4:57 A distinction should be made between (i) independence of mind and (ii) “formal” independence within the meaning of Article 15, 94° of the Insurance Supervision Law. 

4:58 With regard to the first concept (independence of mind), any person who acts as a director, senior manager or person responsible for an independent control function must be able to make conscientious, objective and independent decisions in the interest of the company and its stakeholders, after having carefully weighed all available information and opinions, and independently of any external influence. 

4:59 With regard to formal independence, please refer to the criteria set out in Article 15, 94° of the Insurance Supervision Law. This qualification is granted to certain non-executive directors whose task is to represent all of the company’s stakeholders and to supervise management, in particular by participating in specialised committees of the board of directors.

4.3.3.1 Independence of mind and conflicts of interest

4:60 Directors, senior managers and persons responsible for independent control functions must be able to make their own decisions in a sound, objective and independent manner. Independence of mind is demonstrated by the character and conduct of the person concerned and may be affected by conflicts of interest.

4:61 Thus, the company must assess whether or not the person subject to the suitability assessment:

1. has the necessary behavioural skills, including:
   
   1. courage, conviction and strength to effectively assess and challenge the proposed decisions submitted to him/her;
   2. the ability to ask questions and express divergent opinions; and
   3. the ability to resist groupthink;
2. is likely to face conflicts of interest that could impede his/her ability to perform his/her duties with the necessary independence and objectivity.

4:62 Given the risk of conflicts of interest, the Insurance Supervision Law stipulates that the statutory governing body should establish governance mechanisms to prevent such conflicts. In this regard, please see Article 83 of the Insurance Supervision Law, which relates to the exercise of external functions^[1], and Article 93 of the same law, which relates to loans, credits, guarantees and insurance contracts to managers, shareholders and related persons^[2].

4:63 With regard to situations that may give rise to conflicts of interest, please refer to the overarching Circular on governance NBB_2016_31^[3]. The notion of conflicts of interest is not limited to property-related conflicts of interest within the meaning of the Companies and Associations Code.

4:64 Companies should identify the actual or potential conflicts of interest of the person concerned, in accordance with their conflict of interest policy, and assess whether or not these conflicts are material^[4].

4:65 All actual and potential conflicts of interest, whether material or not, on the part of the board of directors, senior management or a person responsible for an independent control function must be adequately discussed, documented, decided on and duly managed by the competent body (i.e. the necessary measures should be taken). The persons concerned should abstain from voting on any matter which places them in a situation of conflict of interest. 

4:66 If a material conflict of interest has been identified, the company should (i) perform a detailed assessment of the situation; (ii) decide which mitigating measures it will take based on its internal conflicts of interest policy; and (iii) decide which measures it will take to prevent the conflict of interest, if it cannot adequately mitigate or manage it. 

4:67 The company should inform the NBB of any actual or potential material conflict of interest that may impact the independence of mind of a member of the board of directors, of a senior manager or of a person responsible for an independent control function. In the latter case, the company should provide the NBB with at least the following information: (i) a description of the conflict of interest identified, (ii) a description of the assessment performed within the company, (iii) the company’s conclusion as to the mitigating or preventive measures taken, and (iv) the reasons for the adequacy of those measures (conflict of interest statement).

4.3.3.2 Independence of mind versus formal independence within the meaning of Article 15, 94° of the Insurance Supervision Law

4:68 As mentioned above, independence of mind should not be confused with the notion of formal independence within the meaning of Article 15, 94° of the Insurance Supervision Law. An independent director in the formal sense is a non-executive director who has no link with the shareholder and who represents the interests of all the company's stakeholders. The Insurance Supervision Law requires the presence of one or more independent directors in the specialised committees of the statutory governing body^[5].

4:69 The concept of independence is defined in Article 15, 94° of the Insurance Supervision Law, which sets out a list of 9 criteria. However, the company has the possibility to demonstrate to the NBB that, although not all criteria are met, the independence of the person concerned is not compromised (in accordance with the “comply or explain” principle)^[6].

4:70 In practice, the NBB’s decisions on the suitability of the person concerned and its decisions relating to justification of non-compliance with one of the criteria set out in Article 15, 94° of the Insurance Supervision Law are usually taken simultaneously. However, it cannot be excluded that these decisions are taken separately when the issue of independence also concerns the ongoing monitoring of governance. 

^{[1] See also the Royal Decree of 8 February 2022 approving the Regulation of the National Bank of Belgium of 9 November 2021 on the exercise of external functions by managers and persons responsible for independent control functions of regulated companies, as well as Communication NBB_2022_19 on the same subject.}

^{[2] See also Circular NBB_2017_21 on loans, credits, guarantees and insurance contracts to managers, shareholders and related persons.}

^{[3] Including the sections on loans to managers and external functions.}

^{[4] With regard to conflicts of interest that may arise from loans, credits, guarantees and insurance contracts referred to in Article 93 of the Insurance Supervision Law, only loans, credits and guarantees exceeding EUR 100,000 are to be considered as material.} 

^{[5] See Article 48 of the Insurance Supervision Law, which stipulates that companies which are required to set up an audit committee, a risk committee and a remuneration committee must ensure that at least one independent director sits on each of these committees. Furthermore, the majority of the members of the audit committee must be independent.} 

^{[6] In this case, the company must submit a request for derogation together with the fit & proper form of the director concerned, in which it justifies the validity of this request. The NBB decides whether or not to grant this derogation as part of its governance supervision.}