De Nederlandsche Bank (DNB) is entrusted with the prudential and integrity supervision of insurers in Caribbean Netherlands (CN) on the grounds of the BES Financial Markets Act (Wet financiële markten BES/ Wfm BES). The purpose of prudential supervision is to ensure the financial soundness of financial undertakings and contribute to the stability of the financial sector.
Twin peaks model
In the final model, which took effect on 1 July 2012, the supervisory tasks are divided between DNB and the Netherlands Authority for the Financial Markets (Autoriteit Financiële Markten / AFM) in accordance with the twin peaks model as enshrined in the European-Dutch Financial Supervision Act (Wet op het financieel toezicht / Wft). In this model DNB is responsible for the prudential supervision, also in the case of undertakings for whom AFM is the licensing supervisory authority, and AFM is responsible for the conduct of business supervision, also in the case of insurers. DNB remains the licensing supervisory authority for insurers.
Importance and scope of prudential supervision
The purpose of prudential supervision is to protect the interests of customers who purchase financial services from insurers. It is in the interests of customers that the financial undertakings in question fulfil their obligations. To help ensure that the trust and confidence in the financial sector is warranted, DNB carries out prudential supervision of financial undertakings. Prudential supervision comprises solvency and liquidity supervision in order to ensure that the financial undertaking can always meet its payment obligations. The supervision aims to reduce the risk of bankruptcy or insolvency, although this risk can never be entirely excluded in a market economy.
The statutory basis for the prudential supervision of insurers operating in Caribbean Netherlands is the Wfm BES. The general part of the Wfm BES (Chapter 1) sets out, among other things, the object and scope of prudential supervision, and provides that DNB is responsible for exercising prudential supervision of financial undertakings. Chapter 2 defines the activities for which a licence (either from DNB or AFM) is required, the procedure to be followed in order to obtain the licence and the requirements that must be met for this purpose. This chapter also defines the cases in which the competent supervisory authority is permitted to refuse or withdraw the licence. Chapter 3 contains a number of general provisions that financial undertakings must satisfy both in connection with the licensing procedure and in connection with the continuous supervision. This includes rules relating to the governance and the operations of financial undertakings, the required solvency and other financial safeguards. This chapter also provides for participating interests in financial undertakings, reporting and accounting, and the role of the auditor and actuary. Finally, it contains several specific provisions for insurers forming part of a group.
These statutory requirements have been worked out in more detail in secondary legislation, which can be found on this page under the heading ‘downloads’.