregation of data on legal entities operating cross-border; therefore, resulting in unambiguous identification.
It is important to note that generally these guidelines only apply to legal entities. The sole exception is when natural persons are acting as intermediaries operating cross-border in the EEA; in such cases such natural persons also require a LEI.
In terms of the guidelines, competent authorities should require that at least the following legal entities under their supervisory remit have a LEI:
A. Legal entities within the scope of Directive 2009/138/EC:
- Insurance and reinsurance undertakings. Branches of such undertakings established in the EEA and having their head office in the EEA may use the LEI of the insurance and reinsurance undertaking;
- The ultimate parent undertaking as defined in Article 215 of Directive 2009/138/EC, and all undertakings, except non-EEA undertakings and non-regulated undertakings, included in the scope of a group as defined in Article 212(1)(c) of Directive 2009/138/EC;
- Mixed-activity insurance holding companies;
- Branches established in the EEA and belonging to insurance or reinsurance undertakings with their head office in a third country.
B. Institutions for occupational retirement provisions (IORPs) registered or authorised in accordance with Directive (EU) 2016/2341, satisfying one of the following conditions:
- a balance sheet total of more than one thousand million Euro; or
- a balance sheet total of more than one hundred and less than one thousand million Euro and it is ranked as one of the five biggest IORPs in terms of balance sheet totals in the Member State.
- Insurance, reinsurance and ancillary insurance intermediaries which carry out cross border business in accordance with Directive (EU) 2016/97, in so far as they fall under the supervisory remit of the competent authority.
The guidelines also that the competent authorities of the individual Member States must ensure that the non-aggregated information provided to the EIOPA on the legal entities under their supervision also includes the LEI of those entities. The LEI should also be used to identify information provided to the EIOPA regarding branches in third countries belonging to insurance or reinsurance undertakings having their head office within the EEA.
Competent authorities are to communicate with the EIOPA their intention to comply with the guidelines, and any non-compliance should be given with reasons, within two months of issuance of the translated versions. In the absence of said response, they shall be considered as non-compliant.
These guidelines are expected to come into force as from 1st July 2022.
This article was written by Dr Cherise Abela Grech and Legal Trainee Ms Jodie Arpa.
Disclaimer: This article is not intended to impart legal advice and readers are asked to seek verification of statements made before acting on them.