This draft legislation proposes important new rules for reinsurance companies and fills certain gaps currently existing in the law.
1. Current legislation
The legislation on insurance and reinsurance companies is currently split into two parts: the Act of 9 July 1975 on the control of insurance companies (the Insurance Act) and the Act of 16 February 2009 on reinsurance companies (the Reinsurance Act). The new draft Act on the status and supervision of insurance or reinsurance companies (the Draft Act) combines both into one single Act.
2. Objective of the Draft Act
The main purpose of the Draft Act is to transpose prudential provisions of the Directive 2009/138/EG of the European Parliament and the Council of 25 November 2009 on the taking-up and pursuit of the business of insurance- and reinsurance (Solvency II) into national law.The Directive introduces a new, harmonised regulatory system for the insurance sector. The Draft Act also brings some other major regulatory changes. With the entering into force of this Draft Act, insurance and reinsurance activities will be licensed separately and some gaps in the current legislation will be filled.
3. Important changes to licencing requirements for reinsurance activities
Within the current Belgian legislation, a company can request a licence for insurance activities or for reinsurance activities only. However companies that have a licence as an insurance company automatically also have one for carrying out reinsurance services. Once the draft legislation will become effective, these activities will be separated and a company wanting to carry out both, will have to acquire a licence for each activity separately. A transitional system has been provided for insurance companies, under the current legislation, also carrying out reinsurance services without having the specific licence to do so.
Another point of attention is the difference made by the current system between insurance and reinsurance activities on the requirement to obtain a licence for companies governed by the law of a non-EEA countries (third countries). As now defined by the law, all companies (Belgian, EEA and third counties) have to be licensed before they can offer insurance services. The same applies to reinsurance companies providing reinsurance services only, except for those from a third country that wish to provide services on the Belgian market without setting up a Belgian Branch.
This is due to the fact that article 69 of the Reinsurance Act provides for the possibility to issue Royal Decrees to further implement the rules applicable to such third country reinsurance companies providing services in Belgium on a cross-border basis, but no royal decree has been adopted to do so. This creates the situation where a reinsurance company from a third country, providing services on the Belgian market without setting up a branch in Belgium, only has to notify the NBB and is not required to obtain a licence. This puts the latter in a more advantageous position compared to all other reinsurance companies, including Belgian ones.
This issue is resolved in the Draft Act. However, a distinction is made between reinsurance companies from third countries whose solvency treatment is considered to be equal to the one provided by the Solvency II Directive for EEA-countries and reinsurance companies from third countries for which this is not the case.
The first category (solvency regime considered to be equal) may offer reinsurance services on the Belgian market as long as it complies with the rules set forth for reinsurance companies governed by the law of EEA countries. Hence this category may offer reinsurance services for which it has obtained a license in the home country.
The second category (solvency regime not considered to be equal) may equally offer reinsurance services on the Belgian market but has to be in line with the provisions of Chapter I of Title II of the Draft Act (insurance companies from third countries), which includes the obligation to obtain a licence from the NBB.
In a nutshell, we can state that the situation for reinsurance companies from third countries is clearer now. They can offer reinsurance services on the Belgian market (regardless of whether they want to do so with or without setting up a Belgian branch) but will need a license from the NBB if the solvency treatment from that third county is not considered to be equal to the one provided by the Solvency II Directive.