Jean-Marc Gollier, Senior Counsel - Marie Waucquez, Associate
The draft act on the status and supervision of insurance and reinsurance undertakings was submitted to the Chamber of Representatives on 13 January 2016 and adopted on 18 February 2016. It implements Directive 2009/138/EC of 25 November 2009 on the taking-up and pursuit of the business of Insurance and Reinsurance, as amended, (hereinafter "Solvency II") into Belgian law. The act simplifies the supervisory regime for the transfer of insurance portfolios between insurance undertakings within the European Union: the authorisation by the competent authority of the home Member State of the transferring undertaking depends on a certificate from the authorities of the Member State of the undertaking accepting the transfer and on agreement, within a period of three months, by the authorities of the Member States where the contracts were concluded.
Solvency II repeals and replaces various directives that harmonised the supervisory regime for insurance undertakings. This directive had to be implemented by 1 January 2016 at the latest.
Some rules of Solvency II were implemented into Belgian law in the act of 4 April 2014 on insurance (consumer protection) and in an act of 25 April 2015 containing various provisions (governance of insurance undertakings).
In order to complete the implementation of Solvency II, a draft act on the status and supervision of insurance and reinsurance undertakings was submitted to the Chamber of Representatives on 13 January 2016. This draft act was adopted by the Chamber on 18 February 2016. The new act will enter into force on the day of its publication in the Official Gazette.
New system of authorisation of transfer of portfolio – Solvency II
Article 39 of Solvency II replaces the regime of Article 14 of Directive 2002/83/EC of 5 November 2002 concerning life assurance.
It states that an insurance undertaking is allowed to transfer a portfolio of contracts to an insurance undertaking established in a Member State after it has received the authorisation of the supervisory authority of its home Member State. Such authorisation will be granted if (i) the competent authority of the home Member State of the accepting undertaking certifies that this undertaking possesses the necessary eligible own funds to cover the Solvency Capital Requirement after taking the transfer into account, and (ii) the competent authorities of the Member States where the contracts were concluded have consented, or did not react within a period of three months after receiving a request for consultation.
This regime is faithfully implemented in articles 102 and 104 of the new act.
New system of authorisation of transfer of portfolio – the new act
Article 102, first paragraph, 3° of the act provides that "the divestment of all or part of the activities, including all or part of a portfolio entailing the divestment of the rights and obligations deriving from insurance or reinsurance contracts" is subject to prior authorisation by the National Bank of Belgium (as the competent authority for Belgium). Article 104, §1, 1° provides that "if the accepting undertaking falls under the laws of another Member State", the Bank will authorise the transfer only if "the supervisory authorities of that State have certified that this undertaking possesses, after taking into account the transfer, the necessary eligible own funds to cover the Solvency Capital Requirement that is required under the law governing this undertaking". Those rules match the previous regime.
Article 104, §1, 2° of the act provides that "when the authorisation is requested by an insurance undertaking, as transferring undertaking, the divestment of all or part of a portfolio of insurance contracts concluded through a branch located in another Member State, or through the regime of freedom to provide services, further requires the prior approval of the supervisory authorities of the hosting Member States involved".
The latter is an innovation compared with the previous regime: it is no longer the agreement of the Member State of the commitment (Article 14(3) of Directive 2002/83/EC), namely the Member State where the policy holder has his/her habitual residence or is established (Article 1(1)(g) of directive 2002/83/EC) that has to be obtained, but the agreement of the competent authorities of the Member State where the contracts were concluded.
This innovation represents a simplification of the mechanism applicable to the transfer of an insurance portfolio. If all contracts were concluded in Belgium, the approval of the Member State where the policy holder has his/her habitual residence or is established at the time of the transfer is no longer required.
Validity of a transfer of portfolio – Solvency II
Article 39(6) first paragraph of Solvency II states that the authorisation of a transfer of insurance portfolio "shall be published either prior to or following authorisation, as laid down by the national law of the home Member State, of the Member State in which the risk is situated, or of the Member State of the commitment".
Article 39(6) second paragraph of Solvency II states that "Such transfers shall automatically be valid against policy holders, the insured persons and any other person having rights or obligations arising out of the contracts transferred."
These principles have been implemented in articles 216 and 567, § 2 of the act. Article 567, § 2 addresses the publication in Belgium of the decisions of the competent authorities of another Member State in connection with contracts where Belgium is the Member State of commitment or the State where the risk is located.
Validity of a transfer of portfolio – the new law
Article 106 provides that "the Bank shall publish in the Official Gazette an extract of any decision of authorisation (…) of a transfer of rights and obligations deriving from insurance or reinsurance contracts".
Article 106 further states that "every transfer of all or part of the rights and obligations resulting from those transactions is valid against third parties, inter alia policy holders, insured parties and beneficiaries, as of the publication in the Official Gazette of the authorisation of the Bank".
Article 106 specifies that this validity is "without prejudice to articles 17 and 18 of the Insurance Act". Under article 17, any transfer of insurance contracts relating to risks or commitments located in Belgium and authorised by the competent authority is valid against the above-mentioned persons, as from the date of its publication in the Official Gazette. Article 18 allows any policy holder to terminate the contract within three months following such publication.
The insurance undertaking accepting the transfer of the portfolio must also inform the policy holders of the transfer and must provide the FSMA with a copy of such communication (article 36 of the act of 4 April 2014).
Contact Eubelius : Jean-Marc Gollier T:+32 (0)2 543 31 37 email@example.com