Assessment of suitability by the undertaking

As already explained, it is primarily up to the undertaking to assess the fitness and propriety of the persons subject to the suitability assessment. In order to do so, the undertaking must draw up a suitability policy, develop an assessment procedure and ensure that the NBB is informed of the result of its assessment.

Although in principle the assessment of suitability takes place either before the person takes up the position or when s/he changes his or her position, when any information appears in the course of a function which is likely to influence a person’s fitness and propriety, the undertaking must analyse it without delay.

4.5.1 Suitability policy / fit & proper policy

The undertaking should develop and implement a “suitability policy” or “fit & proper policy” which, in application of the EIOPA Guidelines and Circular 2016_31, includes at least the following:

  1. a description of the procedure for identifying functions requiring notification to the NBB and the procedure for notification to the NBB;
  2. a description of the procedures for assessing fitness and propriety of the members of the board of directors and management committee and the responsible persons of independent control functions and branch managers, when they are selected and thereafter on an ongoing basis;
  3. a description of the criteria to be used in assessing fitness and propriety of the members of the board of directors and management committee and the responsible persons of independent control functions and branch managers;
  4. a description of the foreseeable cases which give rise to a reassessment of the fit and proper requirements; and
  5. a description of the procedure for assessing the skills, knowledge, and fitness and propriety of other relevant staff members who are not subject to the legal assessment requirements imposed by the NBB, when their profile is examined for the specific function, but also on an ongoing basis.

In addition, depending on the nature, size, complexity and risk profile of the undertaking, the policy should also include a description of the process for planning renewal of the members of the management committee.

This suitability policy must be consistent with the overall corporate governance framework, corporate culture and risk appetite of the undertaking and be clear, well documented and transparent to all staff within the undertaking.

It must be adopted by the board of directors and updated periodically. If the undertaking has an appointment committee, it is appropriate for that committee to actively contribute to the development of the suitability policy.

The principle of proportionality applies. Significant undertakings should have a more sophisticated suitability policy, while less significant undertakings can implement a simpler policy. However, this policy should ensure that the above criteria are met.

4.5.2 Before taking up a position: suitability assessment procedure and communication of results to the NBB

In addition to developing a suitability policy, the board of directors is responsible for conducting the suitability assessment for the persons covered by this chapter and for communicating the results of its assessment to the NBB. If the undertaking has an appointment committee, it is appropriate for that committee to actively contribute to the assessment of suitability.

It is the responsibility of the undertaking's compliance function to ensure compliance with the legal requirements on suitability.

The undertaking is best placed to determine what specific expertise is required for a function within the undertaking.

In terms of procedure, the NBB expects undertakings to set down a detailed job description in writing clearly stating the way in which the suitability standard works in practice for each position that falls within the scope of the Insurance Supervision Law. It is recommended that undertakings should use the guidelines on assessment standards as laid down in this chapter, as a frame of reference for drawing up the function profiles.

1. Fitness

  1. knowledge and experience;
  2. skills;
  3. professional behaviour (independence, conflicts of interest and availability);
  4. track record;
  5. for members of the board of directors and management committee, collective expertise;

2. Propriety

Undertakings should document the results of the suitability assessment against these criteria. Where there is concern as to the suitability of an applicant for a position within the board of directors or the management committee or as responsible person of an independent control function or as branch manager, an assessment of how that concern affects that person's suitability should be made.

Where the undertaking has completed the investigation and wishes to consider the person's application for the particular position, it is advisable to record this internal selection decision in writing. The decision should contain not only the selection decision but also any considerations upon which it is based. Where applicable, any agreements which have been reached in order to improve the person in question’s fitness on certain points should also be mentioned. Selection decisions stating the grounds for them can be extremely useful as a source of information for the assessment of suitability which is subsequently carried out by the NBB.

The minutes of the board of directors (or, where appropriate, of the appointment committee) relating to the internal selection of the person concerned must be communicated to the NBB as an annex to the suitability file. Both the undertaking and the person who is the subject of the suitability assessment must ensure that the information subsequently provided to the NBB is complete and accurate.

4.5.3 In the performance of duties: procedure for reassessment of individual and collective suitability

As already indicated above, the suitability requirements is of an ongoing nature. In order to ensure ongoing suitability of persons falling within the scope of the Insurance Supervision Law, it is important that undertakings should develop reassessment procedures specifically designed to ensure that such persons remain fit. These procedures for reassessing individual and collective fitness should be implemented not only periodically but also when there are particular signals.

1. Periodic reassessment

The board of directors or the appointment committee where there is one should assess the composition and functioning of the governing and management bodies, inter alia as regards individual and collective suitability of the members. To this end, the board of directors or appointment committee should periodically evaluate on the one hand the structure, size, composition and performance of the statutory governing body, and on the other hand the knowledge, skills, experience and degree of involvement of, on the one hand, the individual members of the statutory governing body, and, on the other hand, the statutory governing body as a whole.

This periodic reassessment should take place once a year for significant undertakings and every two years for less significant undertakings. The main principles of the reassessment procedure should be reflected in the suitability policy.

If, as a result of periodic reassessment, significant shortcomings are identified with regard to the individual or collective suitability of the persons concerned, undertakings must take corrective action. Corrective measures may include, as an indication, adapting responsibilities between members of the management committee or the board of directors; replacing certain members; recruiting additional members; possible measures to mitigate conflicts of interest; training certain members; etc.

Furthermore, as soon as shortcomings have been identified, undertakings must inform the NBB immediately. It is the primary responsibility of the person concerned and the undertaking to report without delay to the supervisory authority any new fact likely to influence suitability: it is their responsibility to provide the NBB with correct and complete information at all times so that the latter can form a correct picture of the suitability of the person concerned. Failing this, the NBB may, where appropriate, disqualify the person concerned, which implies that the person is no longer considered fit[[1].

2. Reassessment on the basis of particular signals

In addition to a periodic reassessment, whenever the undertaking is informed of an element that is likely to have an influence on the individual suitability assessment of a person subject to fitness and propriety assessment or the collective suitability assessment of a managing body, it must carry out an ad hoc reassessment and inform the NBB immediately.

[1] See inter alia the explanatory memorandum to the Law of 5 December 2017 containing various financial provisions, Parliamentary Documents, 2017-2018, Doc. 54 - 2682/001, p. 24.