Financial Institutions Must Comply with Stringent Policy Requirements
In an effort to ensure greater stability and transparency in the financial sector, the European Union has implemented a series of policy requirements for insurance companies. These policies are designed to mitigate risks and ensure that institutions operate in a sound and prudent manner.
Mandatory Policies
According to Article 260 of Delegated Regulation 2015/35, insurance companies must establish the following mandatory policies:
- Concentration risk management policy
- Operational risk management policy
- Reinsurance policy
- Mortgage lending policy (where applicable)
- Asset and liability valuation policy
- Profit-sharing policy
- ORSA policy
- Capital management policy
- Policy on reporting to the National Bank of Belgium
Governance Policies
In addition, institutions must also develop policies on governance sensu stricto, including:
- Fit & Proper policy
- Remuneration policy
- Internal rules on external functions
- Outsourcing policy
- Continuity policy
- Integrity policy
These policies are designed to ensure that institutions operate in a responsible and transparent manner.
Implementation Guidelines
The National Bank of Belgium has issued guidelines for implementing these policies, which require insurance companies to have an effective internal control system in place. This system must include:
- Mechanisms for monitoring and reporting
- Ongoing control mechanisms for all employees
Furthermore, the Bank emphasizes the importance of having a central administration in Belgium, citing Article 48 of the EC Treaty. To comply with this requirement, institutions must ensure that their principal decisions are taken and business is conducted from within Belgium.
Record-Keeping Requirements
The Solvency II Law requires insurance companies to keep documents relating to their activities at their registered office. However, the Bank has recognized that recent technological developments have made it possible for institutions to store information on data centers or equivalent secure computer storage media, provided certain conditions are met. These conditions include:
- Permanent access to stored documents
- Ability to fulfill requests for information from authorities within two working days
- Control over important decisions regarding data centers
- Guarantee of confidentiality, integrity, and availability of stored information
Institutions must also meet the Bank’s requirements relating to IT system security and continuity.
Conclusion
The implementation of these policy requirements is aimed at ensuring that insurance companies operate in a safe and sound manner, protecting the interests of investors and consumers alike.