BPCE_PILLAR_III_2017

11 NON-COMPLIANCE RISKS, SECURITY AND OPERATIONAL RISKS Insurance risks

Activities in 2017

In 2017, the main projects undertakenwith the functionwere aimed at expanding stress tests and forecastingunder Solvency II, Basel III, and the Financial Conglomerates Directive, and at strengthening governance: coordination of the Group’s approach to insurance stress tests, ● particularly the 2017 ORSAs (own risk and solvency assessments); establishment of detailed financial assumptions shared by the ● companies (ORSAs), as well as an analysis of results and recommendations; monitoringof major risks and contagionmechanisms; ● analysis of regulatoryinteractions(Basel III, Solvency II (1) , Financial ● Conglomerates Directive). After integrating the Group’s insurance companies into the bank ● ISTs (internal stress tests), as set out under the 2016 ICAAP (internal capital adequacy assessment process), the model was expandedto include: commissionspaid by insurancecompaniesto the retail networks, - as well asfees paidto the Group’s asset managers; stressed insurance inputs (based on ORSAs) in addition to the - economic and financial inputs used by the Group; the simulationof SCR and MCR SII sector ratios based on ICAAP - scenarios, to documentany capital requirementsunder stress; the integration of CNP Assurances in the Group’s ICAAP - approach, following the establishment of the additional Supervisory Committee.

In terms of insurance compliance,a regulatory project was launched in 2017 and will be completedin 2018 with the InvestmentServices Compliancefunction.The project pertains to IDD, PRIIPs and MiFID 2. BPCE’s Compliance department is responsible for monitoring the operationalapplicationof these directives throughouthe Group. In addition to the MiFID 2, IDD and PRIIPs projects, producer/distributorworkinggroupswere specificallycreatedto cover the fivePillars of the InsuranceDistribution Directive: Pillar 1 “Product governance and distribution rules”: this ● Pillar ensures consistency between the level of risk, the target market and the distribution strategy of aproduct; Pillar 2 “Customer information and prevention of conflicts of ● interest”: the aim of this Pillar is to improve customer information on insuranceand investmentproducts; Pillar 3 “Advice and long-term customer service”: this ● Pillar addresses the duty to advise and the updating of advice over the customer'slife and over the termof the business relationship, Pillar 4 “Price transparency”: the aim of this Pillar is full ● transparency for the customer regarding the prices charged by insurance distributors and rebates on insurance products (life and non-life); Pillar 5 “Continuoustraining”: the purpose of this Pillar is to ensure ● the continuous training of sales teams, taking into account both regulatory developments and best practices.

The DRCCP exercises caution in terms of changes to Solvency II. It is due to be reviewed in December 2018 along with the standard formula. (1)

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Risk Report Pillar III 2017