DIRECTIVE 98/78/EC OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 27 October 1998 on the supplementary supervision of insurance undertakings in an insurance group
THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION,
Having regard to the Treaty establishing the European Community, and in particular Article 57(2) thereof,
Having regard to the proposal from the Commission (1),
Having regard to the opinion of the Economic and Social Committee (2),
Acting in accordance with the procedure laid down in Article 189b of the Treaty (3),
(1) Whereas the first Council Directive 73/239/EEC of 24 July 1973 on the coordination of laws, regulations and administrative provisions relating to the taking up and pursuit of the business of direct insurance other than life assurance (4) and the first Council Directive 79/267/EEC of 5 March 1979 on the coordination of laws, regulations and administrative provisions relating to the taking up and pursuit of the business of direct life assurance (5) require insurance undertakings to have solvency margins;
(2) Whereas, under Council Directive 92/49/EEC of 18 June 1992 on the coordination of laws, regulations and administrative provisions relating to direct insurance other than life assurance and amending Directives 73/239/EEC and 88/357/EEC (6) and Council Directive 92/96/EEC of 10 November 1992 on the coordination of laws, regulations and administrative provisions relating to direct life assurance and amending Directives 79/267/EEC and 90/619/EEC (7) the taking up and the pursuit of the business of insurance are subject to the granting of a single official authorisation issued by the authorities of the Member State in which an insurance undertaking has its registered office (home Member State); whereas such authorisation allows an undertaking to carry on business throughout the Community, under either the right of establishment or the freedom to provide services; whereas the competent authorities of home Member States are responsible for monitoring the financial health of insurance undertakings, including their solvency;
(3) Whereas measures concerning the supplementary supervision of insurance undertakings in an insurance group should enable the authorities supervising an insurance undertaking to form a more soundly based judgment of its financial situation; whereas such supplementary supervision should take into account certain undertakings which are not at present subject to supervision under Community Directives; whereas this Directive does not in any way imply that Member States are required to undertake supervision of those undertakings considered individually;
(4) Whereas insurance undertakings in a common insurance market engage in direct competition with each other and the rules concerning capital requirements must therefore be equivalent; whereas, to that end, the criteria applied to determine supplementary supervision must not be left solely to the discretion of Member States; whereas the adoption of common basic rules will be in the best interests of the Community in that it will prevent distortions of competition; whereas it is necessary to eliminate certain divergences between the laws of the Member States as regards the prudential rules to which insurance undertakings that are part of an insurance group are subject;
(5) Whereas the approach adopted consists in bringing about such harmonisation as is essential, necessary and sufficient to achieve the mutual recognition of prudential control systems in this field; whereas the aim of this Directive is in particular to protect the interests of insured persons;
(6) Whereas certain provisions of this Directive define minimum standards; whereas a home Member State may lay down stricter rules for insurance undertakings authorised by its own competent authorities;
(7) Whereas this Directive provides for the supplementary supervision of any insurance company which is a participating undertaking in at least one insurance undertaking, reinsurance undertaking or non-member-country insurance undertaking and, under different rules, for the supplementary supervision of any insurance company whose parent undertaking is an insurance holding company, a reinsurance undertaking, a non-member-country insurance undertaking or a mixed-activity insurance holding company; whereas the supervision of individual insurance undertakings by the competent authorities remains the essential principle of insurance supervision;
(8) Whereas it is necessary to calculate an adjusted solvency situation for insurance undertakings forming part of an insurance group; whereas different methods are applied by the competent authorities in the Community to take into account the effects on the financial situation of an insurance undertaking attributable to the fact that it belongs to an insurance group; whereas this Directive lays down three methods to effect that calculation; whereas the principle is accepted that these methods are prudentially equivalent;
(9) Whereas the solvency of a related subsidiary insurance undertaking of an insurance holding company, reinsurance undertaking or non-member-country insurance undertaking may be affected by the financial resources of the group of which it is a part and by the distribution of financial resources within that group; whereas the competent authorities should be provided with the means of exercising supplementary supervision and of taking appropriate measures at the level of the insurance undertaking where its solvency is or may be jeopardised;
(10) Whereas the competent authorities should have access to all the information relevant to the exercise of supplementary supervision; whereas cooperation between the authorities responsible for the supervision of insurance undertakings as well as between those authorities and the authorities responsible for the supervision of other financial sectors should be established;
(11) Whereas intra-group transactions can affect the financial position of an insurance undertaking; whereas the competent authorities should be in a position to exercise general supervision over certain types of such intra-group operations and take appropriate measures at the level of the insurance undertaking where its solvency is or may be jeopardised,
HAVE ADOPTED THIS DIRECTIVE:
Article 1 Definitions
For the purposes of this Directive:
(a) insurance undertaking means an undertaking which has received official authorisation in accordance with Article 6 of Directive 73/239/EEC or Article 6 of Directive 79/267/EEC;
(b) non-member-country insurance undertaking means an undertaking which would require authorisation in accordance with Article 6 of Directive 73/239/EEC or Article 6 of Directive 79/267/EEC if it had its registered office in the Community;
(c) reinsurance undertaking means an undertaking, other than an insurance undertaking or a non-member-country insurance undertaking, the main business of which consists in accepting risks ceded by an insurance undertaking, a non-member-country insurance undertaking or other reinsurance undertakings;
(d) parent undertaking means a parent undertaking within the meaning of Article 1 of Directive 83/349/EEC (8) and any undertaking which, in the opinion of the competent authorities, effectively exercises a dominant influence over another undertaking;
(e) subsidiary undertaking means a subsidiary undertaking within the meaning of Article 1 of Directive 83/349/EEC and any undertaking over which, in the opinion of the competent authorities, a parent undertaking effectively exercises a dominant influence. All subsidiaries of subsidiary undertakings shall also be considered subsidiaries of the parent undertaking which is at the head of those undertakings;
(f) participation means participation within the meaning of Article 17, first sentence, of Directive 78/660/EEC (9) or the holding, directly or indirectly, of 20 % or more of the voting rights or capital of an undertaking;
(g) participating undertaking means an undertaking which is either a parent undertaking or another undertaking which holds a participation;
(h) related undertaking means either a subsidiary or other undertaking in which a participation is held;
(i) insurance holding company means a parent undertaking the main business of which is to acquire and hold participations in subsidiary undertakings, where those subsidiary undertakings are exclusively or mainly insurance undertakings, reinsurance undertakings or non-member-country insurance undertakings, one at least of such subsidiary undertakings being an insurance undertaking;
(j) mixed-activity insurance holding company means a parent undertaking, other than an insurance undertaking, a non-member-country insurance undertaking, a reinsurance undertaking or an insurance holding company, which includes at least one insurance undertaking among its subsidiary undertakings;
(k) competent authorities means the national authorities which are empowered by law or regulation to supervise insurance undertakings.
Article 2 Cases of application of supplementary supervision of insurance undertakings
1. In addition to the provisions of Directives 73/239/EEC and 79/267/EEC which lay down the rules for the supervision of insurance undertakings, Member States shall provide supervision of any insurance undertaking which is a participating undertaking in at least one insurance undertaking, reinsurance undertaking, or non-member-country insurance undertaking shall be supplemented in the manner prescribed in Articles 5, 6, 8 and 9.
2. Every insurance undertaking the parent undertaking of which is an insurance holding company, a reinsurance undertaking or a non-member-country insurance undertaking shall be subject to supplementary supervision in the manner prescribed in Articles 5(2), 6, 8 and 10.
3. Every insurance undertaking the parent undertaking of which is a mixed-activity insurance holding company shall be subject to supplementary supervision in the manner prescribed in Articles 5(2), 6 and 8.
Article 3 Scope of supplementary supervision
1. The exercise of supplementary supervision in accordance with Article 2 shall in no way imply that the competent authorities are required to play a supervisory role in relation to the non-member-country insurance undertaking, insurance holding company or mixed-activity insurance holding company or reinsurance undertaking taken individually.
2. The supplementary supervision shall take into account:
- related undertakings of the insurance undertaking,
- participating undertakings in the insurance undertaking,
- related undertakings of a participating undertaking in the insurance undertaking,
referred to in Articles 5, 6, 8, 9 and 10.
3. Member States may decide not to take into account in the supplementary supervision referred to in Article 2 undertakings having their registered office in a non-member country where there are legal impediments to the transfer of the necessary information, without prejudice to the provisions of Annex I, point 2.5, and of Annex II, point 4.
Furthermore, the competent authorities responsible for exercising supplementary supervision may in the cases listed below decide on a case-by-case basis not to take an undertaking into account in the supplementary supervision referred to in Article 2:
- if the undertaking which should be included is of negligible interest with respect to the objectives of the supplementary supervision of insurance undertakings,
- if the inclusion of the financial situation of the undertaking would be inappropriate or misleading with respect to the objectives of the supplementary supervision of insurance undertakings.
Article 4 Competent authorities for exercising supplementary supervision
1. Supplementary supervision shall be exercised by the competent authorities of the Member State in which the insurance undertaking has received official authorisation under Article 6 of Directive 73/239/EEC or Article 6 of Directive 79/267/EEC.
2. Where insurance undertakings authorised in two or more Member States have as their parent undertaking the same insurance holding company, reinsurance undertaking, non-member-country insurance undertaking or mixed-activity insurance holding company, the competent authorities of the Member States concerned may reach agreement as to which of them will be responsible for exercising supplementary supervision.
3. Where a Member State has more than one competent authority for the prudential supervision of insurance undertakings and reinsurance undertakings, such Member State shall take the requisite measures to organise coordination between those authorities.
Article 5 Availability and quality of information
1. Member States shall prescribe that the competent authorities shall require that every insurance undertaking subject to supplementary supervision shall have adequate internal control mechanisms in place for the production of any data and information relevant for the purposes of such supplementary supervision.
2. Member States shall take the appropriate steps to ensure that there are no legal impediments within their jurisdiction preventing the undertakings that are subject to the supplementary supervision and their related undertakings and participating undertakings from exchanging among themselves any information relevant for the purposes of such supplementary supervision.
Article 6 Access to information
1. Member States shall provide that their competent authorities responsible for exercising supplementary supervision shall have access to any information which would be relevant for the purpose of supervision of an insurance undertaking subject to such supplementary supervision. The competent authorities may address themselves directly to the relevant undertakings referred to in Article 3(2) to obtain the necessary information only if such information has been requested from the insurance undertaking and has not been supplied by it.
2. Member States shall provide that their competent authorities may carry out within their territory, themselves or through the intermediary of persons whom they appoint for that purpose, on-the-spot verification of the information referred to in paragraph 1 at:
- the insurance undertaking subject to supplementary supervision,
- subsidiary undertakings of that insurance undertaking,
- parent undertakings of that insurance undertaking,
- subsidiary undertakings of a parent undertaking of that insurance undertaking.
3. Where, in applying this Article, the competent authorities of one Member State wish in specific cases to verify important information concerning an undertaking situated in another Member State which is a related insurance undertaking, a subsidiary undertaking, a parent undertaking or a subsidiary of a parent undertaking of the insurance undertaking subject to supplementary supervision, they must ask the competent authorities of that other Member State to have that verification carried out. The authorities which receive such a request must act on it within the limits of their jurisdiction by carrying out the verification themselves, by allowing the authorities making the request to carry it out or by allowing an auditor or expert to carry it out.
Article 7 Cooperation between competent authorities
1. Where insurance undertakings established in different Member States are directly or indirectly related or have a common participating undertaking, the competent authorities of each Member State shall communicate to one another on request all relevant information which may allow or facilitate the exercise of supervision pursuant to this Directive and shall communicate on their own initiative any information which appears to them to be essential for the other competent authorities.
2. Where an insurance undertaking and either a credit institution as defined in Directive 77/780/EEC (10) or an investment firm as defined in Directive 93/22/EEC (11), or both, are directly or indirectly related or have a common participating undertaking, the competent authorities and the authorities with public responsibility for the supervision of those other undertakings shall cooperate closely. Without prejudice to their respective responsibilities, those authorities shall provide one another with any information likely to simplify their task, in particular within the framework of this Directive.
3. Information received pursuant to this Directive and, in particular, any exchange of information between competent authorities which is provided for in this Directive shall be subject to the obligation of professional secrecy defined in Article 16 of Directive 92/49/EEC and Article 15 of Directive 92/96/EEC.
Article 8 Intra-group transactions
1. Member States shall provide that the competent authorities exercise general supervision over transactions between:
(a) an insurance undertaking and:
(i) a related undertaking of the insurance undertaking;
(ii) a participating undertaking in the insurance undertaking;
(iii) a related undertaking of a participating undertaking in the insurance undertaking;
(b) an insurance undertaking and a natural person who holds a participation in:
(i) the insurance undertaking or any of its related undertakings;
(ii) a participating undertaking in the insurance undertaking;
(iii) a related undertaking of a participating undertaking in the insurance undertaking.
These transactions concern in particular:
- loans,
- guarantees and off-balance-sheet transactions,
- elements eligible for the solvency margin,
- investments,
- reinsurance operations,
- agreements to share costs.
2. To this end, Member States shall require at least annual reporting by the insurance undertakings to the competent authorities of significant transactions as provided for in paragraph 1.
If, on the basis of this information, it appears that the solvency of the insurance undertaking is, or may be, jeopardised, the competent authority shall take appropriate measures at the level of the insurance undertaking.
Article 9 Adjusted solvency requirement
1. In the case referred to in Article 2(1), Member States shall require that an adjusted solvency calculation be carried out in accordance with Annex I.
2. Any related undertaking, participating undertaking or related undertaking of a participating undertaking shall be included in the calculation referred to in paragraph 1.
3. If the calculation referred to in paragraph 1 demonstrates that the adjusted solvency is negative, the competent authorities shall take appropriate measures at the level of the insurance undertaking in question.
Article 10 Reinsurance undertakings, insurance holding companies and non-member-country insurance undertakings
1. In the case referred to in Article 2(2), Member States shall require the method of supplementary supervision to be applied in accordance with Annex II.
2. In the case referred to in Article 2(2), the calculation shall include all related undertakings of the insurance holding company, the reinsurance undertaking or the non-member-country insurance undertaking, in the manner provided for in Annex II.
3. If, on the basis of this calculation, the competent authorities conclude that the solvency of a subsidiary insurance undertaking of the insurance holding company, the reinsurance undertaking or the non-member-country insurance undertaking is, or may be, jeopardised, they shall take appropriate measures at the level of that insurance undertaking.
Article 11 Implementation
1. Member States shall adopt not later than 5 June 2000 the laws, regulations and administrative provisions necessary to comply with this Directive. They shall immediately inform the Commission thereof.
2. Member States shall provide that the provisions referred to in paragraph 1 shall first apply to the supervision of accounts for financial years beginning on 1 January 2001 or during that calendar year.
3. When Member States adopt the measures referred to in paragraph 1, they shall contain a reference to this Directive or shall be accompanied by such reference on the occasion of their official publication. The methods of making such reference shall be laid down by Member States.
4. Member States shall communicate to the Commission the main provisions of national law which they adopt in the field covered by this Directive.
5. Not later than 1 January 2006 the Commission shall submit to the Insurance Committee a report on the application of this Directive and, if necessary, on the need for further harmonisation.
Article 12 Entry into force
This Directive shall enter into force on the day of its publication in the Official Journal of the European Communities.
Article 13 Addressees
This Directive is addressed to the Member States.
Done at Luxembourg, 27 October 1998.