Stand:updated on 06.06.2024 | Topic Governance Governance - Key functions
It is mandatory for undertakings to establish four key functions (independent risk management function, compliance function, internal audit function and actuarial function). These functions are material elements of the governance system, intended to ensure adequate and independent control within an undertaking.
In principle, undertakings are free to decide how to design their key functions. However, the chosen organisational structures must be proportionate to the nature, scale and complexity of the operations of the undertaking and the risks associated with them. The undertakings must also make sure that the key functions are not subject to influences that would prevent them from fulfilling their responsibilities objectively and independently.
Other requirements and objectives are specified in the following – non-exhaustive – list of legal bases and interpretative decisions.
Legal bases
- Section 26 (independent risk management function);
- Section 29 (compliance function);
- Section 30 (internal audit function);
- Section 31 (actuarial function).
Delegated Regulation (EU) 2015/35
- Article 268 (specific provisions);
- Article 269 (risk management function);
- Article 270 (compliance function);
- Article 271 (internal audit function);
- Article 272 (actuarial function).
Guidelines on System of Governance (EIOPA-BoS-14/253 EN)
- Guidelines 17 to 26 and 67 to 70 (risk management function);
- Guidelines 38 and 39 (compliance function);
- Guidelines 40 to 45 (internal audit function);
- Guidelines 46 to 51 (actuarial function).
Circular RS 11/2023 (VA)
This circular provides explanations on the qualification requirements for individuals who perform key functions (i.e., those responsible for or working in key functions) based on the Insurance Supervision Act (Versicherungsaufsichtsgesetz – VAG).
It is directed at all insurance companies, pension funds, insurance holding companies, companies according to § 293 (4) VAG, mixed financial holding companies (companies), and branches of insurance companies based in a third country, under the supervision of the Federal Financial Supervisory Authority (BaFin), according to the following provisions.
In addition to the VAG, the Delegated Regulation (EU) 2015/35 (DVO) and the EIOPA Guidelines on the Governance System (EIOPA-BoS-14/253 DE), including its technical annex, must also be observed.
For occupational pension schemes (pension funds and pension plans), only the relevant VAG provisions apply concerning the qualification requirements for individuals performing key functions. The specific characteristics of each business model will be taken into account.
