Dutch insurer Aegon expects it will remain an ‘internationally active insurance group’ – a status given to the world’s largest international insurers – even after selling its Dutch insurance operations to local rival ASR and redomiciling to Bermuda. It will also change group supervisor but there are wrinkles in the process.

There are currently 52 IAIGs identified by their group wide supervisors across 17 jurisdictions. They are subject to the Common Framework, a global supervisory framework. Aegon is one of the IAIGs under the supervision of DNB, the Dutch central bank. 

Asked whether the insurer will continue to be internationally active after closing the transaction with Dutch insurer ASR and moving its legal seat to Bermuda, a spokesperson for Aegon told mallowstreet: “Aegon is expected to retain its designation as an [IAIG].”

The Bermuda Monetary Authority, which will become Aegon’s new supervisor after redomiciling, declined to say whether Aegon will become the island’s first IAIG.

The BMA is not currently the group supervisor of any IAIGs, but the authority said the situation might change after it proposed the introduction of an IAIG concept to meet the principles and standards of the International Association of Insurance Supervisors’ Common Framework in a consultation in December 2020.

Aegon sold its Dutch insurance operations, including all of its insurance, pensions, mortgages, distribution and services businesses and banking operations to ASR last October, with the sale completing earlier this month. 

This means Aegon will no longer have a regulated insurance business in the Netherlands. The group’s legal domicile will be transferred to Bermuda because, under Solvency II rules, the DNB can no longer be Aegon’s group prudential supervisor. 

Aegon stressed that it will maintain its headquarters in the Netherlands, remain a Dutch tax resident and will continue to be listed on Euronext Amsterdam and on the New York Stock Exchange.

After the Netherlands, Aegon’s core markets are the US and the UK. Outside these jurisdictions, Aegon International consists of growth markets Brazil, China, Spain, Portugal as well as some smaller ventures in Asia. 

The company’s main brands are Aegon and US life insurer Transamerica. In Bermuda, Transamerica Life Bermuda serves affluent and high net-worth individuals across Asia through its branches in Singapore, Hong Kong and Bermuda.

The firm’s spokesperson clarified that Aegon does not decide who its group supervisor is but welcomed the BMA as its new group supervisor, subject to shareholder approval.

After consulting the members of the college of supervisors, the BMA has informed Aegon that the island’s regulator would become its group supervisor if Aegon were to transfer its legal seat to Bermuda.

During an investor call on 30 June, Aegon chief executive Lard Friese praised the BMA for having “an established, well recognised regulatory regime” and that Bermuda has gained full Solvency II equivalence.

He said: “Bermuda hosts many respected international insurance companies... In addition, Bermuda’s solvency framework has been granted equivalent status by the EU and the UK and the jurisdiction has been designated as a qualified jurisdiction by the US National Association of Insurance Commissioners. This enables insurance companies that are regulated by the BMA to easily conduct cross border business.”

Friese also told investors the change in group supervision does not have material impact on the group’s capital management approach and that all other regulated insurance entities in the US, UK, Spain and Portugal and other jurisdictions will continue to be supervised by their current local regulators. 

Aegon will continue to report under IFRS accounting standards, he said, and at the same time, the company will be exploring the implementation of US GAAP in the medium term, in addition to IFRS. 

“US GAAP will allow for better comparison against US peers,” said Friese.

Aegon expects its group solvency ratio and surplus under the Bermuda solvency framework to be broadly in line with that under the Solvency II framework during a transition period until the end of 2027. 

The method to translate Transamerica’s capital position into the group solvency position will also be similar to the current methodology, the firm added. After the transition period, Aegon will fully adopt the Bermudian solvency framework.

Aegon’s decision to offload its Dutch operations to rival ASR was announced in October. The parties also agreed on a partnership of Aegon’s asset management with ASR. As part of the transaction, Aegon received €2.2bn (£1.88bn) cash proceeds and a 29.99% stake in ASR.

At the time, Friese said: “This transaction provides a unique opportunity to accelerate both the return of capital to shareholders and our strategy of investing in markets where we are well positioned for growth. Our priority continues to be to further improve our operational performance and grow profitably.”

After closing the deal with ASR, Spain will be the EU country with the next largest insurance balance sheet at Aegon. 

However, Spain represents less than 1% of the company’s balance sheet, so moving its legal seat to Spain “would be a counter-intuitive outcome”, a spokesperson for the insurer said.

In the interim period between the closing of the transaction with ASR and the completion of the transfer of Aegon’s legal domicile to Bermuda, the role of group supervisor is expected to be allocated to the Dirección General de Seguros y Fondos de Pensiones in Spain, according to Solvency II rules. 

However, both DGSFP and DNB have told the European Insurance and Occupational Pensions Authority that from a supervisory perspective, it is “not desirable” that the Spanish regulator becomes the group supervisor for only a limited time. 

This is because DNB has “long-standing knowledge” of the Aegon Group and its international structure, has full knowledge of the partial internal model that the group uses and that the DGSFP is not familiar with the core market of the group outside the EU, according to Eiopa.

The parties then came up with a delegation agreement whereby the DGSFP would delegate its role as group supervisor to the DNB for the interim period. 

Eiopa said: “Eiopa notes that the delegation agreement is intended to ensure efficient, effective and consistent supervision, and a smooth handover of the tasks and responsibilities of group supervision, if needed, in view of adequate protection of the policyholders of the group.”