Insurance, business continuity and anti-money laundering
New rules and guidelines have come into force in Belgium relating to (1) the Solvency II Directive, (2) business continuity of regulated businesses and (3) anti-money laundering for financial leasing companies.
1. Belgian transposition of Solvency II
The Law of 13 March 2016 on the status and the supervision of insurance and re-insurance undertakings (the Solvency II Law) implements the European Solvency II Directive 2009/138 of 25 November 2009, as last amended in April 2014 (the Solvency II Directive) into Belgian law.
The Solvency II Law replaces the existing prudential and supervision regime and came into force on 13 March. There are some transition provisions, for example in relation to licences and exemptions granted under the former legislation.
The Solvency II Directive is a maximum harmonisation directive, containing very limited options for Member State discretion. In the governance part of the new rules, there are the following Belgian-specific elements:
The Belgian legislator wanted to align the licensing and organisational requirements under the new law as much as possible with those of other regulated financial firms, in particular credit institutions. For example, the Solvency II Law includes the obligation to create a management committee within the board of directors, in exactly the same way as does the Banking Supervision Law of 25 April 2014 applying to credit institutions. The National Bank of Belgium, the prudential supervisor, may grant a waiver taking into account the reduced size or risk profile of the institution. The risk management function is a full-time activity which must in principle be taken up by a member of the management committee.
Strategic decisions by insurance companies require prior approval by the National Bank of Belgium.
If the National Bank of Belgium considers that there is a risk that the financial position of an insurance or re-insurance undertaking may deteriorate significantly, it may ask the institution to prepare a recovery plan. This is not part of the Solvency II Directive. It is based on an existing requirement for credit institutions introduced by the Banking Recovery and Resolution Directive.
For smaller insurance undertakings, there is a less onerous model of prudential requirements and supervision.
2. New FSMA guidelines for business continuity management
On 1 March 2016, the FSMA updated its guidelines for sound management practices for business continuity of regulated businesses in a new circular letter FSMA_2016_03 (the FSMA Circular Letter).
The FSMA Circular Letter is addressed to Belgian investment firms, Belgian management companies of UCITS and AIFMs, and to Belgian branches of such non-EU institutions. It contains practical criteria against which FSMA will check a business continuity policy.
The guidelines are almost identical to a 2005 CBFA circular, except that, for each step of a Business Continuity Plan, the institution must define and determine a Recovery Time Objective (RTO) and Recovery Point Objective (RPO).
The FSMA Circular Letter does not apply to financial businesses which are under prudential supervision of the National Bank of Belgium (NBB), such as, for example, credit institutions or insurance companies. These institutions are still subject to the 2005 CBFA circular.
3. Anti-money laundering rules for financial leasing companies
There are new anti-money laundering rules for financial leasing companies.
The Belgian Official Gazette of 23 December 2015 contains a Royal Decree of 23 October 2015 approving a Regulation adopted in execution of the Anti-money Laundering Law of 11 January 1993 (the AML Law), in relation to leasing companies (the Regulation).
The new rules complement existing Belgian AML law. The Regulation applies to undertakings specialising in movable and immovable property leasing. As from 2 January 2016 these undertakings are subject to detailed and practical anti-money laundering measures in relation to the identification of clients, agents and beneficial owners, the application of a client acceptance policy, the notification of atypical transactions or facts to the CFI-CTIF (ie the Belgian Financial Intelligence Unit) and the appointment of an MLRO (Money-Laundering Reporting Officer).
During a six-month transition period (ie until 2 July 2016), leasing undertakings must identify existing clients, install the client acceptance and monitoring process, train their staff and appoint the MLRO.