Luxembourg insurance and reinsurance companies
22 January 2021
The CAA extends the restrictions on dividend payments and other distributions.
On 20 January 2021, the Luxembourg insurance sector supervisory authority (Commissariat aux Assurances, the CAA) published circular letter 21/1 relating to the recommendation of the European Systemic Risk Board of 15 December 2020 on the restrictions applicable to distributions during the COVID-19 pandemic (Circular 21/1), which extends until 30 September 2021 the restrictions applicable to Luxembourg insurance and reinsurance undertakings (the Undertakings) on making dividend payments and other distributions (the Distributions), existing since 1 August 2020 pursuant to circular letter 20/15 concerning the recommendation of the European Systemic Risk Board of 27 May 2020 on the restrictions applicable to distributions during the COVID-19 pandemic (Circular 20/15).
As provided by Circular 20/15 and Circular 21/1, Undertakings shall not proceed with Distributions, unless extreme care has been taken in deciding on such Distributions and such Distributions would not result in a violation of the approved risk tolerance limits relating to the Undertaking’s “own risk and solvency assessment” (the Exception).
What is new in Circular 21/1 is that the CAA provided procedures which should be followed if an Undertaking contemplates to proceed with the Distributions:
- in case a Distribution is covered by the Exception, the Undertaking would need to notify the CAA about the contemplated Distribution at least 15 days in advance, providing the CAA with documents listed in Circular 21/1, and
- in case a Distribution is not covered by the Exception, the Undertaking would need to request from the CAA a derogation relating to the contemplated Distribution at least 30 days in advance, providing the CAA with documents listed in Circular 21/1 and explanation of the rationale for such Distribution.