Circular on the privileges of insurance creditors, permanent inventories, and the summary statement of permanent inventories

NBB_2017_10 – March 22, 2017 Circular – Page 1/16 Boulevard de Berlaimont 14 – BE-1000 Brussels tel. +32 2 221 38 12 – fax + 32 2 221 31 04 company number: 0203.201.340 RPR Brussels www.bnb.be Circular Brussels, March 22, 2017 Reference: NBB_2017_10 your contact person:
Bertrand Leton tel. +32 2 221 23 65 – fax +32 2 221 31 04 bertrand.leton@nbb.be Circular on the privileges of insurance creditors, permanent inventories, and the summary statement of permanent inventories Scope This circular concerns:
a) Belgian law insurance undertakings that are required to apply for authorization as referred to in Article 18, paragraph 1, 1° of the Law of March 13, 2016 on the status and supervision of insurance or reinsurance undertakings, including:

• undertakings referred to in Article 276 of the aforementioned Law of March 13, 2016,
• mutual insurance companies as defined in Article 15, 79° of the aforementioned Law of March 13, 2016, it being understood that, for these undertakings, "the Bank" should be replaced by "the Supervisory Office for Mutualities and National Unions of Mutualities" as defined in Article 15, 84° of the aforementioned Law of March 13, 2016.
  b) branches of insurance undertakings governed by the law of a non-European Economic Area country when the law of the third country does not provide a system of protection for insurance creditors granting them a rank at least equivalent to that provided for by Articles 643 and 644 of the aforementioned Law of March 13, 2016 (cf. Article 591, § 3 of the aforementioned Law of March 13, 2016). This circular does not concern:
  a) insurance undertakings referred to in Article 275 of the aforementioned Law of March 13, 2016 (undertakings subject to a special regime due to their size and which have concluded an agreement involving the full and systematic reinsurance of insurance contracts or the transfer of commitments), b) insurance undertakings referred to in Article 294 of the aforementioned Law of March 13, 2016 (local insurance undertakings), c) reinsurance undertakings, d) insurance groups.

Circular – Page 2/16 NBB_2017_10 – March 22, 2017 Summary/Objectives The purpose of this circular is to explain the organization of privileges for policyholders, insured persons, and beneficiaries of insurance contracts or commitments, the obligation to maintain permanent inventories by distinct management categories, and the resulting reporting obligations for control purposes. Legal References Law of March 13, 2016 on the status and supervision of insurance or reinsurance undertakings, Articles 194, 195, 230, 643 and 644. Structure
I. Objectives
II. Definitions
III. Entry into force
IV. Specifications relating to the determination of the privilege, permanent inventories and the summary statements of permanent inventories

NBB_2017_10 – March 22, 2017 Circular – Page 3/16 Madam, Sir,
I. Objectives
The Law of March 13, 2016 on the status and supervision of insurance or reinsurance undertakings has established a system of protection for policyholders, insured persons, and beneficiaries of insurance contracts or commitments in the event of liquidation of the insurance undertaking. This circular reiterates the provisions in this area, specifies the obligations applicable to undertakings, and determines the rules for transmitting information to the Bank. These provisions are detailed in Chapter IV of this circular, which comprises six sections.
Section I comments on the provisions of the Law relating to privileges for policyholders, insured persons, and beneficiaries of insurance contracts or commitments. It distinguishes, on the one hand, privileges on special patrimonies corresponding to each of the distinct management categories organized by the Law and, on the other hand, the privilege on all assets of the insurance undertaking.
Section II comments on the concept of privileged claims comprising the distinct management categories and how to determine and value them.
Section III specifies the concept of special patrimony. It reiterates the obligations of insurance undertakings regarding the constitution of these patrimonies, and details the rules relating to their composition both from the perspective of admissible assets and their valuation.
Section IV comments on the requirements relating to the maintenance of permanent inventories, the status of permanent inventories, and the summary statement of these inventories.
Section V relates to the communication of these inventories and statuses, as well as the summary statement, to the Bank.
Finally, Section VI specifies that Regulation No. 12 of the Insurance Supervisory Office of January 22, 2001, is no longer applicable.
II. Definitions
A. Legal and regulatory texts

• The Directive: Directive 2009/138/EC of the European Parliament and of the Council of November 25, 2009 on the taking-up and pursuit of the business of insurance and reinsurance (Solvency II);
• The Law: the Law of March 13, 2016 on the status and supervision of insurance or reinsurance undertakings;
• The accounting decree: the Royal Decree of November 17, 1994 on the annual accounts of insurance and reinsurance undertakings.

Circular – Page 4/16 NBB_2017_10 – March 22, 2017 B. Concepts used in this circular For the purposes of this circular, the following terms shall mean:

1. Privilege
   A privilege is a right that the nature of the claim gives to a creditor to be preferred over other creditors. It allows the holder of the claim, competing with other creditors over the elements of the common debtor's patrimony, to be paid preferentially.
2. Insurance claim
   Article 15, 76° of the Law defines an insurance claim as:
   “any amount due by an insurance undertaking to insured persons, policyholders, beneficiaries or any injured party having a direct right of action against the insurance undertaking and resulting from an insurance contract, including amounts set aside for the aforementioned persons, as long as all elements of the debt are not yet known. Premiums to be reimbursed due by an insurance undertaking as a result of the non-conclusion, cancellation or termination of insurance contracts, in accordance with the law applicable to these contracts, before the opening of liquidation proceedings, are also considered insurance claims.” The holders of insurance claims (policyholders, insured persons, beneficiaries and injured parties having a direct right of action) benefit from the privileges organized by Articles 643 and 644 of the Law.
3. Separate management
   A separate management is a category of insurance contracts or commitments determined in accordance with Article 230 of the Law. Article 231 of the Law sets out the obligations of undertakings concerning separate management categories.
4. Special patrimony
   Within the meaning of Article 643 of the Law, a special patrimony is a set of assets reserved for the fulfillment of commitments towards insurance creditors (policyholders, insured persons, insurance beneficiaries and injured parties having a direct right of action). Each separate management category corresponds to a special patrimony, which constitutes the basis for the privilege organized by Article 643 of the Law. Article 194 of the Law contains the rules relating to the assets comprising a special patrimony.
5. Permanent inventory or special register
   Within the meaning of Article 195 of the Law, a permanent inventory is a special register that identifies the assets comprising a special patrimony by referring to the insurance undertaking's chart of accounts.
6. Status of the permanent inventory
   The status of a permanent inventory determines, at a given date, the list of all assets comprising a special patrimony, the value of these assets at the considered date, and therefore the total value of the special patrimony concerned at the same date.

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7. Summary statement (of the status of permanent inventories)
The summary statement (of the status of permanent inventories) is a summary of the status of permanent inventories at a given date.
8. Technical debts
Technical debts are the debts of the insurance undertaking, other than technical provisions, arising from insurance operations, in favor of policyholders. These debts are defined in point G.I.1, a), 1° to 3° of Section I of Chapter I of the Annex to the accounting decree and are recorded under items 421.111 to 421.114 of the detailed balance sheet defined in Section I of Chapter I of the same annex. These are:

• premiums paid before maturity, i.e., collected during one financial year but due in the following financial year (item 421.111);
• due premiums corresponding to suspended risks (item 421.112);
• consigned deductibles, i.e., provisional guarantees paid by policyholders (item 421.113);
• other technical debts (item 421.114).
  In the absence of other clarifications in this circular, the terms have the meaning defined in the legal and regulatory acts mentioned therein, as well as future implementing measures of the Law.
  III. Entry into force
  The legal provisions whose content is clarified by this circular have been applicable since March 23, 2016.

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IV. Specifications relating to the determination of privileges, permanent inventories and the summary statement
SECTION I - Privileges
The provisions relating to privileges for insurance creditors (policyholders, insured persons and beneficiaries of insurance contracts and commitments, excluding reinsurance contracts and commitments) are set out in Articles 643 and 644 of the Law. They organize, on the one hand, privileges on special patrimonies and, on the other hand, a privilege on all assets of the insurance undertaking. A. Privilege on special patrimonies
Article 643 of the Law1 organizes a privilege on each of the special patrimonies corresponding to each of the distinct management categories referred to in Article 230 of the Law.
As specified in the explanatory memorandum to the Law2, “the role of distinct management categories has been limited to the sole implementation of this privilege otherwise provided for in Articles 643 and 644. […] the term “distinct management categories” is therefore, within the framework of the draft law, exclusively reserved for the determination of the basis of the privilege. The usefulness of the concept is therefore only conceived in a situation of concurrence, namely in a “gone concern” perspective consisting of the opening of liquidation proceedings.” The explanatory memorandum also adds “In this role limited to the implementation of the privilege, it was no longer necessary to provide for as many distinct management categories as in the current regulation.” Therefore, Article 230 of the Law now provides for only three types of distinct management categories:
a) a distinct management category for all non-life (direct) insurance activities3; b) a distinct management category for all life (direct) insurance activities except those referred to in c) below; c) a distinct management category for insurance (direct) activities corresponding to each of the activities linked to an investment fund falling under branches 23, 26 and 27 as defined in Annex II of the Law and for which the investment risk is borne by the policyholder. For these investment funds, Article 230 therefore requires a distinct management category per fund. Notwithstanding the fact that Article 230 refers to Article 224 concerning the first two types of distinct management categories and that the latter article provides that undertakings having both life and non-life insurance and reinsurance activities “shall manage separately, on the one hand, non-life insurance and reinsurance activities and, on the other hand, life insurance and reinsurance activities,” the limited purpose of distinct management categories as recalled above has the consequence that these management categories relate exclusively to (direct) insurance activities even if the undertaking is authorized to carry out both insurance and reinsurance activities. Each special patrimony constitutes the basis for the privilege relating to the corresponding distinct management category. In the event of liquidation of the insurance undertaking, privileged claims will be reimbursed from the special patrimonies in preference to all other creditors of the insurance undertaking, with the exception of the remuneration of the liquidator and their staff, as well as ______________________________________ 1 Article 643 of the Law transposes Article 275, paragraph 1, a) of the Directive. 2 Parl. Doc., Chamber 54-1584/001, p.188. 3 The Law does not use the expressions “direct insurance” and “accepted reinsurance.” Therefore, without exception, the expression “insurance” must be understood as direct insurance with the exception of accepted reinsurance.

NBB_2017_10 – March 22, 2017 Circular – Page 7/16 other liquidation costs insofar as they have benefited the liquidation of the special patrimony concerned (Art. 644, para. 2 of the Law).
If the liquidation of a special patrimony leaves a positive balance, this is shared among the other special patrimonies on a pro rata basis to the deficits of these special patrimonies (Art. 644, para. 3 of the Law).
Within the same distinct management category, insurance creditors have the same rank. If the special patrimony, possibly increased by the surpluses of other special patrimonies, does not allow for the full satisfaction of insurance creditors, a distribution on a pro rata basis must be made and, for the remainder, the privilege on all assets described in point B below must be implemented. B. Privilege on all assets The privilege on all assets of the insurance undertaking is defined in Article 644, paragraph 5 of the Law. It only applies if the liquidation of one or more special patrimonies does not allow for the satisfaction of the insurance creditors concerned. This privilege will therefore only be implemented to the extent that the liquidation of one or more of the special patrimonies referred to in point A above has not allowed for the full satisfaction of the insurance creditors of the corresponding distinct management category. The basis of this privilege consists of all assets of the undertaking that are not subject to the special patrimonies referred to in point A above. In cases where the insurance undertaking is also authorized to carry out reinsurance activities, this basis therefore includes assets related to reinsurance activity. This privilege is general and is only outranked by special privileges (see notably Articles 20 et seq. of the Mortgage Law) and general privileges of salaried workers, the Treasury, and social security bodies and insurers, as well as by the exercise of real rights (mortgages...)4. The insurance creditors concerned by the privilege described in this point have the same rank. In the event of insufficient assets to fully satisfy them, a distribution on a pro rata basis must therefore be made among them.
SECTION II – Privileged claims
The exercise of the privileges described in Section I requires the determination of privileged claims for insurance creditors (policyholders, insured persons and insurance beneficiaries).
A. Type of privileged claims
Given the very broad definition of privileged claim, it should be considered that this concept generally refers to any amount that a person can assert against an insurance undertaking on the basis of an insurance contract or insurance commitment, whether as a policyholder, insured person, beneficiary or injured party having a direct right of action. ______________________________________ 4 In the old regime organized by Article 48/16, § 1 of the Law of July 9, 1975 on the supervision of insurance undertakings, this privilege was general but outranked by all other privileges, both general and special.

Circular – Page 8/16 NBB_2017_10 – March 22, 2017 Among others, the amounts listed below are to be considered privileged claims:
a) for non-life activities:

• premium provisions (unearned premium portion);
• ageing provisions5;
• claims provisions, including IBNR (incurred but not reported) provisions6;
• provisions for profit participation and rebates, but only if and to the extent that the regulation applicable to the contract obliges the insurance undertaking to allocate said profit participation within a specified period without the possibility for the insurance undertaking to reclaim these provisions7;
• technical debts;
  b) for life activities:
• premium provisions (unearned premium portion),
• life insurance provisions, excluding the supplementary provision (fluctuating provision)8 but including ageing provisions9;
• claims provisions;
• provisions for profit participation and rebates, to the extent that the regulation applicable to the contract obliges the insurance undertaking to allocate said profit participation within a specified period without the possibility for the insurance undertaking to reclaim these provisions10;
• technical debts;
  c) for annuities (life and non-life):
• capital for the constitution of annuities;
• capital for constituted annuities.
  B. Valuation
  As specified in Article 194 of the Law, the determination of the amount for which free assets comprising the special patrimonies must be held is made by reference to the amount of insurance claims. For this purpose, insurance claims are valued “assuming liquidation proceedings during which insurance contracts would be terminated.” The explanatory memorandum to the Law11 specifies that “[t]his obligation thus covers insurance commitments determined, from a Solvency I perspective, as if insurance contracts were terminated.” For life insurance contracts, Article 194 in fine of the law specifies that the value of the claim is “the inventory value whose calculation methods the King is authorized, upon advice from the Bank and the FSMA, each within its area of competence, to determine.” As far as necessary, this concept will be explicitly clarified during a future revision of the regulatory provisions applicable to life insurance. This conception is logical insofar as one is in a hypothesis of liquidation of the insurance undertaking, without prospect of continuity or transfer of activity, and where insurance creditors will be led to assert against the undertaking the rights they derive from their contract or from the law. It thus appears that the valuation rules for insurance claims are identical in the case of the implementation of the special privileges referred to in this circular and in the case of the annual accounts that undertakings must keep in application of the accounting decree. It is thus possible to reconcile the amount of privileged claims with certain items in the annual accounts.
  SECTION III - Special patrimonies
  A. Obligation
  Under Article 194 (read in conjunction with Article 643) of the Law, insurance undertakings are obliged to constitute a special patrimony for each of the distinct management categories referred to in Article 230. Each special patrimony consists, at all times, of assets free of any encumbrance for an amount that covers the undertaking's commitments towards the insurance creditors of the distinct management category concerned. The explanatory memorandum12 indicates that the determination of a special patrimony “does not, as such, affect the level of own funds of the insurance undertaking. Thus, in the event of insufficient assets constituting the basis, the insurance undertaking will have to transfer available assets to the permanent inventory.” It adds:
  “Article 194 is an autonomous provision separate from the rules relating to own funds. Its sole purpose is to shield the assets comprising the basis of the privilege from the claims of other creditors of the undertaking than the holders of insurance claims. From this perspective, it matters little whether the assets comprising the basis of the privilege represent or do not represent the Solvency Capital Requirement. The change in the allocation of these assets will therefore have no consequence on the own funds of the insurance undertaking covering the regulatory requirements.” The minimum amount of assets that comprise each special patrimony is determined by the amount of privileged claims of the corresponding distinct management category, valued in accordance with Section II, B. ______________________________________ 5 See point C.VI of Chapter III of the Annex to the accounting decree. Ageing provisions are constituted, notably, within the framework of healthcare contracts with smoothed premiums, so that a portion of the premiums paid at the beginning of the contract are set aside and will be drawn upon at the end of the contract. In the case referred to in this circular where all contracts are terminated, this provision becomes unnecessary and must be returned to policyholders. 6 These provisions are constituted for claims that have occurred but are not yet known to the insurance undertaking (claims incurred but not yet reported). 7 Such a regulation does not currently exist in Belgian law. 8 As specified in Article 34quinquies, § 3 of the accounting decree, the supplementary provision is constituted to compensate for the difference between the technical interest rate guaranteed by the contract and the return that the insurance undertaking derives from the representative values. It stems from a prospective view unrelated to the liquidation issue, which is why it is not included here. 9 See point C.II of Chapter III of the Annex to the accounting decree. 10 See Article 33, § 2 of the Royal Decree of November 14, 2003 on life insurance activity. 11 Parl. Doc., Chamber, 54-1584/001, p. 164. 12 Parl. Doc., Chamber, 54-1584/001, p. 164.

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It should also be recalled that, in application of Article 629 of the Act, the composition of special estates can no longer be modified from the moment a decision to open liquidation proceedings has been taken, except in the following cases:

• the correction of purely material errors,
• the addition, by the liquidator, of financial products generated by the assets composing the special estate,
• the modification has received authorization from the liquidation authorities13.

B. Eligible assets and valuation

According to Article 194 of the Act, the assets composing special estates are “evaluated in accordance with Article 123”, i.e., according to the so-called Solvency II rules, at market value. There is no exception to this rule.

Article 194 further provides that “insurance companies hold, at all times, assets free of any charge”.

Although the Act does not explicitly specify this, the verb “hold” must be understood in the sense that the assets belong in full ownership to the insurance company, as provided by Article 16, § 2 of the Act of 9 July 1975 on the control of insurance companies. The regime established by the Act is indeed in continuation of that existing under the aforementioned Act of 9 July 1975.

The expression “free of any charge” is a rule that does not aim at determining the value of the asset itself – which falls under Article 123 – but at the portion of this value that can be recovered in a special estate (allocation value). When it is certain or probable that, upon realization, the value of an asset will be reduced by certain costs or charges, Article 194 requires subtracting the amount of these costs and charges from the allocation value. It goes without saying that the same asset cannot be included more than once in the special estates.

The following points clarify the aforementioned notions in certain specific cases.

1. If an asset is encumbered by a real right such as a mortgage or pledge, the amount for which the asset is encumbered by the real right cannot be taken into consideration (Articles 194 and 195, second paragraph of the Act).

2. Companies that practice both life and non-life activities are obliged, under Article 224 of the Act, to manage each of these activities separately. Consequently, an asset falling under the management of non-life activities cannot be included in the special estate of life management and vice-versa.

3. Assets are evaluated net of debts incurred for their acquisition.

4. Claims against a third party are evaluated net of debts owed to that third party (Article 628, § 3 of the Act). This rule concerns only the value for which an asset can be included in a special estate. It does not by itself create any set-off between the claim of the insurance company and that of the third party against the insurance company.

5. The amount of the reinsurer’s share in technical provisions can only be taken into consideration net of the deposit made by this reinsurer with the insurance company, in order to avoid double counting between the allocation of the share covered by the deposit and the assets acquired thanks to this deposit.

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13 According to Article 15, 73° of the Act, these authorities are the commercial court regarding bankruptcy and forced dissolution, or the Bank regarding other liquidation procedures.

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6. The value of an asset that the insurance company intends to sell in the short term is reduced by estimated realization costs.

7. Assets are evaluated taking into account the derivatives related to them, provided that these derivatives are not themselves included in the special estate. In other words, if an asset is evaluated taking into account the underlying derivatives, these derivatives cannot be part of the special estate. Conversely, if derivatives are included in a special estate, the assets of which these derivatives constitute the underlying must be evaluated without taking these derivatives into account.

8. Contracts falling under branches 23, 26, and 27 which are linked to investment funds and for which the investment risk is borne by the policyholder are subject, per investment fund, to separate management. For the assets constituting the special estates related to these contracts, their respective amount is determined by the assets composing the concerned investment fund, which also corresponds to the total amount of insurance claims related to the concerned fund. Therefore, the special estate of each of these separate managements can only include the assets of the concerned investment fund.

9. Assets which the Act (Article 197) admits may be located in a third country (State not a member of the European Union) can be taken into consideration for the constitution of a special estate. This means that when they consist of real estate, assets located in a third country are admitted.

On the other hand, securities are only admitted if two conditions are previously met, namely:

• the rights conferred on the insurance company following the deposit of these securities with a depositary intermediary constitute a real right allowing the exercise of a claim on these securities to the exclusion of a simple claim right,
• the concerned depositary intermediary has provided the Bank with a certificate stating that it undertakes to comply with all decisions to restrict or prohibit the free disposal of the insurance company’s assets.

Proof of these conditions is communicated to the Bank as an annex to the summary statement.

10. For sale-and-repurchase transactions (Repo sales), account must be taken, on the one hand, of the principle that allocated assets must be held in full ownership, and, on the other hand, of the value that will re-enter the insurance company’s estate upon the settlement of the transaction. Therefore:

• when the company acts as seller, the sold securities can no longer constitute the special estate but rather the cash (or its investment) received in exchange for a total value that cannot exceed the total value of the sold securities.
• when the company acts as buyer, the purchased securities can constitute the special estate for an amount that cannot exceed their value at the time of purchase.

11. In the case where the company lends securities, the principles mentioned in point 10) are also applicable. Therefore:

• lent securities and securities received as collateral without transfer of ownership cannot constitute the special estate;
• in the case where the lending transaction is not accompanied by sufficient collateral, the claim (against the borrower) for the return of the lent securities cannot constitute the special estate;

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• in the case where the lending transaction is accompanied by a security without transfer of ownership, the claim on securities can constitute the special estate for an amount that cannot exceed the total value of the lent securities;
• in the case where the lending transaction is accompanied by a security with transfer of ownership of the assets provided as collateral, the securities received as collateral can constitute the special estate for an amount not exceeding the total value of the lent securities.

12. In the case where the company borrows securities, the borrowed securities can constitute the special estate for an amount that cannot be higher than the total value of the securities provided as collateral, the latter no longer, in accordance with Article 195, second paragraph of the Act, constituting the special estate.

13. As with investments in general, the insurance company will ensure compliance with the prudent person principle as set out in Articles 190 to 193 of the Act. In particular, it will ensure:

• the security, quality, liquidity, profitability, and congruence of the assets composing the special estates;
• a location ensuring their availability;
• adaptation to the nature and duration of the commitments.

SECTION IV - Permanent inventories, situations of permanent inventories, and summary statement

A. Maintenance of permanent inventories

1. Obligation to maintain permanent inventories

Article 195 of the Act provides that “Insurance companies maintain (…) a special register called 'permanent inventory', of the assets referred to in Article 194 according to the separate managements referred to in Article 230”. In other words, the insurance company maintains a register per separate management14.

The maintenance of permanent inventories pursues two objectives. On the one hand, it allows, at any time, to determine the composition of each special estate and, thus, to determine which assets, in the event of liquidation, will be reserved by priority for insurance creditors. On the other hand, it allows, in particular, the supervisory authority to verify if each special estate sufficiently covers the insurance claims relevant to the concerned separate management.

Permanent inventories are kept at the head office of the insurance company (Art. 195 of the Act). For Belgian branches of companies from third countries, it is the Belgian head office of this branch (Art. 588, § 1, 2° of the Act). In all cases, permanent inventories can be kept in a location previously approved by the Bank (Art. 76 of the Act).

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14 See also Article 276, paragraph 2, first paragraph of the Directive regarding the obligation to maintain separate registers for life and non-life insurance activities.

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2. Responsibilities

The maintenance of permanent inventories falls under the responsibility of the management committee and falls within the competence of the compliance function and the internal audit function. In particular, it is expected of the compliance function that it ensures the proper application of legal rules as explained by this circular, and of the internal audit function, that it ensures the validity of the asset and liability evaluation process, as well as the production of permanent inventories and the summary statement.

3. Task of the statutory auditor

The reports that the statutory auditor draws up based on Article 333 of the Act also concern the permanent inventories.

Furthermore, the Bank may request special reports from the statutory auditor based on Article 334 of the Act.

4. Principles regarding the maintenance of permanent inventories

Insurance companies respect the following principles regarding the maintenance of permanent inventories.

a) Link with the insurance company’s accounting plan

The identification of the assets composing a special estate is done by reference to the accounting plan that the insurance company establishes in application of Article 5 of the accounting decree.

Each asset account of the accounting plan contains:

• either assets that do not fall under any special estate (“free assets”),
• or assets that fall under only one and only one special estate15.

All assets recorded in a specific account of the accounting plan and corresponding to a special estate fall, at all times, from their recording until their deletion, under this special estate.

The structure of the accounting plan must be sufficiently detailed so that assets of different nature fall under different accounts.

Similarly, it is good practice that each deposit account corresponds to a single account of the accounting plan.

b) Required mentions

Each permanent inventory includes the following mentions:

• the statutory name of the company,
• the address of the registered office and, for branches from third countries, the address of the head office in Belgium,
• the administrative code number,
• the name of the concerned separate management,

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15 This does not prevent an asset from being constituted of several undivided shares and each being allocated to a special estate provided that, on the one hand, each share is allocated to only one special estate and, on the other hand, that the sum of the shares does not exceed the total value of the asset.

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• the following formula signed by a person who can validly commit the insurance company:
  This inventory mentions the assets composing the special estate of the separate management … in conformity with Article 194 of the Act of 13 March 2016 on the status and control of insurance or reinsurance companies.
  The undersigned declares that the assets included in the inventory are the property of the insurance company.
• the date and signature of the person mentioned above,
• when the links between the accounting plan and the special estates (cf. below) are modified, these modifications are dated and signed by a person who can validly commit the insurance company.

B. Situation of permanent inventories

The situation of a permanent inventory includes, at a determined date, by reference to the accounts of the accounting plan, each of the assets composing the concerned special estate and, therefore, the separate management, to which these assets relate.

The assets included in the situation are evaluated in accordance with Section III, C. If an event, such as the intention to sell in the short term or a recent or probable decrease in value, is likely to significantly modify the evaluation of an asset, the insurance company must mention it by indicating the (probable) difference in value compared to that mentioned in the situation.

The situation mentions the total value of the concerned special estate, as well as the total amount of privileged claims of the corresponding separate management.

C. Summary statement of the situation of permanent inventories

The summary statement summarizes the content of the permanent inventories by distinguishing the total amount of each special estate and privileged claims from:
a) the non-life separate management, b) the life separate management excluding contracts and commitments linked to an investment fund, c) all separate managements related to contracts and commitments linked to investment funds.

Insurance companies fill out the summary statement according to the model appearing in the annex to this circular.

SECTION V – Communication of permanent inventories and the summary statement to the Bank

A. Principles

Article 195, third paragraph of the Act provides that companies “communicate the situation of the permanent inventory of each separate management to the Bank respecting the form and content prescribed by it and on the support and within the timeframe it sets”.

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Given that permanent inventories are only useful in the event of liquidation of the insurance company, the obligations regarding the production and communication of the various documents covered by this circular are modulated, in particular according to the solvency situation of the company.

B. Communication of the summary statement to the Bank

The summary statement is transmitted to the Bank regularly, at the same time and according to the same modalities (OneGate) as the annual quantitative reporting. It is communicated according to the model of the annex to this circular.

C. Communication of permanent inventories and situations of permanent inventories to the Bank

Since permanent inventories are only useful in the event of liquidation of the insurance company, it is not appropriate to provide for their systematic and complete communication to the Bank when the financial situation of the company can be considered satisfactory.

The insurance company must nevertheless be able to produce its permanent inventories and a situation of each of them at the first request of the Bank, in particular within the framework of a control conducted without travel or an inspection at the company’s head office.

The systematic communication of one or more permanent inventories and/or the corresponding situations may be required by the Bank when the financial situation of the company justifies it. This will be the case, among others, of insurance companies subject to one or more of the following measures:
a) the binding measures referred to in Article 508 of the Act, b) the implementation, by the company, of its recovery plan, as provided by Article 509 of the Act, c) the imposition by the Bank of a recovery program, as provided by Article 510 of the Act, d) the imposition by the Bank of a short-term financing plan as provided in Article 511 of the Act, e) the limitation or prohibition of the free disposal of the insurance company’s assets decided by the Bank based on Article 513 of the Act, f) the exceptional recovery measures referred to in Article 517 of the Act, g) the financial system safeguard measures referred to in Articles 519 to 537 of the Act, h) a waiver of authorization in accordance with Article 538 of the Act, i) an ex officio deregistration in accordance with Article 540 of the Act, j) a revocation of authorization in accordance with Articles 541 and 542 of the Act, k) the withdrawal of the benefit of the transitional measure referred to in Article 667, first paragraph of the Act in application of the third paragraph of the same article, l) the refusal or withdrawal of the benefit of one of the transitional measures referred to in Articles 668 and 669 of the Act in application of Article 671, § 1, first paragraph of the Act.

The permanent inventories and the corresponding situations are attested by a person who can validly commit the insurance company.

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SECTION VI – Regulation No. 12

Pursuant to Article 647 of the Act, Regulation No. 12 of the Insurance Control Office of 22 January 2001 fixing the rules concerning the permanent inventory of representative values, modified by Regulation No. 13 of 4 November 2002, is no longer applicable.

A copy of this circular is transmitted to the statutory auditor(s) of your company.

Sincere regards,

Jan Smets
Governor