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Luxembourg - Regulatory update - CAA released Circular 22/15 on (re)insurance undertakings Board of Directors and key governance matters

15/09/22

In brief

On 26 July 2022, the Commissariat aux Assurances (CAA) published the Circular Letter 22/15 on Board of Directors for (re)insurance undertakings (available here). 

As settled in Circular Letter 08/2 and Circular Letter 21/12, (re)insurance undertakings shall notify to the CAA the nomination of directors and for key functions. This new Circular Letter adds additional guidance on competences and honourability checks that needs to be conducted prior to the nomination of directors or key functions as well as guidance on the mission and the organisation within the Board of Directors (BoD).

The Circular Letters concerns insurance and reinsurance undertakings while captive undertakings are out of its scope.

These new obligations shall apply on the following timelines: 

  • From September 30, 2022, (re)insurance undertakings must comply with the requirements related to the changes of the composition of the BoD as well as with any instructions related to the managing directors and executive directors. 

  • From March 31, 2023, (re)insurance undertakings must review their internal governance and procedures to comply with the requirements in line with the circular. 

In detail

Luxembourg-based (re)insurance undertakings are expected to review their governance and related internal procedures to be in line with the requirements from Circular Letter 22/15. 

The CAA draws particular attention on the following key items:

  • Directors’ competences and behaviour

  • Board of Directors compositions and functioning

  • Legal entity administrators

  • BoD’s decisions and resolutions formalisation

  • Internal committees and key functions organisation

The CAA has, therefore, identified 9 main requirements from (re)insurance undertakings to: 

  • Ensure that all members of the BoD have the necessary background and knowledge on the insurance industry. Competence and honourability check shall be conducted prior to any nominations.

  • The composition of the Board would be aligned with the requirements from the CAA to ensure that, collectively, the Board has appropriate skills and experience to monitor the firm’s risks. 

  • Comply with requirements already settled in Circular Letter 08/2 on a legal person being director of the company. 

  • Collect the needed documents/information for the notification file in case of any change on the BoDs. This notification to the CAA must be done within 4 weeks maximum. 

  • Define the governance system and operational functioning of the company through appropriate documentation.

  • Ensure an ongoing self-assessment of the company governance system.

  • Structure and record in minutes all the resolutions approved by the directors. The CAA gives guidance on information that would need to be documented during the council. 

  • Set up a governance that ensures all key functions are being appointed by the Board and that all documentation/procedure related to key functions are validated in advance by the Board. By setting up its governance the Board must respect and require independence for each of the key functions. 

  • Define a procedure to ensure that all documents required in any (re)insurance company are communicated and approved by the Board (financial statement, risk evaluation etc.)

How PwC can help you

The Circular Letter will enter into force on 31 March 2023, except for the notification to the CAA of any change on the BoD of the (re)insurance undertakings that will apply from 30 September 2022.

At PwC, we can assist you in implementing the requirements in line with the Circular Letter 22/15 by:

  • Reviewing and performing an accurate gap analysis of your current governance and internal policies and procedures and documentation to identify potential breaches with the CAA requirements,

  • Providing support to identify and implement remediation actions to close the identified gaps,

  • Helping you drafting missing policies and/or procedures, 

  • Assisting you in the notification process with the CAA.     

For any questions, feel free to contact us.

Contact us

Matt Moran

Insurance Leader, PwC Luxembourg

Tel: +352 49 48 48 2071

Anthony Dault

Insurance Partner, PwC Luxembourg

Tel: +352 49 48 48 2380

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