Circulaire NBB_2019_24 / Reinsurers governed by the law of a U.S. State

boulevard de Beriaimont 14-BE-100Q Brussels Phone +32 2 221 37 40 - fax + 32 2 221 31 04 Company number 0203. 201 340 RPM (Trade Register) Brussels www. nbb. be ffl BanqueNqtionaleBank DE BELGIQUE VAN BELGiE Eurosystem Circuler Brussels, 1 October2019 Référence: NBB 2019 24 Contact person: Bertrand Leton Phone<-32222t2365-fax*3222213104 bertrand. leton@nbb. be Reinsurers governed by the law of a U. S. State Scope Reinsurance companies governed by the law ofa U. S. State Insurance and reinsurance companies governed by Belgian law Summary/Objectives This communication relates to the bilatéral agreement between the European Union and the United States of America on prudential measures regarding insurance and reinsurance'. It aims ta specify which documents should be submitted to the National Bank ofBelgium by a reinsurer governed by the law of a U. S. State, that intends to accept risks ceded by an insurer or another reinsurer that is subject ta the prudential supervision of the National Bank of Belgium. This communication replaces Communication NBB_2018_18. Dear Sir, Dear Madam, The European Union and the United States of America have signed a bilatéral agreement on prudential measures regarding insurance and reinsurance (hereinafter referred to as "the Agreement"). This Agreement was applied provisionally from 7 November 2017 and entered into force on 8 April 2018. It enables reinsurance companies governed by the law of a U. S. State to enter into reinsurance agreements with ceding insurers established in the European Union without having to establish a branch in the Member State concernée) or pledge collateral. Officiai Journal ofthe European Union, L 258of6. 10. 2017, pp. 4 etseq. The text ofthe agreement is also available on the website of the Bank fhttDS://www.nbb.be/doc/cD/ena/2017/20171006 bilatérale overeenkomst eu vs.pdf NBB 2019 24 - 10ctober2019 Circular - Page 1/5

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1. Définitions For the purposes ofthis communication, the following définitions shall apply: a) "U.S. State": any State, commonwealth, territory, or possession ofthe United States, the District of Columbia, the Commonwealth of Puerto Rico, the Commonwealth of the Northern Mariana Islands, American Samoa, Guam, or the United States Virgin Islands; b) "insurer": an undertaking which is authorised or licensed to take up or engage in the business of direct or primary insurance; e) "reinsurance activity": the activity consisting of accepting risks ceded by an insurer or by another reinsurer; d) "reinsurance agreement": a contract whereby an assuming reinsurer has accepted risk ceded by an insurer or reinsurer; e) "reinsurer": an undertaking which is authorised or licensed to take up or engage in the business of reinsurance activities; f) "ceding insurer": an insurer or reinsurer that is counterparty to an assuming reinsurer under a reinsurance agreement; g) "collateral": assets, such as cash and letters of crédit, pledged by the reinsurer for the benefit of the ceding insurer to guarantee or secure the assuming reinsurer's liabilities to the ceding insurer arising from a reinsurance agreement; h) "supervisory authority": any insurance and reinsurance supervisor in the European Union or in the United States; i) "Bank": the National Bank of Belgium.
2. Conditions
3. 1. Reinsurance activities in Belgium In accordance with Article 600 of the Law of 1 3 March 20162 as modifiée) by Article 92 of the Law of 2 May 2019, reinsurers of non-European Union countries may pursue reinsurance activities in Belgium, via the establishment of a branch or under the free provision of services, for which they have received an authorisation in their country of origin. The Belgian Law is therefore in compliance with the Agreement, in that it does not require a reinsurer from a U. S. State to obtain prier authorisation or open a branch in Belgium in order for it to be able to pursue reinsurance activities in Belgium. 2 Law of 13 Mareh 2016 on the légal status and supervision of insurance or reinsurance companies. Circular- Page 2/5 NBB 20198 24 - 1 October2019

m 2. 2. Additional collateral In principle, pursuant to Article 198 of the aforementioned Law of 13 March 2016 as replacée! by Article 70 of the Law of 2 May 2019, the Bank may, on an individual basis, require collateral for reinsurance agreements entered into with reinsurers from non-European Union countries of which the supervisory régime, according to Article 172(3) or (6) of the Solvency II Directive, is not équivalent to that laid down in the same Directive3. However, this is without préjudice to the international treaties ta which Belgium is a party. In view of the Agreement, the Bank therefore does not require such collateral, provided that the U. S. reinsurer meets the conditions set out in the Agreement. 2. 3. Conditions set out in the Agreement. A U. S. reinsurer must meet certain conditions to be eligible for the favourable régime provided for in the Agreement. For the spécifies of thèse conditions, please refer to Article 3(4) of the Agreement. Additionally, D.S. reinsurers should provide the Bank with documents demonstrating their ongoing compliance with the conditions ofthe Agreement. 3. Documents to be submitted to the Bank 3. 1. Documents In order to allow the Bank to verify the conditions enabling it to benefit from the régime provided for in the Agreement, a reinsurer governed by the law of a D.S. State should provide the Bank with the documents listed below. A) Before entering jnto a first reinsurance agreement with a cedinfl insurer: a) a confirmation from its compétent supervisory authority that it compiles with the risk-based capital ratio within the meaning of Article 3(4)(b) of the Agreement4; b) a statement that it will provide prompt written notice and explanation to the Bank5: i) if it falls below the minimum capital and surplus or own funds specified in Article 3(4)(a) of the Agreement, or the capital ratio spécifiée) in Article 3(4)(b); or ii) if any regulatory action is taken against it for serious non-compliance with applicable law; e) a confirmation: i) that it consents to the jurisdiction of the Belgian courts'; Directive 2009/138/EC of the European Parliament and of the Council oî 25 November 2009 on the taking-up and pursuit of the business of Insurance and Reinsurance (Solvency II) (recast). Article 3(4)(1) of the Agreement. Article 3(4)(c) of the Agreement. Article 3(4)(d) of the Agreement. NBB 2019 24 - 1 October2019 Circutar- Page 3/5

rtl ii) that it consents to pay all final judgments, wherever enforcement is sought, obtained by a ceding insurer, that have been declared enforceable in the territory where the judgment was obtained7; iii) that it will agrée in each reinsurance agreement subject to the Agreement that it will provide collateral for 100 % of its liabilities attributable to reinsurance ceded pursuant to that agreement if it resists enforcement of a final judgment that is enforceable under the law of the territory in which it was obtained or a properly enforceable arbitration award, whether obtained by the ceding insurer or by its résolution estate, if applicable8; e) a written confirmation that it is not presently participating in any suivent scheme of arrangement, which involves ceding insurers that are subject to the supervision of the Bank, and a statement that it will notify the ceding insurer and the Bank and that it will provide 100% collateral to the ceding insurer consistent with the terms of the scheme should it enter into such an arrangement9; B) On an annyal basis: . a confirmation from its compétent supervisory authority that it complies with the risk-based capital ratio within the meaning of Article 3(4)(b) of the Agreement10; G) As soon as the relevant eyent Qcçurs: a) an explanation of the fact1 ' : i) that it fell below the minimum capital and surplus or own funds specified in Article 3(4)(a) of the Agreement, or the capital ratio specified in Article 3(4)(b); or ii) that regulatory action was taken against it for serious non-compliance with applicable law; b) the fact that it is participating in a solvent scheme of arrangement, that it bas notifiée) the ceding insurer and that it bas provided 100 % collateral to the ceding insurer consistent with the terms of the scheme1 2. D) Within fifteen davs of receiving a request from the Bank: a) its annual financial statements with respect to the two years preceding entry into the agreement, audited in accordance with the applicable iaw of the territory of its head office, including the external audit report13; b) the Solvency and Financial Condition Report or the actuarial opinion, if filed with its supervisory authority14; e) an updated list of all disputed and overdue reinsurance claims outstanding for 90 days or more, regarding reinsurance assumed from ceding insurers subject to the supervision of the Bank15; Article 3(4}(f) of the Agreement. Article 3(4)(g) of the Agreement. Article 3(4)(j) of the Agreement. Article 3(4)(1) of the Agreement. Article 3(4)(c) of the Agreement. Article 3(4)(j) of the Agreement Article 3(4)(h)(i) of the Agreement. Article 3(4)(h)(ii) of the Agreement. Article 3(4)(h)(iii) of the Agreement. Circular- Page 4/5 NBB 20198 24 ~ 1 October2019

ni d) the amounts of paid and unpaid losses, broken down according to ceding insurer and whether they relate to assumed reinsurance, ceded reinsurance or recoverable reinsurance16. 3. 2. Récipient The documents should be sent to Insurance.Supervisioniainbb.be or Insurance Supervision Boulevard de Beriaimont 14 1000 Brussels 3. 3. Information provided on a voluntary basis Nothing in the Agreement precludes a reinsurer from providing information to the Bank on a voluntary basis. 4. ListofU. S. reinsurers The Bank draws up a list of U.S. reinsurers which have demonstrated that they meet the conditions specified in the Agreement. This list and any changes made to it are published on the Bank's website. A copy of this Communication will be forwarded to the accredited auditors of your company. Yours faithfully, Pierrs-WUNSCH rernor '" Article 3(4)(h)(iv) of the Agreement. NBB_2019_24 - 10ctober2019 Circular- Page 5/5