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Requirements imposed on special purpose reinsurance vehicles
A special purpose reinsurance vehicle must satisfy various requirements imposed by or by virtue of the Financial Supervision Act (Wet op het financieel toezicht, ‘Wft’), both when applying for a licence and during the pursuit of its business. These requirements aim to promote the soundness of special purpose reinsurance vehicles and, hence, to protect stakeholders from the risk of losses resulting from solvency or liquidity deficiencies. De Nederlandsche Bank (‘DNB’) supervises compliance by special purpose reinsurance vehicles with all statutory and regulatory requirements.
The most important requirements which the Wft and its subsidiary legislation make of a special purpose reinsurance vehicle relate to:
- the trustworthiness of its policymakers
- the competence of its policymakers
- sound operational practices
- controlled operational practices
- outsourcing of activities
- the control structure
- minimum available solvency
- capital adequacy
- technical provisions
These requirements are detailed in subsidiary regulations relating to various operational, technical and financial aspects of the firm. These regulations take acount of the several risks the firm is exposed to and with differences in the nature, size and complexity of insurers. The detailed requirements rely in large measure on internationally harmonised supervisory requirements which have been transposed into Dutch legislation through the implementation of EU Directives.