2016-08-08
Added · Updated
The DNB outlines specific requirements for insurers applying for Basic or Solvency II authorisation, mandating the submission of a comprehensive business plan, recovery plan, and resolution plan. Applicants must provide detailed financial projections, solvency calculations, and evidence of compliance with operational, ethical, and governance standards. The document specifies distinct submission criteria for various insurance classes, including health, motor vehicle liability, and legal assistance, alongside thresholds for exempted non-life insurers.
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Notes to the application form for authorisation to pursue the business of an insurer
These notes describe what DNB wants to see when considering your application for authorisation. In addition to providing you with these notes, we have listed the most relevant sections of the law for your convenience. We refer to the ‘Legislation and regulations relevant to the application for Basic authorisation’ and ‘Legislation and regulations relevant to the application for Solvency II authorisation’ (both in PDF format) on the ‘Applying for authorisation’ page on Open Book on Supervision. Please also keep these at hand when filling in the form and verify carefully whether you comply with all the requirements. By submitting a high-quality and fully completed application form, you can help us reduce our processing time. Insurers Notes to the application form for authorisation to pursue the business of an insurer
Notes to the application form for authorisation to pursue the business of an insurer 1 General information 4 2 What authorisation do I need? 5 3 Business case 6
3.1 Business plan 6
3.2 Recovery plan 9
3.3 Resolution plan 10
4 Controlled business operations 13
5 Ethical business operations 26
6 Integrity and suitability of policymakers and co-policymakers 33 7 Two day-to-day policymakers working from the Netherlands and internal supervisory body 35 8 Transparent governance structure 37 9 Minimum own funds 38 10 Solvency 40 11 Financial projections 42 12 Reinsurance policy 43 13 Financial year 44 Contents
4
1 General information
Company data
Please provide the requested general particulars about your company. Submit all the required annexes, including a certified copy of the notarial deed containing the company’s articles of association. Ensure that the objects clause in the articles of association reflects the actual activities to be performed by your company and does not breach the ban on secondary business activities applicable to insurers under Section 3:36 of the Financial Supervision Act (Wet op het financieel toezicht – Wft). If you do not yet have a copy of the notarial deed containing the company’s articles of association, a final draft version suffices for the purpose of our processing your application. We will not decide on your application until we have received a certified copy of your company’s articles of association. Details of the contact person for the company In addition to information about the company itself, please also include the details of the person we can contact about the application for authorisation. We will contact this person if we have any questions concerning the application. Ensure you provide us with a business email address. You must not use email addresses from Hotmail, Gmail, Yahoo, etc. We are unable to send emails to these addresses for security reasons, and we want to ensure confidential information is at all times well protected. Society at large must be able to rely on DNB handling information carefully. Consultant We recommend that you engage the services of a consultant to assist you in the application process. Practice has shown that it is more likely for an application to be complete and of a substantially higher quality if the applicant has sought advice, for example from a (legal) expert who specialises in the Wft. We can assess a complete and well-substantiated application more quickly and more thoroughly. If you decide to use the services of a consultant please also provide us with this consultant’s particulars. Proportionality When considering your application for authorisation, we take the insurance company’s nature, size, complexity and risks into account. The regulatory framework for insurers is risk-based, meaning that your company must implement all measures that the law requires. The intensity with which you do this, however, depends on the risks that your company is exposed to.
Notes to the application form for authorisation to pursue the business of an insurer Consult the flow chart below to quickly determine what authorisation you need for the 5 proposed activities. Bear in mind the following:
6 To properly assess the various aspects of your application for authorisation, we must have a clear and complete picture of what your company intends to do exactly. In this section we therefore ask you to submit a business plan, a recovery plan and a resolution plan. Note: for several classes a business plan does not suffice and you must furnish additional information. Below we have listed for each category/class the documents you must submit in addition to the business plan.
3.1 Business plan
Your company’s business plan must include a number of specific elements:
Life, non-life and prepaid funeral services insurers
Notes to the application form for authorisation to pursue the business of an insurer
8 insurer with which they have a financial, commercial or administrative connection and that is operating in another insurance class;¹
Notes to the application form for authorisation to pursue the business of an insurer
10 3.3 Resolution plan
You must compile a resolution plan in timely preparation for the potential termination or transfer of the company’s business activities. The purpose of having such a plan in place is that if the company actually needs to be resolved, the resolution process can be executed in an orderly fashion with the fewest adverse effects possible for the policyholders and other rightful claimants. The resolution plan must encompass all the company’s business activities, products and processes. The resolution plan must have a clear responsible owner within the company, requires the prior approval of the management board and – if applicable – the supervisory board, and must be reviewed at least once a year. This must be stated in the plan.
Figure 1 below shows some building blocks that you can use when compiling an adequate
resolution plan. The plan is based on proportionality, and you may determine the level of detail of your resolution plan yourself. Below we will briefly discuss the separate building blocks.
Figure 1 Building blocks for an adequate resolution plan
Resolution plan
Policy and decision-making
Risk analysis
Communications
Governance aspects of resolution
Operational aspects of resolution
Legal aspects of resolution
Financial aspects of resolution
Notes to the application form for authorisation to pursue the business of an insurer Policy and decision-making 11 Your resolution plan must at any rate include a description of the following four elements:
12 Financial aspects
Your resolution plan also serves to help us gain an understanding of the financial aspects of your company’s resolution. First of all, your resolution plan must include a description of how the financial resolution of liabilities has been arranged for all rightful claimants, ensuring that all claims are transferred orderly (fully and well-balanced) and that any amounts charged are reasonable and fair. Secondly, you must provide a rough estimate of the financial resources necessary for each scenario, specifying for each scenario how these are to be financed. And thirdly, your plan must include a description of how financial risks and costs will be approached. Communications Your resolution plan must include a communication plan that has a clear overview of which stakeholders will be informed when and with what message.
Notes to the application form for authorisation to pursue the business of an insurer To qualify for authorisation, you must set up your company’s operating procedures in such a 13 way that they guarantee controlled and ethical business operations. This means that you must analyse the operational risks your company is exposed to and take measures to mitigate these risks. As part of our assessment of controlled business operations, we look at:
14 Please provide a description of your company’s general principles and evidence that your company has organised its operational management to the effect that it guarantees sound business operations on these points. A clear, balanced and adequate organisational structure Your company must have a clear, balanced, and adequate distribution of duties and authorities in place at all levels and for all units of the company. The reporting lines must be in tune with the organisational structure. The division of tasks and the reporting lines must be documented and communicated throughout the company to ensure that all levels of the company have full knowledge of their duties, authorities and responsibilities, their role in the organisation and the control process, and how they are held accountable. If we find any shortcomings or deficiencies, you must ensure that the organisational structure and the procedures and measures are adjusted to ensure that these are remedied. More specifically, the description of your company’s clear, balanced and adequate organisational structure must at least cover the following elements:
Notes to the application form for authorisation to pursue the business of an insurer The description can be part of the company’s procedures manual or be included in a separate 15 document. Please state in the application form where we can find the relevant information. If your company has one or more director-major shareholders (DMSs) Please indicate in the application form whether your company has one or more director-major shareholders (DMSs), or a comparable control structure. A structure of this kind warrants special attention to balanced corporate governance. In your application, we expect you to provide insight into the division of duties, responsibilities and powers aimed at balancing the influence of those directly involved in the company and its business, particularly its managing and supervisory directors and its capital providers. We must be able to establish that the company at all times has expert and balanced operational management with adequate checks and balances and appropriate incentives. In our interpretation of a control structure involving one or more DMSs, a DMS is a natural person who is both a major shareholder (even if indirectly) and a managing director. In the absence of adequate countervailing power (checks and balances), a DMS may exercise an unduly heavy influence on the company’s day-to-day management. DMSs may find themselves in a situation where they let their own interests as a shareholder prevail over the long-term interests of the company or its stakeholders. Apart from potential conflicts of interest, there is also a risk that a DMS identifies with the company to such an extent that he or she is unable to demonstrate and safeguard the objectivity and independence required in that capacity, for example in the event that the company faces critical problems. We judge the admissibility of a control structure involving one or more DMSs on a caseby-case basis. If your company has one or more DMSs, you must provide evidence in your application for authorisation that you have sufficiently mitigated the vulnerabilities attached to a control structure of this kind. This may include establishing a supervisory board or putting adequate arrangements in place to ensure that carefully considered decisions are taken in case of conflicting interests between the company and a DMS. An adequate, transparent and balanced segregation of duties The duties, powers and responsibilities of both individual staff and departments in your company must be distributed to contain the risk of errors and inappropriate use of assets or data. For instance, job descriptions must not include powers enabling one single person to enter into transactions or liabilities uncontrolled, to authorise, process and settle transactions, to have free access to assets, or to manipulate financial or other data. If adequate segregation of duties is difficult to achieve because you have a small number of staff, you must take alternative measures. One option is
to outsource activities to third parties to compensate for the lack of internal segregation of duties. You must clearly state that this is the case, however.
16 In the case of concurrent board membership, you must pay extra attention to the independent functioning of the supervisory board or body having a comparable mandate. Conflicts of interest must be avoided, as they may prevent your company’s interests from being adequately safeguarded. The description can be part of the company’s procedures manual or be included in a separate document. Please state in the application form where we can find the relevant information. An adequate system for the transfer of information To ensure an adequate communication system, the company must have well-operating internal communication channels, designed to ensure that all relevant information reaches the right staff members and functions at the right time. It is also important that the internal supervisory body, the management board and line management are informed promptly and receive reliable information on the company objectives and the relevant operational processes. Please indicate how this is ensured within your company. Prompt and complete records and administration You must record your company’s rights and obligations in a dedicated administrative system. Your company is responsible for ensuring that the turnover and the financial rights and obligations to be recorded in the accounts are accurate and complete. Your description must at any rate specify how your company intends to comply with the requirements in the following respects:
Notes to the application form for authorisation to pursue the business of an insurer Information systems (ICT) and security 17 Your company must have an information system in place that enables effective management of operational processes and risks, and that meets the company’s internal and external information requirements. Please provide a description of how this is ensured. The information system must be set up to ensure that transactions and entries in data files can always be retraced to authorised source files or data processing by authorised staff. Electronic data processing must be an integrated part of the company and electronic data must be available at all times. Consequently, companies using electronic data processing must take measures and implement procedures, including back-up copies and recovery measures, and a calamity plan that must be updated at regular intervals and tested for proper functioning. Please also provide a description of this. Your company must also have procedures and measures in place that safeguard the integrity of electronic data processing. And finally, segregation of duties in electronic data processing must be aligned with the organisational structure. The description can be part of the company’s procedures manual or be included in a separate document. Please state in the application form where we can find the relevant information. Documented policy outlines Your company must have documented policy outlines with respect to risk management, internal control, internal audit, compliance, the actuarial function and, if applicable, outsourcing. These policy outlines must be reviewed at least once every year, they must be approved in advance by the management, policymaking or supervisory body, and they must be adjusted in the event of a significant change of the system or area involved. The description can be part of the company’s procedures manual or be included in a separate document. Please state in the application form where we can find the relevant information. Measures ensuring continuity and regularity in the performance of insurance or reinsurance activities Please provide a short description of the measures you have taken to ensure continuity and regularity in the performance of your activities, including the development of emergency plans. You must demonstrate the use of appropriate and proportionate systems, resources and procedures.
18 Your company must formulate, implement and enforce a business continuity policy to ensure that, in the event that its systems and procedures are interrupted, critical data and business functions are protected and the insurance or reinsurance activities are continued, or – if this is impossible – that the affected data and business functions are promptly recovered and the insurance or reinsurance activities are resumed as soon as feasible. The description can be part of the company’s procedures manual or be included in a separate document. Please state in the application form where we can find the relevant information. Risk management Your company must describe its risk management and risk control, taking account of credit risk, market risk, interest rate risk, concentration risk, liquidity risk, operational risk, insurance risk, and the risks associated with the macroeconomic environment in which the company operates and with the phase of the economic cycle. In addition, you must have a clear perspective of the risks that your company is exposed to. The policy principles following from your risk perception must state how your company intends to manage its risk exposure. Your risk management policy must be recorded in the form of procedures and measures, which must be tuned to the nature, size, risk profile, and the complexity of the company’s activities, and include
Notes to the application form for authorisation to pursue the business of an insurer The risk management function’s duties, responsibilities and powers must be laid down in a 19 charter. Please submit a copy of this charter with your application. The description of your company’s first-line and second-line risk management and of the risk management key function must demonstrate that the company has organised its operational management to the effect that it guarantees sound business operations on this point and that, if applicable, it meets the Solvency II requirements in respect of its risk management function set-up. The description can be part of the company’s procedures manual or be included in a separate document. Please state in the application form where we can find the relevant information. Climate change risks Insurers may be vulnerable to the physical consequences of climate change (physical risks) as well as the transition to a climate-neutral economy (transition risks). Given the potential impact of climate-related risks on the balance sheet of insurers, DNB expects insurers to incorporate climate-related risks into their risk management, a.o. by mapping the influence of these risks on their risk profile. In the Good Practice ‘Integrating climate-related risks in the ORSA’ DNB explains how substance can be given to the integration of climate-related risks in the governance, the risk management and disclosure of insurers. In the context of a controlled and ethical business operation DNB expects insurers to consider and address climate-related risks already in the first stage of a license application. Internal control The effectiveness of the organisational structure and the procedures and measures in place must be tested independently in-house (at least once a year). By “independent” we mean independent of the line management and independent of the control measures integrated in the different operational processes. Independent internal control is an ongoing process that includes changing internal and external circumstances, new products and services, and support processes. Any shortcomings found must be adequately addressed. More specifically, in this section of the application form you must describe your company’s internal control framework, providing details of guidance, procedures and governance relating to operational management. The description can be part of the company’s procedures manual or be included in a separate document. Please state in the application form where we can find the relevant information.
20 Internal audit function
Your company must have an effective internal audit function. This function assesses whether the internal control system and other components of the organisation’s governance system are adequate and effective. The internal audit function is objective and operates independently from other operational units of the organisation. Its duties, responsibilities and powers must be laid down in a charter. The description must demonstrate that your company has adequately set up the third line in the ‘three lines of defence’ model. If your company outsources the internal audit function’s activities, it must have a dedicated policy in place (listing, for example, the criteria that the relevant audit firm must meet). The description can be part of the company’s procedures manual or be included in a separate document. Please state in the application form where we can find the relevant information. Actuarial function Note: this function must be put in place by all life insurers and by non-life insurers providing non-life insurance products with a term of more than four years. Your company must have an organisational unit that performs an independent and effective actuarial function. The organisational unit is responsible for coordinating and auditing the calculation of the technical provisions,and for informing the insurer’s day-to-day policymakers about the adequacy and reliability of this calculation. The actuarial function’s duties, responsibilities and powers must be laid down in a charter. If your company outsources the actuarial function’s activities, it must have a dedicated policy in place. The description can be part of the company’s procedures manual or be included in a separate document. Please state in the application form where we can find the relevant information. Compliance function Your company must have an organisational unit that performs an independent and effective compliance function. It is important to have an independent compliance function in place in order to supervise compliance with legislation and regulations and internal rules, requirements and procedures. Supervision of compliance with rules, requirements and procedures for instance includes assessing new legislation and verifying whether new products and procedures comply with rules and regulations. The actual shape of the compliance function depends on the nature and size of the insurance company. ‘Independent’ at least means that the compliance function is not influenced by commercial or other interests.
Notes to the application form for authorisation to pursue the business of an insurer Compliance duties must be recorded in a compliance charter, and the necessary activities must 21 be further detailed in an annual compliance plan. The compliance charter must at any rate include the following elements:
22 The description of the underlying policy, measures and procedures can be part of your company’s procedures manual or be included in a separate document. Please state in the application form where we can find the relevant information. Your company is permitted to outsource activities unless doing so hampers adequate compliance with the rules and regulations to which it is bound. This limitation applies only to outsourcing of important activities, i.e. activities that may seriously harm the company’s compliance with the requirements of its authorisation, its financial results, or the solidity or continuity of its services and activities if they are performed incompletely or inadequately. There are also activities that you are not permitted to outsource, i.e. the duties and activities of staff members determining the day-to-day policy, including policy adoption and accountability for the policies pursued. In our assessment, we are extra critical of the outsourcing of some specific activities. The internal control function must have professional expertise, detailed knowledge of the structure of the organisation and must be available at all times. Outsourcing this function to a company that has no formal or actual control structure relationship with your company will consequently harm embedding of the quality of internal control. In some cases it may also be difficult to outsource the internal audit function. If the internal audit function is outsourced, the audit must be performed by that third party under your company’s management and supervision. Your company must at all times be able to render account of the structure and effectiveness of its operational management. It is essential to explicitly consider the risk of conflicts of interest when selecting the third party to perform the audit and the staff member within your company who will be responsible for managing and supervising the audit. Your company must pursue an adequate policy and have procedures and measures in place for the processes it outsources on a permanent basis, and it must have adequate procedures and measures and sufficient expertise and information available to be able to assess the performance of outsourced activities. Your company must always enter into written agreements with the third parties to which it outsources activities on a permanent basis. An adequate outsourcing policy requires your company to take into consideration the impact of outsourcing on the soundness of its business operations. This may include implementing procedures to be followed and measures to be taken to remedy deficient services by the third party, and to avert calamities. Insurance companies that outsource activities on a permanent basis must analyse the risks associated with outsourcing. Risk analysis is an essential element for assessing whether or not activities are suitable for outsourcing.
Notes to the application form for authorisation to pursue the business of an insurer To assess outsourced activities adequately, your company must have sufficient information at 23 its disposal about the company to which it outsources these activities. Your company must also have sufficient in-house expertise to properly assess this information. Please enclose copies of the outsourcing agreements with third parties your company has entered into. The outsourcing agreement must at the very minimum provide for the following:
24 The description of your company’s remuneration policy must answer the following four questions:
Notes to the application form for authorisation to pursue the business of an insurer Adequate implementation of processes and procedures largely depends on the level of 25 knowledge and experience of staff. This is why knowledge of and experience with risk management (including money laundering and terrorist financing) are important preconditions for developing an adequate control framework. Staff training courses are important instruments to communicate and embed knowledge of legislation including the AntiMoney Laundering and Anti-Terrorist Financing Act (Wet ter voorkoming van witwassen en financieren van terrorisme – Wwft) and the Sanctions Act 1977 (Sanctiewet 1977 – Sw), and of integrity policy principles and procedures. Your company must provide training courses to familiarise staff members with the provisions of the Wwft and the Sw, and to enable them to perform customer due diligence fully and correctly and recognise unusual transactions. These training courses must cover money laundering and terrorist financing techniques, methods and trends, the international environment and standards, and new developments in this area. To enable staff to keep abreast of new developments and to improve awareness in the long term, rather than as one-off sessions training courses must preferably be provided at regular intervals and at different levels. The compliance function is also advised to attend additional training courses to keep up to date on new developments in national and international legislation and regulations, and money laundering and terrorist financing risks. The description can be part of the company’s procedures manual or be included in a separate document. Please state in the application form where we can find the relevant information.
26 The integrity of your company is one of the pillars of trust and, hence, a precondition for its proper functioning. It is essential that you prevent your company from getting involved in unlawful or socially unacceptable acts. Your company must pursue an adequate policy to ensure ethical operational management. The integrity policy must be detailed and implemented in clear and readily accessible procedures and measures, contained in a procedures manual. This procedures manual must also include (a reference to) the procedures required pursuant to the Decree on Prudential Rules for Financial Undertakings (Besluit prudentiële regels – Bpr). The regulatory framework for adequate integrity policies is risk-based, meaning that your company must implement all measures that the law requires. The intensity with which you do this, however, depends on the risks that your company is exposed to. These risks may for instance be related to the nature and background of customers, the type of product or service provided, the combination of customer and product, and how customer contact takes place (delivery channels). You must assess the risks that your company is exposed to and formulate sufficient mitigating measures. The frameworks of the Wft (ethical operational management) and the Wwft assume that a company allocates its customers to risk categories, based on the nature and size of the risk exposure. The risk categories vary between high and low and allocation must be based on objective and recognisable indicators. The higher the risks, the more effort the company must make to mitigate them. Obviously, you must also define which risks are unacceptable. Your company’s integrity policy must at any rate address the following points:
Notes to the application form for authorisation to pursue the business of an insurer Systematic integrity risk analysis (SIRA) 27 Your company’s integrity policy and its implementation starts with identifying your integrity risk exposure. Such a systematic integrity risk analysis (SIRA) is a precondition for ensuring ethical operational management. Please enclose the SIRA with the application form. As risks are always in a state of flux, the SIRA is bound to a sell-by date, i.e. a date by which the analysis must be updated. The SIRA to be considered together with the authorisation application must at any rate be up to date. It must include instructions stating in which situations business units must be reviewed, when an additional review is required, or when a review must be brought forward. The analysis must be verifiable, i.e. recorded in a separate document, and the integrity policy must be based on the outcome of the SIRA, and you must use a comprehensible quantification method. The SIRA is based on gross (inherent) and net (residual) risks and analyses the likelihood and impact of these risks. The size of net risks must be clear and the measures and procedures must have a plausible effect. The SIRA must at any rate include an analysis of the following risks: conflicts of interest, money laundering, terrorist financing, breach of sanctions legislation, and internet fraud and scams. Your company’s SIRA must also include an analysis of risks associated with your customers’ products and services and you must include this in the customer profiles that you intend to use. In this context, you must pay extra attention to online customer acceptance (applicable only to life insurers). You must show that this always carries high risk and your analysis must show how your company intends to offset this elevated risk. Your procedures and measures must be verifiably connected with the specific risks identified in the SIRA. The control measures set out in the SIRA must be in line with the nature, size, complexity and risk profile of your company’s operations. Please provide a description of your procedures and measures. The description can be part of the company’s procedures manual or be included in a separate document. Please state in the application form where we can find the relevant information. You will find more information on the SIRA in our user manual for producing an adequate SIRA:
‘Integrity risk analysis: more where necessary, less where possible’:
http://www.toezicht.dnb.nl/en/binaries/51-234068.pdf Preventing conflicts of business and private interests Conflicts of interest or the semblance thereof may negatively affect your company as well as its customers. Your company must therefore have procedures and measures in place to prevent conflicts between its own business interests and the private interests of
28 ▪ policymakers
Notes to the application form for authorisation to pursue the business of an insurer Reliability of staff in integrity-sensitive positions 29 In addition to the positions of managing director or member of the supervisory body, there are other positions that may influence ethical business operations. These are known as integritysensitive positions. Integrity-sensitive positions include:
30 Procedures and measures must document how and by whom customer due diligence is to be performed. The relevant staff must be made aware of the internal and statutory requirements imposed on customer due diligence. Customer acceptance must be approved by authorised staff or management based on the four-eyes principle. Business relationships with high-risk customers require the explicit approval of senior management. Your company must also record when enhanced customer due diligence is required and which measures it intends to take in such cases, and document whether customers, prospective customers or UBOs are politically exposed persons (PEPs). You must divide customers into risk categories, stating your reasons for allocating customers, products or services to specific risk categories. This classification must be adequate and in line with the SIRA mentioned above. Acceptance is subject to screening against sanctions lists, PEP lists and any other relevant lists. You must record positive matches in the relevant customer file and take action where needed. You must also document these matches in the customer’s risk profile and report them to us. And finally, an exit policy must be put in place for customers who cannot or do not want to be identified, or whose identity cannot be verified in the prescribed manner. When such cases occur, they must be verifiably followed up. The description of the customer due diligence policy can be part of the company’s procedures manual or be included in a separate document. Please state in the application form where we can find the relevant information. See our Guidance on the Wwft and the Sw for more information on this topic. Sanctions Act Your procedures manual must include your policy and procedures on sanctions legislation. These procedures must guarantee the existence of a comprehensive and up-to-date inventory of services offered, broken down by countries, natural persons, legal entities and groups governed by sanctions legislation. You must also have a separate procedure in place for the receipt and internal distribution of sanctions lists (at any rate with respect to the Dutch sanctions lists and the EU regulations). These procedures and measures must ensure that you regularly check your customer base for matches with the entities targeted by sanctions legislation. The procedures must provide for risk-based monitoring of domestic and international services. Your procedures and measures must take account of the standards and objectives of the different sanctions regulations (sanctions measures against persons or entities and against countries).
Notes to the application form for authorisation to pursue the business of an insurer The procedures and measures must be structured so as to enable your company, if a match is 31 detected, to freeze financial assets or prevent financial resources or services from being made available to sanctioned persons or entities. The company must have adequate measures in place to guarantee that potential matches are promptly reported to the responsible central person or department and that confirmed matches are reported to DNB. Note: your Sw procedures must also include relationships with other customers, e.g. sublicence holders, authorised representatives, and payments to affiliated companies. See our Guidance on the Wwft and the Sw for more information on this topic. http://www.toezicht.dnb.nl/en/binaries/51-212353.pdf. Transaction monitoring and reporting of unusual transactions This section applies exclusively to life insurers not operating as funeral expenses and benefits in kind insurer (Section 1(a)(5) of the Wwft). Your company must have procedures and processes in place to monitor customers’ accounts, activities and/or transactions so as to gain and retain insight into the nature and background of customers and their financial behaviour, and to detect non-standard transaction patterns, including unusual transactions and transactions that by their nature entail increased risk of money laundering or terrorist financing. You must have procedures and processes in place stipulating how transactions are monitored and how to act if transactions are made that may qualify as unusual, and you must make motivated and logical choices between electronic monitoring and manual monitoring. If you have large numbers of transactions, electronic monitoring will be the obvious choice, but this stops at detecting possible unusual transactions. Suspected unusual transactions are not performed before they have been manually verified and, where necessary, you have contacted the party involved. Your procedural descriptions must state which members of staff are authorised to perform manual checks, and which cases require the involvement of the compliance officer. You must have policies and procedures in place to report detected unusual transactions to FIU-Netherlands without delay. And your company must notify all relevant business units of the policies, procedures and measures relating to the subjects mentioned above. Your company is also responsible for
32 ▪ implementing the policies, the procedures and the measures ensuing from them
Notes to the application form for authorisation to pursue the business of an insurer Suitable policymakers 33 The policymakers³ in your company must be suitable to occupy this position. You must therefore take care to nominate individuals whom you expect to pass DNB’s suitability screening. When assessing suitability, we determine whether a nominee displays relevant and appropriate knowledge, skills and professional behaviour to perform the job, and establishes this based on their education, work experience and competences. A suitability screening is linked to position, we take account of
34 Integrity of policymakers and co-policymakers The integrity of the policymakers and co-policymakers in your company (managing directors and supervisory directors or, where applicable, members of the supervisory body) must be beyond any doubt. This requirement also applies to the individuals that have a say in your company policies. Individuals holding direct or indirect qualifying shareholdings in the company are classified as co-policymakers. Owners of a qualifying holding are natural persons or legal entities that have a direct or indirect shareholding interest or control in the company of 10% or more. Persons who are able to exercise actual influence on the company’s day-to-day management are also designated as co-policymakers. DNB verifies whether the propriety of the nominee is beyond doubt. Nominees’ intentions, actions and antecedents must not stand in the way of performing their jobs. In particular, we review criminal, financial, supervisory, tax and administrative law antecedents and other relevant information. In principle, integrity screening is a one-time procedure. Nominees who have passed the screening assessment will not require rescreening. Our decision will stand unless a change in the relevant facts or circumstances provides reasonable grounds for reconsidering a previous integrity screening. Integrity screening only includes the integrity of the relevant person. This means that – unlike in initial suitability screenings – our decision does not depend on circumstances such as the composition of the management board, the type of company that the proposed appointment pertains to or the specific position the nominee will hold. We perform integrity assessments based on information provided by the company and the results of our own screening. For more information see our Open Book on Supervision pages on initial propriety assessments: http://www.toezicht.dnb.nl/en/4/2/16/51-229355.jsp
Notes to the application form for authorisation to pursue the business of an insurer 35 7 Two day-to-day policymakers working from the Netherlands and internal supervisory body Two day-to-day policymakers working from the Netherlands The day-to-day management of your company must be in the hands of at least two natural persons. These persons must perform all activities relating to determining the day-to-day policy from the Netherlands, at any rate for part of the time. The purpose of this requirement is to safeguard the continuity and quality of the company’s business operations and services. The continuity of the day-to-day decision-making at the highest level of an insurance company is safeguarded by having a day-to-day management consisting of at least two natural persons. This reduces the risk of the company being temporarily or permanently out of control. The dayto-day decision-making is not jeopardised in the event of the temporary absence of one of the day-to-day policymakers. It is assumed here that the members of the day-to-day management have sufficient basic expertise to take over the day-to-day decision-making from each other. From the date the authorisation is issued, the company must meet the two-headed day-today management requirement on an ongoing basis, which means that if one or more day-today policymakers are absent or unable to act, it must promptly arrange for such replacement to ensure that at least two are available. Moreover, the day-to-day policymakers must be able to assess each other’s decisions and adjust these where necessary. Internal control requires a minimum of two individuals to provide adequate checks and balances. The managing directors of the insurance company are usually classified as day-to-day policymakers, as they are responsible for the policies and decisions underlying the company’s day-to-day operational management. However, the concept of ‘policymaker’ also covers individuals who are not managing directors but whose influence extends to the company’s day-to-day management. The law prescribes two-headed day-to-day management as a minimum in order to safeguard the attainment of several statutory objectives. When assessing your application, we check whether your company meets these objectives. To pre-empt corporate tunnel vision and unbalanced policy, it is important to have at least two day-to-day policymakers who are able to prepare decisions from diverse relevant angles and who can check and balance each other where necessary. To safeguard an adequate governance structure, the responsibilities at the highest level (and of the appointed management board if applicable) and the manner in which good governance is set up must be clear and unambiguous. It is important to lay down in writing the names and details of the designated day-to-day policymakers. This makes it clear to everyone who are responsible for the policies and decisions underlying the insurance company’s day-to-day operational management.
36 Internal supervisory body
Insurance companies must have an internal supervisory body that functions independently. The body functions independently as a whole and its individual members function independently from each other and from other parties including the management board, the shareholder, the works council and the employees. Its duty is to carefully represent the eligible interests of any particular category of stakeholders in the interest of the insurance company. Insurers whose legal form is public limited company or European company must have a supervisory board or body with a comparable remit. Insurers whose legal form is mutual insurance association must also adequately provide for an internal supervisory function. All insurers applying for authorisation must demonstrate to us that they have set up an independent internal supervisory body and describe how its independent functioning is ensured. The internal supervisory body of a public limited company or European company must consist of at least three natural persons. Consult our Open Book on Supervision pages for more information about the independent functioning of the supervisory board or comparable body. http://www.toezicht.dnb.nl/en/3/51-226002.jsp
Notes to the application form for authorisation to pursue the business of an insurer 37 8 Transparent governance structure Your company must have a transparent and balanced governance structure. In short, this means that your company’s formal governance structure must be the same as its actual governance structure. The governance structure in place must not constitute an impediment to adequate supervision of the company. This occurs if, as a result of the governance structure, the company is affiliated with individuals who are subject to the laws of non-EU states. The aim of this statutory provision is to prevent the organisational structure within which the activities of the governance structure are performed from deviating sharply from the legal structure in which the activities are embedded. An organisational structure of this kind makes it impossible for us to adequately supervise your company. This includes identifying your company’s risk exposure, or assessing whether its operational management is sound and prudent. We must be able to infer from your application and the enclosed annexes that your company meets this requirement.
38 Your company must have own funds for covering the minimum capital requirement. The respective absolute minimum amounts of own funds are listed below:
Notes to the application form for authorisation to pursue the business of an insurer You must also submit a calculation of your company’s eligible own funds for covering 39 the minimum capital requirement, providing documentary evidence for their existence. The relevant template Own funds can be found on our website using the following link:
http://www.toezicht.dnb.nl/2/50-235104.jsp
You must demonstrate to us that your company meets the minimum own funds requirement. In support of the specification of your company’s own funds, you may submit the following documents:
40
10 Solvency
Solvency requirements for a Solvency II authorisation The minimum required solvency is expressed in the solvency capital requirement (SCR). The method to be used for calculating the SCR is determined based on the sectors in which your company is active and the risks it is exposed to. The minimum amount of SCR is calculated using template S25.01, which is also included in Commission Implementing Regulation (EU) 2015/2452, and further detailed in templates S26.01 and S27.01, which can be found on the EIOPA website using the following link: http://www.toezicht.dnb.nl/en/2/51-224687.jsp Please complete the Solvency II templates for calculating the SCR and eligible own funds (S23.01) for covering the SCR. You must also provide documentary evidence for the existence of these items. Note: a number of items are not included, or not included in full, in the calculation of eligible own funds for covering the SCR. We would ask you to pay close attention to this, as we find these items are often overlooked. Intangible assets for instance. These assets are regarded as “soft” assets that offer hardly any buffer against losses in times of stress. Other examples of items not included in the calculation of eligible own funds include deferred tax assets based on future profitability projections. You must obtain our prior permission to use ancillary own funds in determining the actual own funds. Visit http://obtinternlive.dnb.nl/en/2/51-224687.jsp for more information on this point. Solvency requirements for a Solvency II Basic authorisation (applicable to insurers with limited risk) The required solvency is expressed in the solvency capital requirement (SCR). The method to be used for calculating the SCR is determined based on the sectors in which your company is active and the risks it is exposed to. The minimum amount of SCR is calculated using the SCR templates that can be found on our website using the following link:
http://www.toezicht.dnb.nl/2/50-235104.jsp
Information for health insurers is available http://www.toezicht.dnb.nl/en/3/51-233291.jsp Please complete the Solvency II Basic templates for calculating the SCR and eligible own funds to cover the SCR. You must also provide documentary evidence for the existence of these items.
Notes to the application form for authorisation to pursue the business of an insurer Note: a number of items are not included, or not included in full, in the calculation of eligible 41 own funds for covering the SCR. We would ask you to pay close attention to this, as we find these items are often overlooked. Intangible assets for instance. These assets are regarded as “soft” assets that offer hardly any buffer against losses in times of stress. Other examples of items not included in the calculation of eligible own funds include deferred tax assets based on future profitability projections. You must obtain our prior permission to use ancillary own funds in determining the actual own funds. Visit http://obtinternlive.dnb.nl/en/2/51-224687.jsp for more information on this point. Note: The calculation of the SCR may yield an outcome below the minimum capital requirement or the absolute minimum own funds. In that case, the highest of these three amounts constitutes the applicable solvency requirement.
42 Based on your company’s strategy, please provide a three-year projection of your company’s financial position and estimated results, including a full profit and loss account and a balance sheet. You must detail at least the following four points:
Notes to the application form for authorisation to pursue the business of an insurer Your company must describe its proposed reinsurance policy, addressing at any rate the 43 following two elements:
Life, non-life and funeral expenses and benefits in kind insurer We expect you to describe the nature of the reinsurance agreements and specify the reinsurers with which these agreements are to be concluded. Also indicate the risks the company is still exposed to, the amounts involved, as well as the maximum amounts against which insurance policies can be taken out under the reinsurance agreement. Reinsurers Please provide an explanation of your reinsurance policy, more specifically with respect to retrocession, i.e. a reinsurer transferring part of the risks it has insured to another reinsurer on payment of a premium. 12 Reinsurance policy
44 The insurance company’s financial year must coincide with the calendar year. If your company provides evidence that it cannot reasonably be expected to meet this requirement, DNB may, at its request, grant dispensation for a fixed term or ongoing. In that case, you must demonstrate that your company will use alternative means to attain the objectives that this requirement seeks to protect. 13 Financial year
De Nederlandsche Bank N.V.
PO Box 98, 1000 AB Amsterdam, the Netherlands
+31 (0)20 524 91 11 dnb.nl
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Source: De Nederlandsche Bank — original document · Summary generated with machine assistance and reviewed before publication; the authoritative text is the regulator's original document. How RegAlert works