Belgium implements Solvency II but fails to remove unlawful eligible assets restrictions

Upon implementing Solvency II into local legislation, Belgian lawmakers recast the existing insurers supervisory law dated 1975 and adopted a new, coordinated law dated 13 March 2016.

On this occasion, it was expected that the lawmakers would remove a fairly controversial provision inserted into Belgian legislation two years ago, which limited the sort of eligible assets that an insurer active in the Belgian market could offer as part of its unit-linked insurance products (so-called “class 23”). Under this controversial provision (further identified in Article 20 of the law dated 4 April 2014 on insurances), Belgian and foreign insurers can only offer to Belgian retail clients unit-linked insurance products linked to UCITS or similar funds investing in transferable securities. This restriction raised significant concerns and business disruption, mainly for foreign insurers.

The Belgian government justified this restriction based on Article 133§3 of Solvency II which allows Member States to restrict the types of asset or reference value to which policy benefits may be linked where the investment risk is borne by a policy holder who is a natural person. However, the said Belgian provision is a question of prudential status and therefore could only apply to Belgian insurers, not EU insurers acting under passport. Moreover, the restriction currently applies to retail clients (which includes corporate SMEs) where the limitation under Solvency II may only apply to natural persons.

It was therefore expected that this controversial provision be significantly reviewed (with the risk of conflicting with the level playing field between Belgian and foreign insurers) or simply be removed.

Certain elements show that the Belgian government is aware of the situation and is considering fixing the issue soon. However, to date no formal action has been taken in this regard, thus maintaining Belgium in obvious breach of EU core rules.