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Limitation of the power of disposal

Factsheet

Published: 23 December 2022

DNB may operate several instruments to enforce compliance with the Financial Supervision Act (Wet op het financieel toezicht). Specifically in respect of insurers, DNB has a special instrument to limit an insurer’s power of disposal over its assets (to cover the technical provisions).

Together with the Netherlands Authority for the Financial Markets (Autoriteit Financiële Markten / AFM), DNB supervises compliance with the Financial Supervision Act (Wet op het financieel toezicht) and the rules ensuing from the Act. In order to permit effective supervision, DNB may operate a number of instruments. Thus, DNB has the power to collect information, to give an instruction and to appoint a receiver. Where insurers are concerned, DNB has an additional instrument in that it may restrict an insurer’s power to dispose of its asset or prohibit the insurer from disposing of its assets in any way other than with DNB’s authorisation.

On whom may the restriction or prohibition be imposed?

DNB may impose such a measure solely on insurers, irrespective of where the insurer has its registered office.

When may the restriction or prohibition be imposed?

DNB may impose a restriction or prohibition on an insurer to dispose of its assets in a number of cases. First, if the rules regarding the minimum requirements for the technical provisions are not complied with. These requirements relate, among other things, to the amount of the technical provisions and the diversification of assets. In addition, DNB may decide upon such a measure if the insurer no longer meets the requirements as to the minimum amount of the solvency margin and DNB expects that the insurer’s financial position will worsen even further. The restriction or prohibition must be lifted as soon as the insurer again meets the minimum requirements.

Consequences

In principle, the prohibition or restriction is a measure having an internal effect so that it does not affect legal acts with third parties. However, if a counterparty knows or should know that such a measure has been imposed, the insurer may invoke the nullity of legal acts that are in contravention thereof.

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