Communication concerning the exemption from the obligation to provide for the supplementary provision in 2019

boulevard de Berlaimont 14-BE-1000 Bruxelles tél. +32221 34 31 numéro d'entreprise: 0203. 20Î. 340 RPR Brussel www. nbb. be fTt BanqueNqtionaleBank DE BELGIQUE VAN BELGIË Eurosystem Communication Bruxelles, le 5 novembre 2019 Kenmerk: NBB 2019 28 uw correspondent:
Geoffroy Herberigs tel. +32 2 221 56 61 geoffroy. herberigs@nbb. be Communication concerning the exemption from the obligation to provide for the supplementary provision in 2019 Scope Insurance companies subject to the Law of 13 March 2016 on the status and supervision of insurance or reinsurance companies and operating in the Life and Work Accident branches. Summary/Objective This communication concerns the exemption from the obligation to provide for the supplementary provision, commonly known as the "flashing provision" (provision clignotant). Madam, Sir, Pursuant to Article 34quinquies, § 4, of the Royal Decree on the annual accounts of insurance companies1, the Bank considers it necessary to impose an additional condition for granting an exemption from the obligation to provide for the flashing provision for the 2019 financial year. This is an additional condition to that mentioned in Circular NBB 2016 39. Under this additional condition for granting an exemption for the 2019 financial year, insurance companies are required to achieve, as of 30 September 2019, a coverage of at least 125% of the required solvency capital as defined in the Supervision Law2, without recourse to the transitional measures referred to in Articles 668 and 669 of said Law. The tightening of the conditions for granting this exemption is motivated by the very low interest rate environment and the significant underestimation of the capital requirement for interest rate risk in the standard formula. Recent years have been marked by the realization of the low interest rate risk, confronting insurers with a very difficult macroeconomic environment. The significant and rapid decline in the EIOPA risk-free interest rate curve, characterized since the beginning of 2019 by much lower and much more negative interest rates on much longer maturities, indicates a new intensification of interest rate risk for the insurance sector. Royal Decree of 17 November 1994 on the annual accounts of insurance and reinsurance companies. Law of 13 March 2016 on the status and supervision of insurance or reinsurance companies. NBB_2019 28-5 November 2019 Communication - Page 1/2

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Analyses carried out as part of the Solvency II revision have shown3 that the capital requirement for interest rate risk may be seriously underestimated in the standard formula. Current regulation provides, in fact, that in the calculation of the capital requirement, the interest rate curve cannot fall below 0%. Moreover, the order of magnitude of the movements in the interest rate curve recently observed is significantly greater than those imposed in the calculation of the capital requirement. The underestimation of the capital requirement for interest rate risk increases as an ever-growing part of the interest rate curve falls below 0%. The Bank also intends to revise and refine Circular NBB 2016 39 in 2020 to take into account the evolution of market conditions and the underestimation of the capital requirement for interest rate risk in the standard formula. We ask you to accept, Madam, Sir, the expression of our distinguished sentiments. ^httos://eioDa. eurooa. eu/Publications/ConsyltatiQns/EIOPA-BoS-19-465 CP Opinion 2020 review. odf Communication - Page 2/2 NBB_2019_28 - 5 novembre 2019