Reporting on governance
- Solvency II Law: Articles 42, § 1, 10 ° (introduction of a reporting system), 42, § 3, and 77, § 6 (governance), 95 to 101 (SFCR), 80, § 5 and 199 to 203 (periodic provision of information and accounting rules), and 312, § 2 (prudential reporting)
- Delegated Regulation 2015/35: Articles 258(1)(a) (internal reporting system) and (h) (system for reliable information), 290 et seq. (content of the SFCR), 304 et seq. (content of the RSR), 359 et seq. (SFCR for groups), 372 (RSR for groups), and Annex 20 (structure of the SFCR and RSR)
- Underlying thematic NBB Circular: eCorporate Communication NBB_2019_22
- EIOPA Guidelines: /
The Solvency II Law and Delegated Regulation 2015/35 require insurance companies to prepare several reports on governance, to enable the public and the Bank, as the prudential supervisory authority, to assess the suitability of their governance system.
15.1. Coherence between the SFCR, RSR and governance memorandum
In addition to the ORSA report (cf. Chapter 3 above) and the reports by the management committee on the assessment of the effectiveness of the governance system (cf. Chapter 14 above), the main ‘qualitative’ reports are:
- the Solvency and Financial Condition Report (hereinafter referred to as the ‘SFCR’), a report on an annual basis intended for the public, the content of which is set out in Delegated Regulation 2015/35 (Article 290 et seq.);
- the ‘governance system’ section of the Regular Supervisory Report (hereinafter referred to as the ‘RSR’), which is provided to the Bank every three years for the exercise of prudential supervision, the content of which is also set out in Delegated Regulation 2015/35 (Articles 308 et seq.); and
- the governance memorandum, a report on an annual basis to the Bank, the content of which is set out in Article 42, § 3 of the Solvency II Law.
Since the entry into force of the Solvency II Law, the Bank has reviewed a large number of these reportings. It has also received requests to simplify the qualitative reportings in order to avoid overlap. In this context, the Bank noted that:
- the original coherence between the aforementioned reportings (with the governance memorandum being qualified as the ‘key reporting’ centralising all information on governance) should be reviewed;
- the system for submitting certain reportings to the Bank could be adapted;
- the frequency for submitting the RSR should be made more granular.
The main pillars for the review of the qualitative reportings are as follows:
- the complete integration of the governance memorandum in the chapter on “Governance system” of the RSR (which is currently the ‘key reporting’ for all aspects, including those related to governance);
- the revision of the frequency for submitting the RSR, which will become annual for significant companies and remain triennial for less significant companies (with annual notification of changes);
- the revision of the procedure for submitting certain reportings on governance;
- conditional authorisation to include references in the RSR;
- definition of conditions to be complied with in order to be allowed to centralise multiple reportings in a single group report.
 Regarding language use for the SFCR, the executive summary should be drawn up in one or more national languages (depending on the location of the insurance company’s registered office) and the Bank allows detailed information to be drafted in a single language, i.e. in Dutch, French or English, the latter being commonly used in the world of finance.
15.2. Integration of the governance memorandum in the RSR
The governance memorandum should be integrated in its entirety in het chapter on “Governance system” of the RSR.
Insofar as the structures of the governance memorandum and the RSR have already been aligned, this integration should be straightforward. However, it should be noted that certain “Belgian characteristics” present in the governance memorandum will have to be included in the chapter on “Governance system” of the RSR from now on, in particular:
- Detailed information on the manner in which the following criteria are taken into account for the composition of the management bodies: number of directors, duration and rotation of mandates, upper age limit, gender etc.;
- Information regarding the insurance company’s internal rules on external functions and incompatibilities;
- Information on loans, credits or guarantees and insurance policies granted to managers by the insurance company;
- Remuneration figures;
- Information on the organisation of the independent control functions i.e. the risk management function, the actuarial function, the compliance function and the internal audit function;
- Information on the insurance company’s organisational and operational structure and on the financial and accounting organisation;
- Information on the financial and prudential reporting;
- Information on the integrity rules in place (whistleblowing, conflicts of interest etc);
- Information on the IT infrastructure (IT system, continuity policy, clouds etc.);
- Information on any shareholder charters.
Annex 2 includes a template that clearly specifies where the Belgian characteristics must be integrated in the chapter on “Governance system” of the RSR. The insurance companies are asked to follow this template.
15.3. Revision of the frequency for submitting the RSR
The frequency for submitting the RSR has been revised. In practice, the frequency for submitting the RSR is no longer identical for significant insurance and reinsurance companies/groups and less significant insurance and reinsurance companies/groups.
In accordance with the proportionality criteria included in the introduction of this Circular, the following system applies:
- Annual submission for significant insurance and reinsurance companies/groups, and
- Triennial submission for less significant insurance and reinsurance companies/groups (with annual notification of changes),
in both cases without prejudice to the fact that the Bank can, at any moment, request a complete ad hoc revision of the RSR when it finds that the company or group no longer functions or is at risk of no longer functioning in compliance with the Solvency II Law.
As specified in the eCorporate Communication, insurance and reinsurance companies/groups are informed of their classification as “significant company/group” or “non-significant company/group” through an individual ad-hoc letter sent by the Bank.
Moreover, by way of exception, the Bank reserves the right to compel less significant companies/groups to submit the RSR annually on the basis of their risk profile. In that case, they are informed of this decision by the Bank.
15.4. Revision of the procedure for submitting certain reportings on governance
The Bank considers that certain reportings no longer need to be uploaded systematically to the eCorporate platform but should be made available to the Bank at its first request.
The reportings which must now be submitted at first request are the activity reports and the action plans of the independent control functions (reports that are primarily intended for the company’s internal management bodies and which are then made available to the Bank).
For more information on this subject, please refer to Annex 1 to the eCorporate Communication, in which a column was added to specify which reportings must be submitted systematically and which reportings must be made available to the Bank at its first request.
15.5. Conditional authorisation to include references to internal documents in the RSR
It should be possible to read the chapter on “Governance system” of the RSR as a standalone document. However, references to internal documents are allowed for specific detailed information.
In practice, the RSR should include a short summary by theme providing an overview of the topic covered, and references can be made to other documents for more detailed information. The RSR should not be a collection of cross-references.
Additionally, for references to detailed information, the Bank asks that the company tasks the independent control functions risk management and compliance specifically with coordinating the RSR, in order to ensure (i) that the RSR remains comprehensible and coherent, (ii) that the references made actually correspond to detailed information, and (iii) that these references are made to existing documents that are sufficiently detailed/accurate so the underlying information can be retrieved quickly.
Two independent control functions are tasked with coordinating and ensuring the coherence of the RSR. In this regard, please refer to sections 5.2.1. (risk management function - extra task relating to the coordination and coherence of the RSR) and 5.4. (compliance function - coordination and coherence of the RSR). Additionally, the rules described above, requiring the RSR to include a short summary by theme and allowing references to other documents for detailed information, also apply to the other chapters of the RSR. For these other chapters, the aforementioned coordination task is conferred upon the risk management function.
15.6. Group reportings
15.6.1. Group reportings by the entity responsible for the group
The parent undertaking heading a Belgian group, regardless of whether this is (i) a participating insurance company, (ii) an insurance holding company governed by Belgian law, (iii) a mixed financial holding company or (iv) a mixed-activity insurance holding company governed by Belgian law, is responsible for establishing the group reportings and submitting them to the Bank, save in exceptional cases where the Bank allows a subsidiary entity to be the entity responsible for an insurance or reinsurance group governed by Belgian law instead of the aforementioned parent undertaking.
The list of governance reportings expected from Belgian insurance groups is included in the eCorporate Communication . The main reportings are: (i) a Group SFCR, (ii) a Group RSR and (iii) a Group ORSA. These reportings should generally contain the same information as that required from the individual companies (taking into account the principle of proportionality).
15.6.2. Possibility of centralising multiple reportings in a single group report
With the prior authorisation of the Bank (or, for subsidiaries of foreign groups, of the European supervisory authority that is the group supervisor), insurance groups can centralise multiple reportings of entities belonging to the group in a single report. This applies to two reports:
- the Solvency and Financial Condition Report (SFCR) and
- the ORSA.
As the legal texts do not provide for this possibility with regard to the Regular Supervisory Report (RSR), an RSR should be drawn up for each entity concerned of the group.
§1. A single group SFCR
Authorisation to publish a single group Solvency and Financial Condition Report (single SFCR) enables the head of the group to publish a single SFCR pertaining to both the group and its subsidiaries.
If the group chooses this option, it must, in addition to complying with its publishing obligations, submit the single document to the group’s supervisory authority. A summary of the document should be translated into the languages of each subsidiary, and the subsidiaries’ supervisory authorities may also demand that parts of the single document relating to the companies under their control be translated into their language.
The single group Solvency and Financial Condition Report can be limited to the group and some of its subsidiaries. In that case, the group’s other subsidiaries are required to publish an individual Solvency and Financial Condition Report.
§2. A single group ORSA
If the group chooses to draw up a single group ORSA, it shall submit this single document to all supervisory authorities concerned simultaneously. The supervisory authorities may demand that parts of the single document relating to the companies under their control be translated into their language.
In any case, the single document should provide the supervisory authority concerned with the same level of information on each company as an individual SFCR or ORSA report would have.
§3. Application file and procedure
In order to obtain the aforementioned authorisation from the Bank as group supervisor, the companies must contact the Bank as soon as possible to determine the content of the information to be provided. Where appropriate, the Bank will consult the supervisory authorities of the foreign subsidiaries concerned.
If the group has chosen to draw up a single SFCR or ORSA, it must continually ensure that this single report contains the following information:
- the same information as required individually from the insurance companies concerned;
- a description of the way each company of the group complies with the governance requirements and, in particular, of the involvement of these companies’ management bodies (board of directors and management committee) in the assessment and approval of the single report; and
- a description of the single report’s layout to enable the Bank or, where appropriate, the other supervisory authorities concerned to easily identify the individual information relating to the different insurance companies belonging to the group (individually identifiable information).
Authorisation from the Bank to publish a single SFCR or ORSA remains valid as long as the perimeter covered by this report remains unchanged.
 Except for Belgian insurance groups headed by a mixed-activity insurance holding company (cf. Article 343, first paragraph, 4° of the Solvency II Law), for which the expected reporting is determined on a case-by-case basis by the Bank and the mixed-activity insurance holding company, in compliance with Article 450 of the Solvency II Law.
 For the "Governance system" chapter of the Group RSR, please refer to Part II of Annex II to this Circular.