Instruction No. 2017-I-09 of June 15, 2017 Modifying Instruction No. 2014-I-07 Regarding the Acceptance Procedure for Experts in the Valuation of Real Estate and Shares of Non-Listed Real Estate Companies

PRUDENTIAL CONTROL AND RESOLUTION AUTHORITY

Instruction No. 2017-I-09 dated June 15, 2017
Regarding the acceptance procedure for experts in the context of the evaluation of the realization value of real estate and shares or stock of non-listed real estate or land companies repealing Instruction No. 2014-I-07 dated July 10, 2014

The Prudential Control and Resolution Authority, Having regard to the Monetary and Financial Code, particularly Articles L. 612-1 and L. 612-2; Having regard to the Insurance Code, particularly Article R. 343-11; Having regard to the Social Security Code, particularly Article R. 931-11-1; Having regard to the Mutual Insurance Code, particularly Article R. 212-11; Having regard to the opinion of the Prudential Affairs Consultative Committee dated June 1, 2017; DECIDES

Article 1:
This instruction applies to insurance entities subject to the control of the Prudential Control and Resolution Authority (ACPR) for the evaluation of the realization values of real estate and shares or stock of real estate or land companies not listed on the stock exchange of a member state of the OECD, under the conditions provided for in Articles R. 343-11 of the Insurance Code, R. 931-11-1 of the Social Security Code, and R. 212-11 of the Mutual Insurance Code.

Article 2:
The insurance entities referred to above must, for the closing of annual accounts, have carried out the five-year appraisal or the update of values between two appraisals, of the real estate assets¹ referred to in Article 1 located in France or abroad. The five-year appraisal concerns properties appraised five years prior or those entered into the entity's assets and which have not yet been subject to a five-year appraisal. The update of the realization value, also called intermediate update, is carried out between two appraisal deadlines.

1 Also referred to as "properties".

Article 3:
The real estate valuation expert is the one responsible for the evaluation of the value of the real estate. The expert in the valuation of the accounting value of the real estate or land company, also called the central expert, is the one responsible for the evaluation of the value of the shares or stock of the concerned company.

Article 4:
The experts² referred to in Article 3, proposed for their acceptance by the ACPR, must possess the technical skills and sufficient resources for the evaluation of the properties for which they will be commissioned. Experts must be independent both vis-à-vis the insurance entity wishing to commission them and vis-à-vis the properties to be appraised. Experts must adhere to professional standards and apply current ethical principles. Experts cannot carry out two consecutive appraisals of the same property.

Article 5:
Insurance entities must propose to the ACPR for acceptance the real estate valuation experts and the central experts prior to the engagement of the expert's mission. Acceptance is valid only for the five-year appraisal mission presented, followed by the intermediate updates linked to it. The central expert is responsible for verifying the realization of the valuations of the underlying assets by experts under conditions equivalent to those required in this instruction. In the case of real estate or land companies whose shares or stock are held by multiple insurance entities, the insurance entity that holds the majority³ of these shares is generally the lead entity proposing the central expert for acceptance by the ACPR.

Article 6:
Entities have full latitude in the choice of experts meeting the requirements set forth in Article 4. When an insurance entity intends to submit to the ACPR the designation of one or more experts, it transmits to the General Secretariat of the ACPR, for each proposed expert, an acceptance request.

Article 7:
The acceptance request file includes a declarative statement and the list of real estate assets (Form 1), accompanied, depending on the mission, by the following forms duly completed by each proposed signing expert, whether in their personal capacity or on behalf of an expert firm:
– Form 2, presentation of the real estate or land valuation expert; – and/or Form 3, presentation of the central expert in the valuation of a real estate or land company; – Form 4, commitment of the real estate or land valuation expert; – and/or Form 5, commitment of the central expert in the valuation of a real estate or land company.

Article 8:
When, during a five-year appraisal cycle and intermediate updates, a change of expert is envisaged, the insurance entity transmits an acceptance request for a new expert to the General Secretariat of the ACPR.

Article 9:
The expert acceptance requests provided for in Articles 6, 7, and 8 must reach the General Secretariat of the ACPR during the relevant accounting year. These requests must be transmitted at the latest two months before the engagement of the expert's mission. This engagement must take place within a reasonable and sufficient timeframe allowing the expert to produce the valuation of the property as of the inventory date.

Article 10:
The acceptance of the expert by the ACPR is deemed granted within a period of two months from receipt of the complete file comprising the declarative statement, Form 1, and Forms 2 or 3, 4 or 5 depending on the missions.

Article 11:
Valuations carried out by an expert who has not been accepted under the conditions of this instruction are deemed non-compliant with the provisions of Articles R. 343-11 of the Insurance Code, R. 931-11-1 of the Social Security Code, and R. 212-11 of the Mutual Insurance Code.

Article 12:
When an insurance entity becomes aware of an element likely to modify the conditions under which the expert exercises their duties, it must inform the General Secretariat of the ACPR by letter as soon as possible.

Article 13:
The declarative statement provided for in Article 7 must be signed by the management of the insurance entity, notably within the meaning of Articles L. 321-10 of the Insurance Code, L. 211-8 of the Mutual Insurance Code, and L. 931-5 of the Social Security Code.

Article 14:
The expert acceptance request files as well as the sales table of the year presented in Annex II are sent to the following address:
General Secretariat of the Prudential Control and Resolution Authority Directorate of Authorizations 66-2789 Insurance Entities Service 4, place de Budapest CS 92459 75 436 PARIS Cedex 09

Article 15:
Instruction No. 2014-I-07 of the Prudential Control and Resolution Authority is repealed.

Article 16:
Instruction No. 2017-I-09 enters into force upon its publication in the Official Register of the Prudential Control and Resolution Authority.

Done in Paris, on June 15, 2017
For the Insurance Sectoral Sub-Collegium
The President,
[Bernard DELAS]