NBB published a communication, for insurance companies, on exemption from the obligation to allocate additional provisions, commonly known as "flashing provisions," in 2020. Pursuant to Article 34d, § 4, of the Royal Decree on the annual accounts of insurance companies, NBB considers it necessary to impose a condition for granting an exemption from the obligation to allocate the "flashing provision" for the 2020 financial year. In response to the COVID-19 pandemic, NBB has decided to discontinue the 2020 stress test exercise and thus tighten the conditions for granting this exemption.
Under the condition for granting an exemption for the financial year 2020, insurance companies are required to achieve, continuously during 2020, a coverage of at least 125% of the solvency capital requirement (SCR) as defined in the supervisory law, without resorting to the transitional measures referred to in articles 668 and 669 of the law. NBB requests to receive a projection of the SCR ratio at December 31, 2020 to be able to assess compliance with this condition. The exemption file must be sent to NBB by November 15, 2020. The communication also highlights that analyses done as part of the Solvency II review have shown that capital requirement for interest rate risk can be seriously underestimated in the standard formula. The current regulations indeed provide that, in calculating the capital requirement, the yield curve cannot go below 0%.
Related Link (in French): NBB Communication
Keywords: Europe, Belgium, Insurance, COVID-19, Solvency II, Stress Testing, SCR, Interest Rate Risk, Capital Requirement, Flashing Provisions, Reporting, NBB
Previous ArticleECB Framework on Cross-Border Spillover of Macro-Prudential Policies
EBA finalized the two sets of draft regulatory technical standards on the identification of material risk-takers and on the classes of instruments used for remuneration under the Investment Firms Directive (IFD).
EC published, in the Official Journal of the European Union, a notification that the European Court of Auditors (ECA) has published a special report on resolution planning in the Single Resolution Mechanism.
BoE published a scenario against which it will be stress testing banks in 2021, in addition to setting out the key elements of the 2021 stress test, guidance on the 2021 stress test, and the variable paths for the 2021 stress test.
PRA published a consultation paper (CP3/21) proposes rules regarding the timing of identity verification required for eligibility of depositor protection under the Financial Services Compensation Scheme (FSCS).
FSB published the work program for 2021, which reflects a strategic shift in priorities in the COVID-19 environment.
FCA announced that 50% firms have started using the new data collection platform RegData, which is slated to replace the existing platform known Gabriel.
Bundesbank published Version 5.0 of the derivation rules for completeness check at the form level, with respect to the data quality of the European harmonized reporting system.
FED finalized a rule that updates capital planning requirements to reflect the new framework from 2019 that sorts large banks into categories, with requirements that are tailored to the risks of each category.
ECB published results of the quarterly lending survey conducted on 143 banks in the euro area.
ESAs published the final draft implementing technical standards on reporting of intra-group transactions and risk concentration of financial conglomerates subject to the supplementary supervision in EU.