Operational supervisory practice – put briefly, where DNB and a supervised insurer come into contact - consists of several types of activities:
allowing an insurer access to the market (for example by granting an authorisation);
collecting information on supervised insurers and assessing this information based on the supervisory requirements;
guiding supervised insurers and intervening where necessary, if supervision requirements are not being complied with.
Once an insurer has been allowed access to the market, the supervisory practice consists in concrete terms of collecting and assessing information. DNB collects information in various different ways, by receiving reports and documentation, conducting discussions and carrying out on-site investigations. More indirectly, DNB also uses information from analyses of developments in the financial sector and from contacts with other supervisory authorities. DNB can also make very specific requests for information from the insurer itself as well as from other parties involved. Based on the information, DNB carries out prudential analyses. The information and analysis together form the basis for the judgement as to whether an insurer is complying with the supervisory requirements. DNB will use its findings again in the operational supervision of the relevant insurer.
An important source of information for assessing the financial position of an insurer is formed by the annual reporting statements that are submitted electronically. A major part of the assessment work of the reports is computerised. Where the financial position is worsening, DNB analyses the reasons. The causes may be: financial or other gaps in the institution’s structure; incorrect implementation of the structure, or incidental causes. Depending on the outcome, the insurer is asked what measures it will take to improve the financial position.
DNB holds periodic consultation with insurers. This consultation addresses the current situation and progress, as well as plans and expectations for the coming years. At DNB’s request the actuary and/or auditor may be involved in the consultation. The frequency of such periodic consultation depends among other things on the size and risk profile of the insurer.
The application of a risk-based supervision method means that the supervision requirements are geared to the risk profile of the insurer. DNB has developed a risk analysis model for this purpose: the Financial Institutions Risk Analysis Method (FIRM). With the help of FIRM and the information available about an insurer, relevant risks are identified and assessed. DNB uses the risk profile drawn up using FIRM to set priorities in operational supervision.
In supervisory practice, DNB works closely together with other domestic and foreign supervisory authorities. In the context of the Wft, it cooperates in particular with the Netherlands Authority for the Financial Markets (Autoriteit Financiële Markten / AFM). This cooperation includes:
determining secondary legislation on subjects relevant to both prudential supervision and conduct of business supervision;
exchanging information and determining concrete supervisory activities (e.g. in cases where AFM supervises an investment firm in its capacity as the authorising supervisor and DNB exercises supplementary prudential supervision of the investment firm);
advance consultation on specific planned supervisory measures with significant impact.
The cooperation between DNB and AFM is described partly in the Wft and partly in a separate agreement. In cases involving insurers operating internationally, DNB also cooperates with the supervisory authorities in the other countries where the undertaking is active.