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Insurers are subject to a comprehensive regulatory framework and must comply with a variety of market conduct rules that vary according to the type of insurer, the products offered and the customers targeted. In addition, certain transactions, arrangements and actions require regulatory approval or compliance with mandatory rules and regulations.

It is not always clear whether a product qualifies as an insurance. In particular, warranty products and ongoing service contracts relating to maintenance and repair may trigger discussion in this regard. DNB has indicated that if a product is sold with a warranty period that appears to exceed the expected lifetime of the product, this may qualify as an insurance. If certain criteria are met, such an offer would trigger the licensing requirement.

Licence requirement for Dutch insurers
An insurer established in the Netherlands must obtain a licence from the Dutch Central Bank (DNB). In the licence application process, DNB assesses the governance, financial soundness and organisation of the insurer. The members of the board of directors and the supervisory board are screened for suitability and integrity, and second tier directors are also screened. The direct and indirect shareholders (10% and more) must submit a declaration of no objection.

Licence requirement for non-Dutch insurers
EU insurers can, in principle, rely on a European passport to offer insurance products in the Netherlands. In this case, no Dutch licence is required, but ongoing Dutch regulatory requirements may still apply. Non-EU insurers are generally required to establish a local EU subsidiary in order to access the Dutch market. Non-EU (re)insurers can apply to DNB for a notification to offer reinsurance products in the Netherlands on a cross-border basis.

Solvency II - Prudential framework for insurers
Solvency II is the regulatory framework for insurance and reinsurance supervision in the European Union. As implemented in the Dutch regulatory framework, it covers issues such as governance, regulatory capital requirements (SCR), own risk and solvency assessment (ORSA) and transparency. Solvency II also determines the application of group supervision. The Solvency II framework is comprehensive and includes a variety of European Insurance and Occupational Pensions Authority (EIOPA) guidelines and recommendations. Certain small insurance companies are exempt from the Solvency II framework and may comply with the Solvency II Basic regime. This exemption is available if certain specific size criteria are met. Some specific Dutch prudential rules apply in addition to the Solvency II framework. For example, certain acts of an insurer require a declaration of no objection.

Capital instruments
Solvency II imposes conditions on capital instruments in order for the related capital injection to qualify as regulatory capital. Both Tier 1 instruments, such as share capital, and Tier 2 and Tier 3 instruments, such as subordinated loans or subordinated notes issued by the insurance company or group must meet specific criteria. Insurance companies are recommended to submit the proposed issue of capital instruments to DNB in order to assess their compatibility with the regulatory capital requirements.

Insurance portfolio transactions
An insurer wishing to transfer an insurance portfolio to another insurer may do so with the approval of DNB. The Dutch Financial Supervision Act contains a specific procedure, which includes the information to be provided to DNB and the publication of the transfer in the Dutch Government Gazette and newspapers. With the approval of DNB, no individual consent of the policy holders is required to complete the transfer of the insurance policies. For life and non-life insurers, a tailored portfolio transfer regime applies. We can assist you with the approval process, for both the divestment and purchase of a portfolio.

Acquisition of a pension portfolio
A life insurer may acquire a pension portfolio from a Dutch pension fund. Such a collective value transfer requires a different approval through a tailored procedure under Dutch pension law (see here for more information on pension funds and the Dutch pension reforms).

Reinsurance contracts
Reinsurance contracts can be an effective measure for insurers to manage and mitigate risk. A well-structured reinsurance contract can help protect policyholders and other stakeholders of the insurer. In order to be considered an effective risk mitigation technique and to allow for SCR relief, reinsurance arrangements and the internal governance of the insurance undertaking must comply with the relevant requirements of Solvency II and its Delegated Regulation.

Asset-based reinsurance contracts
Some reinsurance contracts involve the transfer of risk but as well as the transfer of assets. In such arrangements, the (re)insurer generally manages the insurer’s asset portfolio and the parties have a joint interest in the investment returns on these assets. DNB has adopted a proactive stance in its supervision to ensure that the Dutch insurer retains sufficient control over its balance sheet. It is proposed that these asset-based reinsurance contracts will require the formal approval from DNB. Effective alignment with DNB is also recommended under the current regime.

Market conduct requirements for insurers - IDD and PRIIPs
The Dutch Financial Supervision Act provides the basis for market conduct requirements. These include information requirements, product governance requirements (PARP) and complaints procedures. The European framework, based on the Packaged retail and insurance-based investment products (PRIIPs) regulation and the Insurance Distribution Directive (IDD), contains requirements on the information to be provided to customers prior to the conclusion of an insurance contract.

Inducements and inducement ban
For certain insurance products, such as a unit-linked life insurance, payment protection products and life insurance products that are linked to another financial product, Dutch regulatory rules provide for an inducement ban. This means that the insurer may not pay a broker fee to intermediaries for such a product. Inducement rules apply for other insurance products.

Outsourcing and DORA
Insurers are required to manage and oversee all outsourcing arrangements, which must comply with mandatory rules, including the EIOPA guidelines. This applies to both intra-group outsourcing and outsourcing to third parties. In addition, DORA is an important new framework for insurers. DORA sets out requirements for resilience to digital incidents and cyber threats, and ability to manage ICT risks effectively. Most insurers will need to update at least part of their ICT risk management and contracts with ICT service providers.

Insurers increasingly use AI and other digitalisation tools to enhance efficiency and effectiveness of their operations. The Dutch regulators generally see this as a positive development. At the same time, they attach great importance to a sound and controlled IT environment in which the risk of using digitalisation and AI are carefully addressed. Together with the implementation of DORA, this is one of the focal points of the Dutch regulators.

  • How we can help you

    We assist our clients with things like:

    • Qualifying a product as an insurance product, e.g. guarantees and service contracts
    • Licence applications for insurers
    • Assisting non-Dutch insurers in entering the Dutch market for
    • Drafting policies and ensuring compliance with the governance and internal organisation requirements for insurers
    • Approval for the transfer of insurance and pension portfolios
    • Advice on regulatory aspects for insurers (Solvency II and Dutch rules)
    • Issuance of Solvency II-compliant capital instruments (share capital, subordinated notes, hybrids etc)
    • Drafting, negotiation and alignment of reinsurance contracts, including asset-based arrangements
    • Drafting of product and customer documentation for insures, including PRIIPS
    • Advice on insurer/broker relationships and IDD requirements
    • Assisting with outsourcing arrangements and DORA implementation

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