BPCE_PILLAR_III_2017

NON-COMPLIANCE RISKS, SECURITY AND OPERATIONAL RISKS Insurance risks

Insurance risks 11.8

Organization The combination of the three Level 2 controls within the Risk, Complianceand PermanentControl division (DRCCP) gave rise to the pooling of insurance, risk and compliance expertise. The DRCCP, in coordinationwith the Insurance division, ensures the effective implementation and operation of the insurance risk monitoring processes (including underwriting risk) within the principal insurance companies in which the Group is the major shareholder,namely:Natixis Assurances(includingits subsidiaryBPCE Assurances), Compagnie Européenne de Garanties et de Cautions (CEGC), Prépar-Vie and Coface. Insurance risk oversight committees have been formally set up for each company which meet once a quarter. CNP Assurances, in which the Group is a minority shareholder, is also subject to DRCCP supervision due to its materiality through a dedicated mechanism (CNP additional Supervisory Committee).

In this context, the principle of subsidiarity applies, with controls carried out first by the insurance companies,then at the level of the Risk divisions of the parent companies (Natixis and BRED Banque Populaire) and then by Groupe BPCE’s DRCCP, which reports to the Group Risk and Compliance Committee every six months. The aim of insurance complianceis to ensure that sales of insurance products comply with all applicable laws, regulations and ACPR recommended best practices. Banking institutions authorized to operate as insurance brokers are subject to brokerage law and required to comply in full. Accordingly, standards are disseminated and applied to informationsystems, an approval processes is carried out for new products distributed by the Group, sales processes and professionalethics are monitored,trainingmodules are reviewed and updated,and finally content,advertisementsand documentsintended for the networks and training activities are validated. the financial conglomerateapproach seeks to consolidate banking ● and insurance sector-based metrics, particularly capital requirements; additionalsupervisionis primarilybased on the bankingsystemas a ● whole and theGroup InsuranceRisk function. In order to provide forward-lookinginsight into the Group’s capital adequacy from a financial conglomerate standpoint, the Capital Managementfunctiondefinesmulti-yearforecastsfor surpluscapital. The conglomerate’s surplus capital is tracked using the Level 1 indicators derivedfrom the Group RAF (risk appetite framework). All three aspects of the system (insurance, banking and financial conglomerates) are presented to and discussed with the ECB/ACPR joint supervisoryteam (JST). Governanceis reviewed, as are the main management reports or analyses that have been provided to BPCE Executive Management over the course of the year.

Additional Supervisionof FinancialConglomerates Groupe BPCE has been identified by the ACPR/ECB as a financial conglomerate,owing to the absolute and relative size of its banking and insurance businesses.Since the launch of the Single Supervisory Mechanism (SSM), the ECB has coordinated the supervision of financial conglomerates predominantly focused onbanking.

Conglomerate regulations require insight into the entire scope of consolidation (banking, insurance, asset management and non-financialsector) andadditional supervision of: “financial conglomerate” capital adequacy; ● intra-group transactions between different entities of the ● conglomerate; monitoringof risk concentration; ● risk managementand the internal control system. ● In termsof risk monitoring:

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Risk Report Pillar III 2017