It doesn’t matter where you live or who you are, the current covid-19 pandemic has impacted us all in one way or another.

LFF sat down, keeping a safe distance, with Claude Marx, Director General of the Commission de Surveillance du Secteur Financier (CSSF) and with Claude Wirion, Director of the Commissariat aux Assurances (CAA) to get a glimpse of the pandemic through the eyes of a supervisor.



As Covid-19 spread around the globe, financial sector regulators found themselves under the spotlight probably more than ever before. The CSSF and the CAA, between them, supervise all of the Luxembourg financial industry which gives them a panoramic view of what is happening in the market.

While this was initially rather a health crisis than an economic crisis, the CSSF identified some of the possible consequences early on. “The CSSF was one of the first authorities to issue recommendations to supervised entities regarding the implementation of business continuity plans in the context of the Covid-19 pandemic. That was two weeks before the lockdown,” says Claude Marx, Director General of the Commission de Surveillance du Secteur Financier (CSSF).

Insurance is about managing risk and looking into the future. A pandemic is a risk that is quite well known to the insurance world and is normally considered within underwriting policies.


The financial centre today is better equipped to face a crisis than it was ten years ago due to a more robust legal framework.


“CAA officials followed what was going on. First in China and then in other countries. We were fully aware that this virus could sweep over to Luxembourg, but it is fair to say that the CAA took only concrete measures when similar measures were recommended by the Luxembourg government. The lockdown was a key-moment when we all realised how serious this was,” says Claude Wirion, Director of the CAA.


The financial centre today is better equipped to face a crisis than it was ten years ago due to a more robust legal framework. Also, so far, the situation is not dramatic; total net assets held in Luxembourg undertakings for collective investment were down by 11% in March compared to the previous month and the banking industry looks stable.
Marx warns that: “if many companies and individuals are not capable of reimbursing their loans, this unprecedented economic crisis could worsen and even lead to a financial crisis. It is too early to assess the extent of both the economic crisis and its impact on the banks. In a few month’s we will have a clearer picture, probably in the fourth quarter.”
Claude Wirion agrees. The greater part of the impact on the insurance sector will only materialise over the next 12 to 18 months. However, for him, the immediate effects are threefold:

Firstly, on the valuation of assets: this impact is material and instantly visible, with stock market prices and corporate bonds sharply down as companies were perceived to experience difficulties or were even downgraded. Fortunately, the market has recovered somewhat but it
remains volatile. As long-term investor, the insurance industry is less worried about short-term market movements.



Secondly there is the effect of change in the value of future claims. The CAA has tried to identify the business lines that could be affected directly or indirectly by Covid-19 such as healthcare, credit insurance, business interruption and event cancellation. These areas, though not of primary importance to the Luxembourg insurance sector, saw an instant impact.

The third immediate effect is operational risk and loss of business. A concern was that companies should be able to provide services to their customers. Loss of business means no new business for the insurance sector. “The great part of insurance is just renewing contracts. Luckily, we don’t need physical interaction between clients and insurers, so that business continues. New business is different, and we will still have to wait and see the effects of this pandemic over time,” says Wirion.

The CSSF foresees several impacts on the investment fund and banking sectors. “We have issued a number of recommendations to the sector and alleviated some of the administrative burden by, for example, extending deadlines for submitting regulatory reports. We have done this in parallel to legislative action by the EU authorities. We have had numerous contacts with our supervised entities and with representative associations such as ABBL and ALFI, to name but two,” Marx comments.


The regulators have been in continuous discussion with both local and international counterparts as the crisis unfolded.
The CSSF remains committed to its main mission, which is to protect investors and consumers of financial services and, together with the BCL, contribute to the financial stability of the country.

Even though the CSSF has had to adapt, it continued to be fully operational as evidenced by the recent launch of their new website.

“Our first priority was to take care of the health of our staff, whilst ensuring the continuity of our missions. Between mid-March and the end of May, 98% of our agents have worked remotely. I must say that thanks to the investments we made in the context of our CSSF 4.0 strategy, we were well prepared for this.” Marx adds, “No internal or external meetings or interviews had to be cancelled. They were simply held at a distance via tele- or video-conferencing tools.”

When lockdown measures were decided by the Luxembourg government the CAA also realised that they had to think about the best way to continue their control mission and how companies would be able to cope with confinement.  They were expecting these measures to a certain extent after they saw the action taken by neighbouring countries, starting with Italy and later Germany. The CAA had no illusions that Luxembourg would escape the pandemic.


During the crisis, the Ministry of Finance organised regular digital meetings with the members of the Systemic Risk Committee, a committee that brings together the Minister of Finance, the Central Bank, the CSSF and the CAA.

The CAA conducted a survey amongst its supervised companies two weeks after the lockdown. 80 to 90% of staff within the insurance sector were working from home. So, within a very short time they made it possible to switch from the office to home.

“A great part of the country is relying on commuters coming from Belgium, France and Germany. It would have been an illusion to think that we could prevent this virus from skipping into Luxembourg. An immediate closure of our borders would not have been a viable solution since most companies could no longer have functioned without any workforce coming in from abroad,” says Wirion.


“The CAA is a small organisation of 50 people, so we don’t have a lot of handbooks about crisis management. We needed one or two afternoons with the management board to put the necessary measures into place. Initially, we started with half of the staff working from home, only one person was allowed to be present at a time in one office space. Then, when the lockdown became a reality everybody was sent home. Except for maybe one or two people who were absolutely necessary to run the business,” says Claude Wirion.

During the crisis, the Ministry of Finance organised regular digital meetings with the members of the Systemic Risk Committee, a committee that brings together the Minister of Finance, the Central Bank, the CSSF and the CAA. In normal times this interaction would take place 4 or 5 times a year. During this crisis, meetings were held on an almost weekly basis and fed by input provided by the banks, the
fund industry, the insurance sector, the central bank and the government about the measures being taken and the trends observed.

“This has been a remarkable time in so many ways,” says Wirion looking back on the past two months.


In recent years the regulators have witnessed supervised companies investing a lot in digitalisation and facilitating digital interaction with their clients. So, even if these tools were not put into place specifically for a pandemic, they proved to be very useful and most companies
were able to continue business seamlessly.

“I think many companies now have discovered the advantages of working from home. People spend less time in traffic jams or public transportation and it certainly contributes to a better environment. Teleworking is definitely one change that will stay in the future,” says Wirion.


One of the things that has remained the same during this current crisis is the role of the supervisors. They continued to oversee what is happening in the financial and insurance sectors by supervising the application of rules, business controls and documents. The same goes for their international relations where physical meetings have been replaced by video conferences.

“The Covid-19 crisis has been, and still is, extensively discussed at the level of all the EU institutions, including the ECB, EBA, ESMA and ESRB. We actively participate in these discussions and provide input on measures to be taken at various levels”, states Marx. “We also interact locally with the Ministry of Finance, the Luxembourg Central Bank and the Systemic Risk Committee. But of course, due to the specific nature of this crisis, the CSSF is also in close contact with the Ministry of Health.”

It is obvious that there has been additional work due to this pandemic. The CAA for example has made regular requests for additional data that they didn’t need before. Wirion says: “And of course, some of our work could no longer take place as before. Physical meetings and onsite inspections had to be cancelled for example. We had a certain number of interviews lined up with potential newcomers to Luxembourg that had to be postponed. Some we could replace by video calls, but when it comes to newcomers they still prefer to meet physically with a supervisor.”


Teleworking could have a positive impact on the costs of supervised entities, on the environment due to less traffic and on our work-life balance.


It is safe to say that the main supervisory work will continue together with new measures that had to be taken, as recommended by the European Insurance and Occupational Pension Authority, EIOPA, which represents all national insurance supervisors within the European Union.

The CAA had to perform some top down stress tests to simulate the potential impact of the Covid-19 crisis on balance sheets and foresee possible requirements for insurers. This of course is dependent on the figures that are reported by companies.

Wirion adds: “We called up companies where we thought that there could be problems. Some companies contacted us to share and discuss their concerns. In some cases we intensified supervision, replacing quarterly reporting by monthly reporting. We took these measures in conjunction with the industry of course.”


According to Claude Wirion it is still too early to tell what the medium-term or long-term impact is. Insurance, especially in the non-life business, is quite aligned with the overall economic situation. If businesses are disappearing there will be fewer clients for the insurance industry.

The insurance industry has proven to be quite resilient even if they were not prepared for a pandemic of this size. As we look forward, both in the short and the long term, few can predict every step in the evolution of this pandemic. This being said we can see trends emerging and can safely ascertain some key themes that will emerge from the crisis.

Marx sees three key areas of sustained change; the adoption of teleworking, the acceleration of digitalisation and heightened hope for the EU green deal. “Teleworking could have a positive impact on the costs of supervised entities, on the environment due to less traffic and on our work-life balance,” predicts Marx. “I also see an acceleration of digitalisation, a positive for our ecosystem, including start-ups, Fintechs and specialist service providers.”

Wirion, who sees similar themes in the insurance sector, doesn’t expect immediate issues within the sector either. “We are not overly worried. I’m sure that the insurance industry will be able to prove itself and provide solutions in the future. Of course, there will not always be a solution for every problem; but. I remain optimistic and I truly hope that we can revert to normal soon. We are looking forward to that moment,” says Wirion hopefully.

As confinement is gradually eased in line with government decisions, this does not mean that one should not remain alert.
“We have to remain vigilant as to the liquidity and solvency of supervised entities. At present, we encourage supervised entities to continue relying on teleworking, which remains the best social distancing tool for banks and other supervised entities,” counsels Marx.