1973L0239 — EN — 20.03.2002 — 012.001 — 1
This document is meant purely as a documentation tool and the institutions do not assume any liability for its contents
►B FIRSTCOUNCILDIRECTIVE
of24July1973
on the coordination of laws, Regulations and administrative provisions relating to the taking-up
andpursuitofthebusinessofdirectinsuranceotherthanlifeassurance
(73/239/EEC)
(OJ L 228, 16.8.1973, p. 3)
Amended by:
Official Journal
No page date
►M1Council Directive 76/580/EEC of 29 June 1976 L 189 13 13.7.1976
►M2Council Directive 84/641/EEC of 10 December 1984 L 339 21 27.12.1984
►M3Council Directive 87/343/EEC of 22 June 1987 L 185 72 4.7.1987
►M4Council Directive 87/344/EEC of 22 June 1987 L 185 77 4.7.1987
►M5Second Council Directive 88/357/EEC of 22 June 1988 L 172 1 4.7.1988
►M6Council Directive 90/618/EEC of 8 November 1990 L 330 44 29.11.1990
►M7Council Directive 92/49/EEC of 18 June 1992 L 228 1 11.8.1992
►M8European Parliament and Council Directive 95/26/EC of 29 June 1995 L 168 7 18.7.1995
►M9Directive 2000/26/EC of the European Parliament and of the Council of
16 May 2000L 181 65 20.7.2000
►M10Directive 2002/13/EC of the European Parliament and of the Council of
5 March 2002L 77 17 20.3.2002
Amended by:
►A1Act of Accession of Greece L 291 17 19.11.1979
►A2Act of Accession of Spain and Portugal L 302 23 15.11.1985
►A3Act of Accession of Austria, Sweden and Finland C241 21 29.8.1994
(adapted by Council Decision 95/1/EC, Euratom, ECSC) L 1 1 1.1.1995
Corrected by:
►C1Corrigendum, OJ L 5, 7.1.1978, p. 27 (73/239/EEC)
NB: This consolidated version contains references to the European unit of account and/or the ecu, which from 1 January 1999
should be understood as references to the euro — Council Regulation (EEC) No 3308/80 (OJ L 345, 20.12.1980, p. 1) andCouncil Regulation (EC) No 1103/97 (OJ L 162, 19.6.1997, p. 1).
▼B
FIRSTCOUNCILDIRECTIVE
of24July1973
on the coordination of laws, Regulations and administrative provi-
sionsrelatingtothetaking-upandpursuitofthebusinessofdirect
insuranceotherthanlife assurance
(73/239/EEC)
THE COUNCIL OF THE EUROPEAN COMMUNITIES,
Having regard to the Treaty establishing the European Economic
Community, and in particular Article 57 (2) thereof;
Having regard to the General Programme (1) for the abolition of restric-
tions on freedom of establishment, and in particular Title IV C thereof;
Having regard to the proposal from the Commission;
Having regard to the Opinion of the European Parliament (2);
Having regard to the Opinion of the Economic and Social
Committee (3);
Whereas by virtue of the General Programme the removal of restric-
tions on the establishment of agencies and branches is, in the case ofthe direct insurance business, dependent on the coordination of theconditions for the taking-upand p ursuit of this business; whereas such
coodination should be effected in the first place in respect of direct
insurance other than life assurance;
Whereas in order to facilitate the taking-upand p ursuit of the business
of insurance, it is essential to eliminate certain divergencies which existbetween national supervisory legislation; whereas in order to achieve
this objective, and at the same time ensure adequate protection for
insured and third parties in all the Member States, it is desirable tocoordinate, in particular, the provisions relating to the financial guaran-tees required of insurance undertakings;
Whereas a classification of risks in the different classes of insurance is
necessary in order to determine, in particular, the activities subject to a
compulsory authorization and the amount of the minimum guaranteefund fixed for the class of insurance concerned;
Whereas it is desirable to exclude from the application of this Directive
mutual associations which, by virtue of their legal status, fulfil appro-
priate conditions as to security and financial guarantees; whereas it isfurther desirable to exclude certain institutions in several MemberStates whose business covers a very limited sector only and isrestricted by law to a specified territory or to specified persons;
Whereas the various laws contain different rules as to the simultaneous
undertaking of health insurance, credit and suretyshipinsurance andinsurance in respect of recourse against third parties and legal defence,whether with one another or with other classes of insurance; whereascontinuance of this divergence after the abolition of restrictions on theright of establishment in classes other than life assurance would mean
that obstacles to establishment would continue to exist; whereas a solu-
tion to this problem must be provided in subsequent coordination to beeffected within a relatively short period of time;
Whereas it is necessary to extend supervision in each Member State to
all the classes of insurance to which this Directive applies; whereas
such supervision is not possible unless the undertaking of such classesof insurance is subject to an official authorization; whereas it is there-fore necessary to define the conditions for the granting or withdrawalof such authorization; whereas provision must be made for a right toapply to the courts should an authorization be refused or withdrawn;1973L0239 — EN — 20.03.2002 — 012.001 — 2
(1) OJ No 2, 15. 1. 1962, p. 36/62.
(2) OJ No C 27, 28. 3. 1968, p. 15.
(3) OJ No 158, 18. 7. 1967, p. 1.
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Whereas it is desirable to bring the classes of insurance known as
transport classes bearing Nos 4, 5, 6, 7 and 12 in Paragraph A of theAnnex, and the credit insurance classes bearing Nos 14 and 15 in para-
graph A of the Annex, under more flexible rules in view of the
continual fluctuations in conditions affecting goods and credit;
Whereas the search for a common method of calculating technical
reserves is at present the subject of studies at Community level;whereas it therefore appears to be desirable to reserve the attainmentof coordination in this matter, as well as questions relating to the deter-
mination of categories of investments and the valuation of assets, for
subsequent Directives;
Whereas it is necessary that insurance undertakings should possess,
over and above technical reserves of sufficient amount to meet theirunderwriting liabilities, a supplementary reserve, to be known as thesolvency margin, and represented by free assets, in order to provide
against business fluctuations; whereas in order to ensure that the
requirements imposed for such purposes are determined according toobjective criteria, whereby undertakings of the same size are placedon an equal footing as regards competition, it is desirable to providethat such margin shall be related to the overall volume of business ofthe undertaking and be determined by reference to two indices of
security, one based on premiums and the other on claims;
Whereas it is desirable to require a minimum guarantee fund related to
the size of the risk in the classes undertaken, in order to ensure thatundertakings possess adequate resources when they are set up and thatin the subsequent course of business the solvency margin shall in noevent fall below a minimum of security;
Whereas it is necessary to make provision for the case where the finan-
cial condition of the undertaking becomes such that it is difficult for it
to meet its underwriting liabilities;
Whereas the coordinated rules concerning the taking-upand p ursuit of
the business or direct insurance within the Community should, in prin-ciple, apply to all undertakings entering the market and, consequently,also to agencies and branches where the head office of the undertaking
is situated outside the Community; whereas it is, nevertheless, desirable
as regards the methods of supervision to make special provision withrespect to such agencies or branches in view of the fact that the assetsof the undertakings to which they belong are situated outside theCommunity;
Whereas it is, however, desirable to permit the relaxation of such
special conditions, while observing the principle that such agencies
and branches should not obtain more favourable treatment than under-takings within the Community;
Whereas certain transitional provisions are required in order, in parti-
cular, to permit small and medium-sized undertakings already inexistence to adapt themselves to the requirements which must beimposed by the Member States in pursuance of this Directive, subject
to the application of Article 53 of the Treaty;
Whereas it is important to guarantee the uniform application of coordi-
nated rules and to provide, in this respect, for close collaborationbetween the Commission and the Member States in this field;
HAS ADOPTED THIS DIRECTIVE:
Title I— General provisions
Article 1
1. This Directive concerns the taking-upand p ursuit of the self-
employed activity of direct insurance, including the provision of assis-tance referred to in paragraph 2, carried on by undertakings which are1973L0239 — EN — 20.03.2002 — 012.001 — 3
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established in the territory of a Member State or which wish to become
established there.
2. The assistance activity shall be the assistance provided for
persons who get into difficulties while travelling, while away fromhome or while away from their permanent residence. It shall consistin undertaking, against the prior payment of a premium, to make aid
immediately available to the beneficiary under an assistance contract
where that person is in difficulties following the occurrence of achance event, in the cases and under the conditions set out in thecontract.
The aid may consist in the provision of benefits in cash or in kind. The
provision of benefits in kind may also be effected by means of the staffand equipment of the person providing them.
The assistance activity does not cover servicing, maintenance, after-
sales service or the mere indication or provision of aid as an inter-
mediary.
3. The classification by classes of the activity referred to in this
Article appears in the Annex.
Article 2
This Directive does not apply to:
1. The following kinds of insurance:
(a) Life assurance, that is to say, the branch of insurance which
comprises, in particular, assurance on survival to a stipulatedage only, assurance on death only, assurance on survival to astipulated age or an earlier death, life assurance with return of
premiums, tontines, marriage assurance, and birth assurance;
(b) Annuities;
(c) Supplementary insurance carried on by life-assurance undertak-
ings, that is to say, insurance against personal injury including
incapacity for employment, insurance against death resultingfrom an accident, and insurance against disability resultingfrom an accident or sickness, where these various kinds of insur-ance are underwritten in addition to life assurance;
(d) Insurance forming part of a statutory system of social security;
(e) The type of insurance existing in Ireland and the United
Kingdom known as ‘permanent health insurance not subject tocancellation’.
2. The following operations:
(a) Capital redemption operations, as defined by the law in each
Member State;
(b) Operations of provident and mutual benefit institutions whose
benefits vary according to the resources available and in whichthe contributions of the members are determined on a flat-ratebasis;
(c) Operations carried out by organizations not having a legal
personality with the purpose of providing mutual cover for their
members without there being any payment of premiums or
constitution of technical reserves;
(d) Pending further coordination, export credit insurance operations
for the account of or guaranteed by the State, or where the State
is the insurer.
3. The assistance activity in which liability is limited to the following
operations provided in the event of an accident or breakdown invol-1973L0239 — EN — 20.03.2002 — 012.001 — 4
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ving a road vehicle which normally occurs in the territory of the
Member State of the undertaking providing cover:
— an on-the-spot breakdown service for which the undertaking
providing cover uses, in most circumstances, its own staff andequipment,
— the conveyance of the vehicle to the nearest or the most appro-
priate location at which repairs may be carried out and the
possible accompaniment, normally by the same means of assis-
tance, of the driver and passengers to the nearest location fromwhere they may continue their journey by other means,
— if provided for by the Member State of the undertaking
providing cover, the conveyance of the vehicle, possibly accom-panied by the driver and passengers, to their home, point ofdeparture or original destination within the same State,
unless such operations are carried out by an undertaking subject to
this Directive.
In the cases referred to in the first two indents, the condition that the
accident or breakdown must have happened in the territory of the
Member State of the undertaking providing cover
(a) shall not apply where the latter is a body of which the benefi-
ciary is a member and the breakdown service or conveyance ofthe vehicle is provided simply on presentation of a membershipcard, without any additional premium being paid, by a similarbody in the country concerned on the basis of a reciprocal
agreement;
(b) shall not preclude the provision of such assistance in Ireland and
the United Kingdom by a single body operating in both States.
In the circumstances referred to in the third indent, where the acci-
dent or the breakdown has occurred in the territory of Ireland or, inthe case of the United Kingdom, in the territory of Northern Ireland,the vehicle, possibly accompanied by the driver and passengers, may
be conveyed to their home, point of departure or original destination
within either territory.
Moreover, the Directive does not concern assistance operations
carried out on the occasion of an accident to or the breakdown of a
road vehicle and consisting in conveying the vehicle which has beeninvolved in an accident or has broken down outside the territory ofthe Grand Duchy of Luxembourg, possibly accompanied by thedriver and passengers, to their home, where such operations arecarried out by the Automobile Club of the Grand Duchy of Luxem-
bourg.
Undertakings subject to this Directive may engage in the activity
referred to under this point only if they have received authorization
for class 18 in point A of the Annex without prejudice to point C of
the said Annex. In that event this Directive shall apply to the opera-tions in question.
Article 3
1. This Directive shall not apply to mutual associations which fulfil
all the following conditions:
(a) the articles of association must contain provisions for calling up
additional contributions or reducing their benefits;
(b) their business does not cover liability risks unless these constitute
ancillary cover within the meaning of point C of the Annex or
credit and suretyshiprisks;
(c) the annual contribution income for the activities covered by this
Directive must not exceed EUR 5 million; and
(d) at least half of the contribution income from the activities covered
by this Directive must come from persons who are members of themutual association.1973L0239 — EN — 20.03.2002 — 012.001 — 5
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This Directive shall not apply to undertakings which fulfil all the
following conditions:
— the undertaking does not pursue any activity falling within the
scope of this Directive other than the one described in class 18 in
point A of the Annex,
— this activity is carried out exclusively on a local basis and consists
only of benefits in kind, and
— the total annual income collected in respect of the activity of assis-
tance to persons who get into difficulties does not exceedEUR 200000.
Nevertheless, the provisions of this Article shall not prevent a mutual
insurance undertaking from applying, or continuing, to be licensedunder this Directive.
2. This Directive shall not, moreover, apply to mutual associations
which have concluded with other associations of this nature an agree-
ment which provides for the full reinsurance of the insurance policiesissued by them or under which the concessionary undertaking is tomeet the liabilities arising under such policies in the place of theceding undertaking.
In such a case the concessionary undertaking shall be subject to the
rules of this Directive.
Article 4
This Directive shall not apply to the following institutions unless their
statutes or the law are amended as regards capacity:
(a)InGermany
The following institutions under public law enjoying a monopoly
(Monopolanstalten):
1. Badische Gebäudeversicherungsanstalt, Karlsruhe,
2. Bayerische Landesbrandversicherungsanstalt, Munich,3. Bayerische Landestierversicherungsanstalt, Schlachtviehversi-
cherung, Munich,
4. Braunschweigische Landesbrandversicherungsanstalt, Bruns-
wick,
5. Hamburger Feuerkasse, Hamburg,6. Hessische Brandversicherungsanstalt (Hessische Brandversi-
cherungskammer), Darmstadt,
7. Hessische Brandversicherungsanstalt, Kassel,8. Hohenzollernsche Feuerversicherungsanstalt, Sigmaringen,9. Lippische Landesbrandversicherungsanstalt, Detmold,
10. Nassauische Brandversicherungsanstalt, Wiesbaden,11. Oldenburgische Landesbrandkasse, Oldenburg,12. Ostfriesische Landschaftliche Brandkasse, Aurich,13. Feuersozietät Berlin, Berlin,14. Württembergische Gebäudebrandversicherungsanstalt, Stuttgart.However, territorial capacity shall not be regarded as modified in
the case of a merger between such institutions which has the effectof maintaining for the benefit of the new institution the territorialcapacity of the institutions which have merged, nor shall capacityas to the classes of insurance be regarded as modified if one of
these institutions takes over in respect of the same territory one or
more of the classes of another such institution.
The following semi-public institutions:
1. Postbeamtenkrankenkasse,
2. Krankenversorgung der Bundesbahnbeamten;1973L0239 — EN — 20.03.2002 — 012.001 — 6
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(b)InFrance
The following institutions:
1. Caisse départementale des incendiés des Ardennes,
2. Caisse départementale des incendiés de la Côte-d'Or,
3. Caisse départementale des incendiés de la Marne,
4. Caisse départementale des incendiés de la Meuse,
5. Caisse départementale des incendiés de la Somme,
6. Caisse départementale grêle du Gers,7. Caisse départementale grêle de l'Hérault;
(c)InIreland
Voluntary Health Insurance Board;
(d)InItaly
The Cassa di Previdenza per l'assicurazione degli sportivi (Spor-
tass);
(e)IntheUnited Kingdom
The Crown Agents;
(f)InDenmark
Falcks Redningskorps A/S, København;
(g)InSpain
The following institutions:
1. Comisaría de Seguro Obligatorio de Viajeros,
2. Consorcio de Compensación de Seguros,
3. Fondo Nacional de Garantía de Riesgos de la Circulación.
Article 5
For the purposes of this Directive:
(a) ‘Unit of account’ means the European unit of account (EUA) as
defined by Commission Decision 3289/75/ECSC(
1). Wherever this
Directive refers to the unit of account, the conversion value innational currency to be adopted shall, as from 31 December ofeach year, be that of the last day of the preceding month ofOctober for which EUA conversion values are available in all the
Community currencies;
(b) ‘Matching assets’ means the representation of underwriting liabil-
ities expressed in a particular currency by assets expressed orrealizable in the same currency;
(c) ‘Localization of assets’ means the existence of assets, whether
movable of immovable, within a Member State but shall not beconstrued as involving a requirement that movable property bedeposited or that immovable property be subjected to restrictivemeasures such as the registration of mortgages. Assets representedby claims against debtors shall be regarded as situated in the
Member State where they are to be liquidated;
(d) ‘Large risks’ means:
(i) risks classified under classes 4, 5, 6, 7, 11 and 12 of point A
of the Annex;1973L0239 — EN — 20.03.2002 — 012.001 — 7
(1) OJ No L 327, 19. 12. 1975, p. 4.▼M2
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(ii) risks classified under classes 14 and 15 of point A of the
Annex, where the policy-holder is engaged professionally inan industrial or commercial activity or in one of the liberal
professions, and the risks relate to such activity;
(iii)►
M6risks classified under classes 3, 8, 9, 10, 13 and 16 of
point A of the Annex ◄in so far as the policy-holder exceeds
the limits of at least two of the following three criteria:
firststage: until 31 December 1992:
— balance-sheet total: 12,4 million ECU,
— net turnover: 24 million ECU,— average number of employees during the financial year:
500.
secondstage: from 1 January 1993:
— balance-sheet total: 6,2 million ECU,
— net turnover: 12,8 million ECU,— average number of employees during the financial year:
250.
If the policy-holder belongs to a group of undertakings for
which consolidated accounts within the meaning of Directive83/349/EEC (
1) are drawn up, the criteria mentioned above
shall be applied on the basis of the consolidated accounts.
Each Member State may add to the category mentioned under
(iii) risks insured by professional associations, joint venturesor temporary groupings.
TitleII— Rulesapplicabletoundertakingswhoseheadofficesare
situatedwithintheCommunity
SectionA: Conditionsofadmission
Article 6
The taking upof the business of direct insurance shall be subject to
prior official authorization.
Such authorization shall be sought from the competent authorities of
the home Member State by:
(a) any undertaking which establishes its head office within the terri-
tory of that State;
(b) any undertaking which, having received the authorization referred
to in the first subparagraph, extends its business to an entire class
or to other classes.
Article 7
1. Authorization shall be valid for the entire Community. It shall
permit an undertaking to carry on business there, under either the right
of establishment or the freedom to provide services.
2. Authorization shall be granted for a particular class of insurance.
It shall cover the entire class, unless the applicant wishes to cover onlysome of the risks pertaining to that class, as listed in point A of theAnnex.
However:
(a) Member States may grant authorization for the groups of classes
listed in point B of the Annex, attaching to them the appropriate
denominations specified therein;
(b) authorization granted for one class or a groupof classes shall also
be valid for the purpose of covering ancillary risks included in1973L0239 — EN — 20.03.2002 — 012.001 — 8
(1) OJ No L 193, 18. 7. 1983, p. 1.▼B
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another class if the conditions imposed in point C of the Annex are
fulfilled.
Article 8
1. The home Member State shall require every insurance under-
taking for which authorization is sought to:
(a) adopt one of the following forms:
— in the case of the Kingdom of Belgium: ‘société anonyme —
naamloze vennootschap’ — , ‘société en commandite par
actions — commanditaire vennootschapopaandelen’ — ,
‘association d'assurance mutuelle — onderlingeverzekeringsvereniging’ — , ‘société coopérative — coöpera-tieve vennootschap’;
— in the case of the Kingdom of Denmark: ‘aktieselskaber’,
‘gensidige selskaber’;
— in the case of the Federal Republic of Germany: ‘Aktienge-
sellschaft’, ‘Versicherungsverein auf Gegenseitigkeit’,‘Öffentlich-rechtliches Wettbewerbsversicherungsunternehmen’;
— in the case of the French Republic: ‘société anonyme’, ‘société
d'assurance mutuelle’, ‘institution de prévoyance régie par lecode de la sécurité sociale’, ‘institution de prévoyance régie
par le code rural’ and ‘mutuelles régies par le code de la mutua-
lité’;
— in the case of Ireland: incorporated companies limited by shares
or by guarantee or unlimited;
— in the case of the Italian Republic: ‘società per azioni’, ‘società
cooperativa’, ‘mutua di assicurazione’;
— in the case of the Grand Duchy of Luxembourg: ‘société
anonyme’, ‘société en commandite par actions’, ‘associationd'assurances mutuelles’, ‘société coopérative’;
— in the case of the Kingdom of the Netherlands: ‘naamloze
vennootschap’, ‘onderlinge waarborgmaatschappij’;
— in the case of the United Kingdom: incorporated companies
limited by shares or by guarantee or unlimited, societies regis-
tered under the Industrial and Provident Societies Acts,societies registered under the Friendly Societies Acts, the asso-ciation of underwriters known as Lloyd's;
— in the case of the Hellenic Republic: ‘ ανώνυµη εταιρία ’,
‘αλληλασφαλιστικός συνεταιρισµός ’;
— in the case of the Kingdom of Spain: ‘sociedad anónima’, ‘soci-
edad mutua’, ‘sociedad cooperativa’;
— in the case of the Portuguese Republic: ‘sociedade anónima’,
‘mútua de seguros’;
— in the case of the Republic of Austria: ‘Aktiengesellschaft’,
‘Versicherungsverein auf Gegenseitigkeit’;
— in the case of the Republic of Finland: ‘keskinäinen
vakuutusyhtiö — ömsesidigt försäkringsbolag’ — ,‘vakuutusosakeyhtiö — försäkringsaktiebolag’ — ,
‘vakuutusyhdistys — försäkringsförening’;
— in the case of the Kingdom of Sweden: ‘försäkringsaktiebolag’,
‘ömsesidiga försäkringsbolag’, ‘understödsföreningar’.
An insurance undertaking may also adopt the form of a European
Company (SE) when that has been established.
Furthermore, Member States may, where appropriate, set up under-
takings in any public-law form provided that such bodies have astheir objects insurance operations under conditions equivalent tothose under which private-law undertakings operate;
(b) limit its objects to the business of insurance and operations arising
directly therefrom, to the exclusion of all other commercial busi-ness;1973L0239 — EN — 20.03.2002 — 012.001 — 9
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(c) submit a scheme of operations in accordance with Article 9;
(d) possess the minimum guarantee fund provided for in Article 17 (2);
(e) be effectively run by persons of good repute with appropriate
professional qualifications or experience;
(f) communicate the name and address of the claims representative
appointed in each Member State other than the Member State in
which the authorisation is sought if the risks to be covered are clas-sified in class 10 of point A of the Annex, other than carrier'sliability.
Moreover, where close links exist between the insurance undertaking
and other natural or legal persons, the competent authorities shall grant
authorization only if those links do not prevent the effective exercise oftheir supervisory functions.
The competent authorities shall also refuse authorization if the laws,
regulations or administrative provisions of a non-member countrygoverning one or more natural or legal persons with which the under-taking has close links, or difficulties involved in their enforcement,prevent the effective exercise of their supervisory functions.
The competent authorities shall require insurance undertaking to
provide them with the information they require to monitor compliancewith the conditions referred to in this paragraph on a continuous basis.
1a. Member States shall require that the head offices of insurance
undertakings be situated in the same Member State as their registeredoffices.
2. An undertaking seeking authorization to extend its business to
other classes or to extend an authorization covering only some of the
risks pertaining to one class shall be required to submit a scheme of
operations in accordance with Article 9.
It shall, furthermore, be required to show proof that it possesses the
solvency margin provided for in Article 16 and, if with regard to such
other classes Article 17 (2) requires a higher minimum guarantee fundthan before, that is possesses that minimum.
3. Nothing in this Directive shall prevent Member States from main-
taining in force or introducing laws, regulations or administrative
provisions requiring approval of the memorandum and articles of asso-ciation and communication of any other documents necessary for thenormal exercise of supervision.
Member States shall not, however, adopt provisions requiring the prior
approval or systematic notification of general and special policy condi-tions, scales of premiums and forms and other printed documentswhich an undertaking intends to use in its dealings with policyholders.
Member States may not retain or introduce prior notification or
approval of proposed increases in premium rates except as part ofgeneral price-control systems.
Nothing in this Directive shall prevent Member States from subjecting
undertakings seeking or having obtained authorization for class 18 inpoint A of the Annex to checks on their direct or indirect resources instaff and equipment, including the qualification of their medical teamsand the quality of the equipment available to such undertakings to meet
their commitments arising out of this class of insurance.
4. The abovementioned provisions may not require that any applica-
tion for authorization be considered in the light of the economicrequirements of the market.1973L0239 — EN — 20.03.2002 — 012.001 — 10
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Article 9
The scheme of operations referred to in Article 8 (1) (c) shall include
particulars or proof concerning:
(a) the nature of the risks which the undertaking proposes to cover;
(b) the guiding principles as to reinsurance;
(c) the items constituting the minimum guarantee fund;
(d) estimates of the costs of setting upthe administrative services and
the organization for securing business; the financial resourcesintended to meet those costs and, if the risks to be covered are clas-sified in class 18 in point A of the Annex, the resources at the
undertaking's disposal for the provision of the assistance promised
and, in addition, for the first three financial years:
(e) estimates of management expenses other than installation costs, in
particular current general expenses and commissions;
(f) estimates of premiums or contributions and claims;
(g) a forecast balance sheet;
(h) estimates of the financial resources intended to cover underwriting
liabilities and the solvency margin.
Article 10
1. An insurance undertaking that proposes to establish a branch
within the territory of another Member State shall notify the competent
authorities of its home Member State.
2. The Member States shall require every insurance undertaking that
proposes to establish a branch within the territory of another Member
State to provide the following information when effecting the notifica-
tion provided for in paragraph 1:
(a) the Member State within the territory of which it proposes to estab-
lish a branch;
(b) a scheme of operations setting out, interalia, the types of business
envisaged and the structural organization of the branch;
(c) the address in the Member State of the branch from which docu-
ments may be obtained and to which they may be delivered, it
being understood that that address shall be the one to which all
communications to the authorized agent are sent;
(d) the name of the branch's authorized agent, who must possess suffi-
cient powers to bind the undertaking in relation to third parties andto represent it in relations with the authorities and courts of theMember State of the branch. With regard to Lloyd's, in the eventof any litigation in the Member State of the branch arising out of
underwritten commitments, the insured persons must not be treated
less favourably than if the litigation had been brought against busi-nesses of a conventional type. The authorized agent must,therefore, possess sufficient powers for proceedings to be takenagainst him and must in that capacity be able to bind the Lloyd's
underwriters concerned.
Where the undertaking intends its branch to cover risks in class 10 of
point A of the Annex, not including carrier's liability, it must produce adeclaration that it has become a member of the national bureau and the
national guarantee fund of the Member State of the branch.
3. Unless the competent authorities of the home Member State have
reason to doubt the adequacy of the administrative structure or thefinancial situation of the insurance undertaking or the good repute and
professional qualifications or experience of the directors or managers
or the authorized agent, taking into account the business planned, theyshall within three months of receiving all the information referred to inparagraph 2 communicate that information to the competent authoritiesof the Member State of the branch and shall inform the undertakingconcerned accordingly.1973L0239 — EN — 20.03.2002 — 012.001 — 11
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The competent authorities of the home Member State shall also attest
that the insurance undertaking has the minimum solvency margincalculated in accordance with Articles 16 and 17.
Where the competent authorities of the home Member State refuse to
communicate the information referred to in paragraph 2 to the compe-
tent authorities of the Member State of the branch they shall give the
reasons for their refusal to the undertaking concerned within threemonths of receiving all the information in question. That refusal orfailure to act may be subject to a right to apply to the courts in thehome Member State.
4. Before the branch of an insurance undertaking starts business, the
competent authorities of the Member State of the branch shall, withintwo months of receiving the information referred to in paragraph 3,inform the competent authority of the home Member State, if appro-
priate, of the conditions under which, in the interest of the general
good, that business must be carried on in the Member State of thebranch.
5. On receiving a communication from the competent authorities of
the Member State of the branch or, if no communication is receivedfrom them, on expiry of the period provided for in paragraph 4, thebranch may be established and start business.
6. In the event of a change in any of the particulars communicated
under paragraph 2 (b), (c) or (d), an insurance undertaking shall givewritten notice of the change to the competent authorities of the homeMember State and of the Member State of the branch at least one
month before making the change so that the competent authorities of
the home Member State and the competent authorities of the MemberState of the branch may fulfil their respective roles under paragraphs 3and 4.
Article 12
Any decision to refuse an authorization shall be accompanied by the
precise grounds for doing so and notified to the undertaking in ques-tion.
Each Member State shall make provision for a right to apply to the
courts should there be any refusal.
Such provision shall also be made with regard to cases where to
competent authorities have not dealt with an application for an author-ization upon the expiry of a period of six months from the date of itsreceipt.
SectionB: Conditionsforexercise ofbusiness
Article 13
1. The financial supervision of an insurance undertaking, including
that of the business it carries on either through branches or under the
freedom to provide services, shall be the sole responsibility of the
home Member State.
2. That financial supervision shall include verification, with respect
to the insurance undertaking's entire business, of its state of solvency,of the establishment of technical provisions and of the assets coveringthem in accordance with the rules laid down or practices followed inthe home Member State under provisions adopted at Community level.
Where the undertaking in question is authorized to cover the risks clas-
sified in class 18 in point A of the Annex, supervision shall extend tomonitoring of the technical resources which the undertaking has at itsdisposal for the purpose of carrying out the assistance operations it has1973L0239 — EN — 20.03.2002 — 012.001 — 12
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undertaken to perform, where the law of the home Member State
provides for the monitoring of such resources.
3. The competent authorities of the home Member State shall
require every insurance undertaking to have sound administrative and
accounting procedures and adequate internal control mechanisms.
Article 14
The Member State of the branch shall provide that where an insurance
undertaking authorized in another Member State carries on businessthrough a branch the competent authorities of the home Member State
may, after having informed the competent authorities of the Member
State of the branch, carry out themselves or through the intermediaryof persons they appoint for that purpose on-the-spot verification of theinformation necessary to ensure the financial supervision of the under-taking. The authorities of the Member State of the branch mayparticipate in that verification.
Article 15
1. The home Member State shall require every insurance under-
taking to establish adequate technical provisions in respect of itsentire business.
The amount of such technical provisions shall be determined in accor-
dance with the rules laid down in Directive 91/674/EEC.
2. The home Member State shall require every insurance under-
taking to cover the technical provisions in respect of its entire
business by matching assets in accordance with Article 6 of Directive88/357/EEC. In respect of risks situated within the European Commu-nity, those assets must be localized within the Community. MemberStates shall not require insurance undertakings to localize their assets
in any particular Member State. The home Member State may,
however, permit relaxations in the rules on the localization of assets.
3. If the home Member State allows any technical provisions to be
covered by claims against reinsurers, it shall fix the percentage soallowed. In such cases, it may not specify the localization of the assetsrepresenting such claims.
Article 15a
1. Member States shall require every insurance undertaking with a
head office within their territories which underwrites risks included inclass 14 in point A of the Annex (hereinafter referred to as ‘creditinsurance’) to set up an equalization reserve for the purpose of offset-ting any technical deficit or above-average claims ration arising in thatclass in any financial year.
2. The equalization reserve shall be calculated in accordance with
the rules laid down by the home Member State in accordance withone of the four methods set out in point D of the Annex, which shallbe regarded as equivalent.
3. Upto the amount calculated in accordance with the methods set
out in point D of the Annex, the equalization reserve shall be disre-
garded for the purpose of calculating the solvency margin.
4. Member States may exempt insurance undertakings with head
offices within their territories from the obligation to set upequalizationreserves for credit insurance business where the premiums or contribu-tions receivable in respect of credit insurance are less than 4 % of the
total premiums or contributions receivable by them and less than ECU
2 500000.
Article 16
1. Each Member State shall require of every insurance undertaking
whose head office is situated in its territory an adequate available1973L0239 — EN — 20.03.2002 — 012.001 — 13
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solvency margin in respect of its entire business at all times, which is
at least equal to the requirements in this Directive.
2. The available solvency margin shall consist of the assets of the
insurance undertaking free of any foreseeable liabilities, less any intan-
gible items, including:
(a) the paid-up share capital or, in the case of a mutual insurance
undertaking, the effective initial fund plus any members' accountswhich meet all the following criteria:
(i) the memorandum and articles of association must stipulate that
payments may be made from these accounts to members onlyin so far as this does not cause the available solvency marginto fall below the required level, or, after the dissolution of the
undertaking, if all the undertaking's other debts have been
settled;
(ii) the memorandum and articles of association must stipulate,
with respect to any payments referred to in point (i) forreasons other than the individual termination of membership,that the competent authorities must be notified at least onemonth in advance and can prohibit the payment within that
period;
(iii) the relevant provisions of the memorandum and articles of
association may be amended only after the competent authori-ties have declared that they have no objection to theamendment, without prejudice to the criteria stated in points(i) and (ii);
(b) reserves (statutory and free) not corresponding to underwriting
liabilities;
(c) the profit or loss brought forward after deduction of dividends to be
paid.
The available solvency margin shall be reduced by the amount of own
shares directly held by the insurance undertaking.
For those insurance undertakings which discount or reduce their tech-
nical provisions for claims outstanding to take account of investment
income as permitted by Article 60(1)(g) of Council Directive 91/674/
EEC of 19 December 1991 on the annual accounts and consolidatedaccounts of insurance undertakings (
1), the available solvency margin
shall be reduced by the difference between the undiscounted technicalprovisions or technical provisions before deductions as disclosed in thenotes on the accounts, and the discounted or technical provisions after
deductions. This adjustment shall be made for all risks listed in point A
of the Annex, except for risks listed under classes 1 and 2. For classesother than 1 and 2, no adjustment need be made in respect of thediscounting of annuities included in technical provisions.
3. The available solvency margin may also consist of:
(a) cumulative preferential share capital and subordinated loan capital
upto 50 % of the lesser of the available solvency margin and the
required solvency margin, no more than 25 % of which shallconsist of subordinated loans with a fixed maturity, or fixed-termcumulative preferential share capital, provided in the event of thebankruptcy or liquidation of the insurance undertaking, binding
agreements exist under which the subordinated loan capital or
preferential share capital ranks after the claims of all other cred-itors and is not to be repaid until all other debts outstanding at thetime have been settled.
Subordinated loan capital must also fulfil the following conditions:
(i) only fully paid-up funds may be taken into account;
(ii) for loans with a fixed maturity, the original maturity must be
at least five years. No later than one year before the repaymentdate the insurance undertaking must submit to the competent1973L0239 — EN — 20.03.2002 — 012.001 — 14
(1) OJ L 374, 31.12.1991, p. 7.
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authorities for their approval a plan showing how the available
solvency margin will be kept at or brought to the requiredlevel at maturity, unless the extent to which the loan may
rank as a component of the available solvency margin is
gradually reduced during at least the last five years before therepayment date. The competent authorities may authorise theearly repayment of such loans provided application is madeby the issuing insurance undertaking and its available solvency
margin will not fall below the required level;
(iii) loans the maturity of which is not fixed must be repayable
only subject to five years' notice unless the loans are no longerconsidered as a component of the available solvency margin or
unless the prior consent of the competent authorities is specifi-
cally required for early repayment. In the latter event theinsurance undertaking must notify the competent authoritiesat least six months before the date of the proposed repayment,specifying the available solvency margin and the requiredsolvency margin both before and after that repayment. The
competent authorities shall authorise repayment only if the
insurance undertaking's available solvency margin will notfall below the required level;
(iv) the loan agreement must not include any clause providing that
in specified circumstances, other than the winding-up of the
insurance undertaking, the debt will become repayable beforethe agreed repayment dates;
(v) the loan agreement may be amended only after the competent
authorities have declared that they have no objection to the
amendment;
(b) securities with no specified maturity date and other instruments,
including cumulative preferential shares other than those mentionedin point (a), up to 50 % of the lesser of the available solvencymargin and the required solvency margin for the total of such secu-rities and the subordinated loan capital referred to in point (a)
provided they fulfil the following:
(i) they may not be repaid on the initiative of the bearer or
without the prior consent of the competent authority;
(ii) the contract of issue must enable the insurance undertaking to
defer the payment of interest on the loan;
(iii) the lender's claims on the insurance undertaking must rank
entirely after those of all non-subordinated creditors;
(iv) the documents governing the issue of the securities must
provide for the loss-absorption capacity of the debt and unpaid
interest, while enabling the insurance undertaking to continueits business;
(v) only fully paid-up amounts may be taken into account.
4. Upon application, with supporting evidence, by the undertaking to
the competent authority of the home Member State and with the agree-ment of that competent authority, the available solvency margin may
also consist of:
(a) one half of the unpaid share capital or initial fund, once the paid-up
part amounts to 25 % of that share capital or fund, up to 50 % of
the lesser of the available solvency margin and the required
solvency margin;
(b) in the case of mutual or mutual-type association with variable
contributions, any claim which it has against its members by wayof a call for supplementary contribution, within the financial year,upto one half of the difference between the maximum contribu-
tions and the contributions actually called in, and subject to a
limit of 50 % of the lesser of the available solvency margin andthe required solvency margin. The competent national authoritiesshall establish guidelines laying down the conditions under whichsupplementary contributions may be accepted;
(c) any hidden net reserves arising out of the valuation of assets, in so
far as such hidden net reserves are not of an exceptional nature.1973L0239 — EN — 20.03.2002 — 012.001 — 15
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5. Amendments to paragraphs 2, 3 and 4 to take into account devel-
opments that justify a technical adjustment of the elements eligible forthe available solvency margin, shall be adopted in accordance with the
procedure laid down in Article 2 of Council Directive 91/675/EEC (
1).
Article 16a
1. The required solvency margin shall be determined on the basis
either of the annual amount of premiums or contributions, or of theaverage burden of claims for the past three financial years.
In the case, however, of insurance undertakings which essentially
underwrite only one or more of the risks of credit, storm, hail or frost,
the last seven financial years shall be taken as the reference period for
the average burden of claims.
2. Subject to Article 17, the amount of the required solvency margin
shall be equal to the higher of the two results as set out in paragraphs 3and 4.
3. The premium basis shall be calculated using the higher of gross
written premiums or contributions as calculated below, and grossearned premiums or contributions.
Premiums or contributions in respect of the classes 11, 12 and 13 listed
in point A of the Annex shall be increased by 50 %.
The premiums or contributions (inclusive of charges ancillary to
premiums or contributions) due in respect of direct business in the lastfinancial year shall be aggregated.
To this sum there shall be added the amount of premiums accepted for
all reinsurance in the last financial year.
From this sum there shall then be deducted the total amount of
premiums or contributions cancelled in the last financial year, as wellas the total amount of taxes and levies pertaining to the premiums or
contributions entering into the aggregate.
The amount so obtained shall be divided into two portions, the first
portion extending up to EUR 50 million, the second comprising the
excess; 18 % and 16 % of these portions respectively shall be calcu-lated and added together.
The sum so obtained shall be multiplied by the ratio existing in respect
of the sum of the last three financial years between the amount ofclaims remaining to be borne by the undertaking after deduction ofamounts recoverable under reinsurance and the gross amount of claims;this ratio may in no case be less than 50 %.
With the approval of the competent authorities, statistical methods may
be used to allocate the premiums or contributions in respect of the
classes 11, 12 and 13.
4. The claims basis shall be calculated, as follows, using in respect
of the classes 11, 12 and 13 listed in point A of the Annex, claims,
provisions and recoveries increased by 50 %.
The amounts of claims paid in respect of direct business (without any
deduction of claims borne by reinsurers and retrocessionaires) in theperiods specified in paragraph 1 shall be aggregated.
To this sum there shall be added the amount of claims paid in respect
of reinsurances or retrocessions accepted during the same periods andthe amount of provisions for claims outstanding established at the endof the last financial year both for direct business and for reinsuranceacceptances.
From this sum there shall be deducted the amount of recoveries
effected during the periods specified in paragraph 1.1973L0239 — EN — 20.03.2002 — 012.001 — 16
(1) OJ L 374, 31.12.1991, p. 32.
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From the sum then remaining, there shall be deducted the amount of
provisions for claims outstanding established at the commencement ofthe second financial year preceding the last financial year for which
there are accounts, both for direct business and for reinsurance accep-
tances. If the period of reference established in paragraph 1 equalsseven years, the amount of provisions for claims outstanding estab-lished at the commencement of the sixth financial year preceding thelast financial year for which there are accounts shall be deducted.
One-third, or one-seventh, of the amount so obtained, according to the
period of reference established in paragraph 1, shall be divided intotwo portions, the first extending up to EUR 35 million and the secondcomprising the excess; 26 % and 23 % of these portions respectivelyshall be calculated and added together.
The sum so obtained shall be multiplied by the ratio existing in respect
of the sum of the last three financial years between the amount of
claims remaining to be borne by the undertaking after deduction ofamounts recoverable under reinsurance and the gross amount of claims;this ratio may in no case be less than 50 %.
With the approval of the competent authorities, statistical methods may
be used to allocate the claims, provisions and recoveries in respect of
the classes 11, 12 and 13. In the case of the risks listed under class 18
in point A of the Annex, the amount of claims paid used to calculatethe claims basis shall be the costs borne by the insurance undertakingin respect of assistance given. Such costs shall be calculated in accor-dance with the national provisions of the home Member State.
5. If the required solvency margin as calculated in paragraphs 2, 3
and 4 is lower than the required solvency margin of the year before,
the required solvency margin shall be at least equal to the requiredsolvency margin of the year before multiplied by the ratio of theamount of the technical provisions for claims outstanding at the endof the last financial year and the amount of the technical provisions
for claims outstanding at the beginning of the last financial year. In
these calculations technical provisions shall be calculated net of rein-surance but the ratio may in no case be higher than 1.
6. The fractions applicable to the portions referred to in the sixth
subparagraph of paragraph 3 and the sixth subparagraph of paragraph4 shall each be reduced to a third in the case of health insurance prac-
tised on a similar technical basis to that of life assurance, if
(a) the premiums paid are calculated on the basis of sickness tables
according to the mathematical method applied in insurance;
(b) a provision is set up for increasing age;
(c) an additional premium is collected in order to set up a safety
margin of an appropriate amount;
(d) the insurance undertaking may cancel the contract before the end of
the third year of insurance at the latest;
(e) the contract provides for the possibility of increasing premiums or
reducing payments even for current contracts.
Article 17
1. One third of the required solvency margin as specified in Article
16a shall constitute the guarantee fund. This fund shall consist of theitems listed in Article 16(2), (3) and, with the agreement of the compe-tent authority of the home Member State, (4)(c).
2. The guarantee fund may not be less than EUR 2 million. Where,
however, all or some of the risks included in one of the classes 10 to
15 listed in point A of the Annex are covered, it shall be EUR 3million.
Any Member State may provide for a one-fourth reduction of the
minimum guarantee fund in the case of mutual associations andmutual-type associations.1973L0239 — EN — 20.03.2002 — 012.001 — 17
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Article 17a
1. The amounts in euro as laid down in Article 16a (3) and (4) and
Article 17(2) shall be reviewed annually starting 20 September 2003 in
order to take account of changes in the European index of consumer
prices comprising all Member States as published by Eurostat.
The amounts shall be adapted automatically by increasing the base
amount in euro by the percentage change in that index over the periodbetween the entry into force of this Directive and the review date and
rounded upto a multip le of EUR 100000.
If the percentage change since the last adaptation is less than 5 %, no
adaptation shall take place.
2. The Commission shall inform annually the European Parliament
and the Council of the review and the adapted amounts referred to inparagraph 1.
Article 18
1. Member States shall not prescribe any rules as to the choice of
the assets that need not be used as cover for the technical provisionsreferred to in Article 15.
2. Subject to Article 15 (2), Article 20 (1), (2), (3) and (5) and the
last subparagraph of Article 22 (1), Member States shall not restrain
the free disposal of those assets, whether movable or immovable, that
form part of the assets of authorized insurance undertakings.
3. Paragraphs 1 and 2 shall not preclude any measures which
Member States, while safeguarding the interests of the isured persons,are entitled to take as owners or members of or partners to the under-
takings in question.
Article 19
1. Each Member State shall require every undertaking whose head
office is situated in its territory to produce an annual account, coveringall types of operation, of its financial situation, solvency and, asregards cover for risks listed under No 18 in point A of the Annex,
other resources available to them for meeting their liabilities, where
its laws provide for supervision of such resources.
1a. In respect of credit insurance, the undertaking shall make avail-
able to the supervisory authority accounts showing both the technical
results and the technical reserves relating to that business.
2. Member States shall require insurance undertakings with head
offices within their territories to render periodically the returns,together with statistical documents, which are necessary for the
purposes of supervision. The competent authorities shall provide each
other with any documents and information that are useful for thepurposes of supervision.
3. Every Member State shall take all steps necessary to ensure that
the competent authorities have the powers and means necessary for the
supervision of the business of insurance undertakings with head offices
within their territories, including business carried on outwith thoseterritories, in accordance with the Council Directives governing suchbusiness and for the purpose of seeing that they are implemented.
These powers and means must, in particular, enable the competent
authorities to:
(a) make detailed enquiries regarding an undertaking's situation and
the whole of its business, inter alia, by:
— gathering information or requiring the submission of documents
concerning its insurance business,1973L0239 — EN — 20.03.2002 — 012.001 — 18
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— carrying out on-the-spot investigations at the undertaking's
premises;
(b) take any measures with regard to an undertaking, its directors or
managers or the persons who control it, that are appropriate and
necessary to ensure that that undertaking's business continues tocomply with the laws, regulations and administrative provisionswith which the undertaking must comply in each Member Stateand in particular with the scheme of operations insofar as itremains mandatory, and to prevent or remedy any irregularities
prejudicial to the interests of insured persons;
(c) ensure that those measures are carried out, if need be by enforce-
ment and where appropriate through judicial channels.
Member States may also make provision for the competent authorities
to obtain any information regarding contracts which are held by inter-mediaries.
Article 20
1. If an undertaking does not comply with Article 15, the competent
authority of its home Member State may prohibit the free disposal ofits assets after having communicated its intention to the competent
authorities of the Member States in which the risks are situated.
2. For the purposes of restoring the financial situation of an under-
taking the solvency margin of which has fallen below the minimum
required under ►
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home Member State shall require that a plan for the restoration of asound financial situation be submitted for its approval.
In exceptional circumstances, if the competent authority is of the
opinion that the financial situation of the undertaking will deterioratefurther, it may also restrict or prohibit the free disposal of the under-taking's assets. It shall inform the authorities of other Member Stateswithin the territories of which the undertaking carries on business of
any measures it has taken and the latter shall, at the request of the
former, take the same measures.
3. If the solvency margin falls below the guarantee fund as defined
in Article 17, the competent authority of the home Member State shall
require the undertaking to submit a short-term finance scheme for itsapproval.
It may also restrict or prohibit the free disposal of the undertaking's
assets. It shall inform the authorities of other Member States withinthe territories of which the undertaking carries on business accordinglyand the latter shall, at the request of the former, take the samemeasures.
4. The competent authorities may further take all measures neces-
sary to safeguard the interests of insured persons in the cases providedfor in paragraphs 1, 2 and 3.
5. Each Member State shall take the measures necessary to be able,
in accordance with its national law, to prohibit the free disposal ofassets located within its territory at the request, in the cases provided
for in paragraphs 1, 2 and 3, of the undertaking's home Member State,
which shall designate the assets to be covered by such measures.
Article 20a
1. Member States shall ensure that the competent authorities have
the power to require a financial recovery plan for those insuranceundertakings where competent authorities consider that policyholders'rights are threatened. The financial recovery plan shall as a minimuminclude particulars or proof concerning for the next three financial
years:
(a) estimates of management expenses, in particular current general
expenses and commissions;1973L0239 — EN — 20.03.2002 — 012.001 — 19
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(b) a plan setting out detailed estimates of income and expenditure in
respect of direct business, reinsurance acceptances and reinsurancecessions;
(c) a forecast balance sheet;
(d) estimates of the financial resources intended to cover underwriting
liabilities and the required solvency margin;
(e) the overall reinsurance policy.
2. Where policyholders' rights are threatened because the financial
position of the undertaking is deteriorating, Member States shall ensure
that the competent authorities have the power to oblige insuranceundertakings to have a higher required solvency margin, in order toensure that the insurance undertaking is able to fulfil the solvencyrequirements in the near future. The level of this higher requiredsolvency margin shall be based on the financial recovery plan referred
to in paragraph 1.
3. Member States shall ensure that the competent authorities have
the power to revalue downwards all elements eligible for the availablesolvency margin, in particular, where there has been a significantchange in the market value of these elements since the end of the lastfinancial year.
4. Member States shall ensure that the competent authorities have
the power to decrease the reduction, based on reinsurance, to thesolvency margin as determined in accordance with Article 16a where:
(a) the nature or quality of reinsurance contracts has changed signifi-
cantly since the last financial year;
(b) there is no or an insignificant risk transfer under the reinsurance
contracts.
5. If the competent authorities have required a financial recovery
plan for the insurance undertaking in accordance with paragraph 1,they shall refrain from issuing a certificate in accordance with Article
10(3), second subparagraph of this Directive, Article 16(1)(a) of
Council Directive 88/357/EEC (second non-life insurance Directive) (
1)
and Article 12(2) of Council Directive 92/49/EEC (third non-life insur-ance Directive) (
2), as long as they consider that policyholders rights
are threatened within the meaning of paragraph 1.
Article 21
1. Each Member State shall make it possible for an undertaking to
assign all or part of its portfolio of policies if the assignees possessthe necessary solvency margin, due account being taken of the assign-ment.
The supervisory authorities concerned shall consult each other before
approving such assignment.
2. Once approved by the competent supervisory authority, such
assignment shall affect directly the policy-holders or insuredconcerned.1973L0239 — EN — 20.03.2002 — 012.001 — 20
(1) OJ L 172, 4.7.1988, p. 1. Directive as last amended by Directive 2000/26/
EC of the European Parliament and of the Council (OJ L 181, 20.7.2000, p.
65).
(2) OJ L 228, 11.8.1992, p. 1. Directive as last amended by Directive 2000/64/
EC of the European Parliament and of the Council (OJ L 290, 17.11.2000,
p. 27).▼B
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SectionC: Withdrawalofauthorization
Article 22
1. Authorization granted to an insurance undertaking by the compe-
tent authority of its home Member State may be withdrawn by thatauthority if that undertaking:
(a) does not make use of that authorization within 12 months,
expressly renounces it or ceases to carry on business for more
than six months, unless the Member State concerned has made
provision for authorization to lapse in such cases;
(b) no longer fulfils the conditions for admission;
(c) has been unable, within the time allowed, to take the measures
specified in the restoration plan or finance scheme referred to in
Article 20;
(d) fails seriously in its obligation under the regulations to which it is
subject.
In the event of the withdrawal or lapse of authorization, the competent
authority of the home Member State shall notify the competent autho-
rities of the other Member States accordingly, and they shall take
appropriate measures to prevent the undertaking from commencingnew operations within their territories, under either the right of estab-lishment or the freedom to provide services. The home Member State'scompetent authority shall, in conjunction with those authorities, take all
measures necessary to safeguard the interests of insured persons and, in
particular, shall restrict the free disposal of the undertaking's assets inaccordance with Article 20 (1), (2), second subparagraph, or (3),second subparagraph.
2. Any decision to withdraw authorization shall be supported by
precise reasons and communicated to the undertaking in question.
Title IIIA— Rulesapplicabletoagencies or branchesestablished
within the Community and belonging to undertakings whose head
officesareoutsidetheCommunity
Article 23
1. Each Member State shall make access to the business referred to
in Article 1 by any undertaking whose head office is outside the
Community subject to an official authorization.
2. A Member State may grant an authorization if the undertaking
fulfils at least the following conditions:
(a) It is entitled to undertake insurance business under its national law;
(b) It establishes an agency or branch in the territory of such Member
State;
(c) It undertakes to establish at the place of management of the agency
or branch accounts specific to the business which it undertakes
there, and to keepthere all the records relating to the businesstransacted;
(d) It designates an authorized agent, to be approved by the competent
authorities;
(e) It possesses in the country where it carries on its business assets of
an amount equal to at least one-half of the minimum amountprescribed in Article 17 (2), in respect of the guarantee fund, anddeposits one-fourth of the minimum amount as security;
(f) It undertakes to keepa margin of solvency in accordance with the
requirements referred to in Article 25;
(g) It submits a scheme of operations in accordance with the provisions
of Article 11 (1) and (2);1973L0239 — EN — 20.03.2002 — 012.001 — 21
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(h) It communicates the name and address of the claims representative
appointed in each Member State other than the Member State inwhich the authorisation is sought if the risks to be covered are clas-
sified in class 10 of point A of the Annex, other than carrier's
liability.
Article 24
Member States shall require undertakings to establish adequate tech-
nical reserves to cover the underwriting liabilities assumed in theirterritories. Member States shall see that the agency or branch coverssuch technical reserves by means of assets which are equivalent tosuch reserves and are, to the extent fixed by the State in question,
matching assets.
The law of the Member States shall be applicable to the calculation of
technical reserves, the determination of categories of investments, andthe valuation of assets.
The Member State in question shall require that the assets representing
the technical reserves shall be localized in its territory. Article 15 (3)shall, however, be applicable.
Article 25
1. Each Member State shall require for agencies or branches estab-
lished in its territory a solvency margin consisting of assets free of allforeseeable liabilities, less any intangible items. The solvency marginshall be calculated in accordance with the provisions of Article 16 (3).However, for the purpose of calculating this margin, account shall be
taken only of the premiums or contributions and claims pertaining to
the business effected by the agency or branch concerned.
2. One-third of the solvency margin shall constitute the guarantee
fund. The guarantee fund may not be less than one-half of the
minimum required under Article 17 (2). The initial deposit lodged in
accordance with Article 23 (2) (e) shall be counted towards such guar-antee fund.
3. The assets representing the solvency margin must be kept within
the country where the business is carried on upto the amount of the
guarantee fund and the excess, within the Community.
Article 26
1. Any undertaking which has requested or obtained authorization
from more than one Member State may apply for the following advan-tages which may be granted only jointly:
(a) the solvency margin referred to in Article 25 shall be calculated in
relation to the entire business which it carries on within theCommunity; in such case, account shall be taken only of the opera-tions effected by all the agencies or branches established within theCommunity for the purposes of this calculation;
(b) the deposit required under Article 23 (2) (e) shall be lodged in only
one of those Member States;
(c) the assets representing the guarantee fund shall be localized in any
one of the Member States in which it carries on its activities.
2. Application to benefit from the advantages provided for in para-
graph 1 shall be made to the competent authorities of the MemberStates concerned. The application must state the authority of theMember State which in future is to supervise the solvency of the entire
business of the agencies or branches established within the Community.
Reasons must be given for the choice of authority made by the under-taking. The deposit shall be lodged with that Member State.
3. The advantages provided for in paragraph 1 may only be granted
if the competent authorities of all Member States in which an applica-1973L0239 — EN — 20.03.2002 — 012.001 — 22
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tion has been made agree to them. They shall take effect from the time
when the selected supervisory authority informs the other supervisoryauthorities that it will supervise the state of solvency of the entire busi-
ness of the agencies or branches within the Community.
The supervisory authority selected shall obtain from the other Member
States the information necessary for the supervision of the overall
solvency of the agencies and branches established in their territory.
4. At the request of one or more of the Member States concerned,
the advantages granted under this Article shall be withdrawn simulta-
neously by all Member States concerned.
Article 27
The provisions of Articles 19 and 20 shall also apply in relation to
agencies and branches of undertakings to which this Title applies.
As regards the application of Article 20, where an undertaking qualifies
for the advantages provided for in Article 26 (1), the authority respon-sible for verifying the solvency of agencies or branches establishedwithin the Community with respect to their entire business shall betreated in the same way as the authority of the State in the territory of
which the head office of a Community undertaking is situated.
Article 28
In the case of a withdrawal of authorization by the authority referred to
in Article 26 (2), this authority shall notify the authorities of the otherMember States where the undertaking operates and the latter supervi-sory authorities shall take the appropriate measures. If the reason forthe withdrawal of the authorization is the inadequacy of the overallstate of solvency as fixed by the Member States which agreed to the
request referred to in Article 26, the Member States which gave their
approval shall also withdraw their authorizations.
Article 28a
1. Under the conditions laid down by national law, each Member
State shall authorize agencies and branches set upwithin its territoryand covered by this Title to transfer all or part of their portfolios ofcontracts to an accepting office established in the same Member State
if the competent authorities of that Member State or, if appropriate, of
the Member State referred to in Article 26 certify that after taking thetransfer into account the accepting office possesses the necessarysolvency margin.
2. Under the conditions laid down by national law, each Member
State shall authorize agencies and branches set upwithin its territoryand covered by this Title to transfer all or part of their portfolios ofcontracts to an insurance undertaking with a head office in another
Member State if the competent authorities of that Member State certify
that after taking the transfer into account the accepting office possessesthe necessary solvency margin.
3. If under the conditions laid down by national law a Member State
authorizes agencies and branches set upwithin its territory and coveredby this Title to transfer all or part of their portfolios of contracts to anagency or branch covered by this Title and set upwithin the territory ofanother Member State it shall ensure that the competent authorities of
the Member State of the accepting office or, if appropriate, of the
Member State referred to in Article 26 certify that after taking thetransfer into account the accepting office possesses the necessarysolvency margin, that the law of the Member State of the acceptingoffice permits such a transfer and that that State has agreed to thetransfer.1973L0239 — EN — 20.03.2002 — 012.001 — 23
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4. In the circumstances referred to in paragraphs 1, 2 and 3 the
Member State in which the transferring agency or branch is situatedshall authorize the transfer after obtaining the agreement of the compe-
tent authorities of the Member State in which the risks are situated,
where different from the Member State in which the transferringagency or branch is situated.
5. The competent authorities of the Member States consulted shall
give their opinion or consent to the competent authorities of the homeMember State of the transferring insurance undertaking within threemonths of receiving a request; the absence of any response from theauthorities consulted within that period shall be considered equivalent
to a favourable opinion or tacit consent.
6. A transfer authorized in accordance with this Article shall be
published as laid down by national law in the Member State in whichthe risk is situated. Such transfers shall automatically be valid against
policyholders, insured persons and any other persons having rights or
obligations arising out of the contracts transferred.
This provision shall not affect the Member States' right to give policy-
holders the option of cancelling contracts within a fixed period after a
transfer.
Article 29
The Community may, by means of agreements concluded pursuant to
the Treaty with one or more third countries, agree to the application
of provisions different to those provided for in this Title, for thepurpose of ensuring, under conditions of reciprocity, adequate protec-tion for insured persons in the Member States.
Title III B — Rules applicable to subsidiaries of parent undertak-
ingsgovernedbythelawsofathirdcountryandtoacquisitionsof
holdingsbysuchparentundertakings
Article 29a
The competent authorities of the Member States shall inform the
Commission:
(a) of any authorization of a direct or indirect subsidiary, one or more
parent undertakings of which are governed by the laws of a third
country. The Commission shall inform the Insurance Committeeto be established by the Council on proposal by the Commission;
(b) whenever such a parent undertaking acquires a holding in a
Community insurance undertaking which would turn the latter intoits subsidiary. The Commission shall inform the InsuranceCommittee to be established by the Council on proposal by the
Commission accordingly.
When authorization is granted to the direct or indirect subsidiary of one
or more parent undertakings governed by the law of third countries, thestructure of the groupshall be sp ecified in the notification which the
competent authorities shall address to the Commission.
Article 29b
1. Member States shall inform the Commission of any general diffi-
culties encountered by their insurance undertakings in establishingthemselves or carrying on their activities in a third country.
2. Initially not later than six months before the application of this
Directive, and thereafter periodically, the Commission shall draw up areport examining the treatment accorded to Community insuranceundertakings in third countries, in the terms referred to in paragraphs3 and 4, as regards establishment and the carrying on of insuranceactivities, and the acquisition of holdings in third-country insurance1973L0239 — EN — 20.03.2002 — 012.001 — 24
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undertakings. The Commission shall submit those reports to the
Council, together with any appropriate proposals.
3. Whenever it appears to the Commission, either on the basis of the
reports referred to in paragraph 2 or on the basis of other information,
that a third country is not granting Community insurance undertakingseffective market access comparable to that granted by the Communityto insurance undertakings from that third country, the Commission maysubmit proposals to the Council for the appropriate mandate for nego-tiation with a view to obtaining comparable competitive opportunities
for Community insurance undertakings. The Council shall decide by a
qualified majority.
4. Whenever it appears to the Commission, either on the basis of the
reports referred to in paragraph 2 or on the basis of other information,that Community insurance undertakings in a third country are notreceiving national treatment offering the same competitive opportu-
nities as are available to domestic insurance undertakings and that the
conditions of effective market access are not being fulfilled, theCommission may initiate negotiations in order to remedy the situation.
In the circumstances described in the first subparagraph, it may also be
decided at any time, and in addition to initiating negotiations, in accor-dance with the procedure laid down in the Act establishing the
Insurance Committee referred to in Article 29a, that the competent
authorities of the Member States must limit or suspend their decisions:
— regarding requests pending at the moment of the decision or future
requests for authorizations, and
— regarding the acquisition of holdings by direct or indirect parent
undertakings governed by the laws of the third country in question.
The duration of the measures referred to may not exceed three months.Before the end of that three-month period, and in the light of the
results of the negotiations, the Council may, acting on a proposalfrom the Commission, decide by a qualified majority that the measuresshall be continued.
Such limitations or suspension may not apply to the setting up of subsi-
diaries by insurance undertakings or their subsidiaries duly authorized
in the Community, or to the acquisition of holdings in Communityinsurance undertakings by such undertakings or subsidiaries.
5. Whenever it appears to the Commission that one of the situations
described in paragraphs 3 and 4 has arisen, the Member States shallinform it at its request:
(a) of any request for the authorization of a direct or indirect
subsidiary, one or more parent undertakings of which are governed
by the laws of the third country in question;
(b) of any plans for such an undertaking to acquire a holding in a
Community insurance undertaking such that the latter would
become the subsidiary of the former.
This obligation to provide information shall lapse once an agreement is
concluded with the third country referred to in paragraph 3 or 4 orwhen the measures referred to in the second and third subparagraphsof paragraph 4 cease to apply.
6. Measures taken under this Article shall comply with the Commu-
nity's obligations under any international agreements, bilateral or
multilateral, governing the taking-upand p ursuit of the business ofinsurance undertakings.
TitleIV— Transitionalandotherprovisions
Article 30
1. Member States shall allow undertakings referred to in Title II
which at the entry into force of the implementing measures to thisDirective provide insurance in their territories in one or more of the1973L0239 — EN — 20.03.2002 — 012.001 — 25
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classes referred to in Article 1 a period of five years, commencing with
the date of notification of this Directive, in order to comply with therequirements of Articles 16 and 17.
2. Furthermore, Member States may:
(a) allow any undertakings referred to in (1), which upon the expiry of
the five-year period have not fully established the margin of
solvency, a further period not exceeding two years in which to doso provided that such undertakings have, in accordance with Article20, submitted for the approval of the supervisory authority themeasures which they propose to take for such purpose;
(b) exempt undertakings referred to in (1) whose annual premium or
contribution income upon the expiry of the period of five yearsfalls short of six times the amount of the minimum guarantee fundrequired under Article 17 (2) from the requirement to establishsuch minimum guarantee fund before the end of the financial year
in respect of which the premium or contribution income is as much
as six times such minimum guarantee fund. After considering theresults of the examination provided for under Article 33, theCouncil shall unanimously decide, on a proposal from the Commis-sion, when this exemption is to be abolished by Member States.
3. Undertakings desiring to extend their operations within the
meaning of Article 8 (2) or Article 10 may not do so unless they
comply immediately with the rules of this Directive. However, the
undertakings referred to in paragraph (2) (b) which within the nationalterritory extend their business to other classes of insurance or to otherparts of such territory may be exempted for a period of ten years fromthe date of notification of the Directive from the requirement to consti-
tute the minimum guarantee fund referred to in Article 17 (2).
4. An undertaking having a structure different from any of those
listed in Article 8 may continue, for a period of three years from thenotification of the Directive, to carry on their present business in thelegal form in which they are constituted at the time of such notifica-tion. Undertakings set upin the United Kingdom ‘by Royal Charter’or ‘by private Act’ or ‘by special public Act’ may continue to carry
on their business in their present form for an unlimited period.
Undertakings in Belgium which, in accordance with their objects, carry
on the business of intervention mortgage loans or savings operations inaccordance with No 4 of Article 15 of the provisions relating to thesupervision of private savings banks, coordinated by the ‘arrête royal’of 23 June 1967, may continue to undertake such business for a periodof three years from the date of notification of this Directive.
The Member States in question shall draw upa list of such undertak-
ings and communicate it to the other Member States and the
Commission.
5. At the request of undertakings which comply with the require-
ments of Articles 15, 16 and 17, Member States shall cease to applyrestrictive measures such as those relating to mortgages, deposits andsecurities established under present regulations.
Article 31
Member States shall allow agencies or branches referred to in Title III
which, at the entry into force of the implementing measures to thisDirective, are undertaking one or more classes referred to in Article 1
and do not extend their business within the meaning of Article 10 (2) a
maximum period of five years, from the date of notification of thisDirective, in order to comply with the conditions of Article 25.
Article 32
During a period which terminates at the time of the entry into force of
an agreement concluded with a third country pursuant to Article 29 andat the latest upon the expiry of a period of four years after the notifica-tion of the Directive, each Member State may retain in favour ofundertakings of that country established in its territory the rules applied1973L0239 — EN — 20.03.2002 — 012.001 — 26
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to them on 1 January 1973 in respect of matching assets and the loca-
lization of technical reserves, provided that notification is given to theother Member States and the Commission and that the limits of relaxa-
tions granted pursuant to Article 15 (2) in favour of the undertakings of
Member States established in its territory are not exceeded.
Title V— Finalprovisions
Article 33
The Commission and the competent authorities of the Member States
shall collaborate closely for the purpose of facilitating the supervisionof direct insurance within the Community and of examining any diffi-culties which may arise in the application of this Directive.
Article 34
1. The Commission shall submit to the Council, within six years
from the date of notification of this Directive, a report on the effectsof the financial requirements imposed by this Directive on the situation
on the insurance markets of the Member States.
2. The Commission shall, as and when necessary, submit interim
reports to the Council before the end of the transitional period providedfor in Article 30 (1).
Article 35
Member States shall amend their national provisions to comply with
this Directive within 18 months of its notification and shall forthwithinform the Commission thereof.
The provisions thus amended shall, subject to Articles 30, 31 and 32,
be applied within 30 months from the date of notification.
Article 36
Upon notification of this Directive, Member States shall ensure that the
texts of the main provisions of a legislative, regulatory or administra-
tive nature which they adopt in the field covered by this Directive are
communicated to the Commission.
Article 37
The Annex shall form an integral part of this Directive.
Article 38
This Directive is addressed to the Member States.1973L0239 — EN — 20.03.2002 — 012.001 — 27
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ANNEX
A.Classificationofrisksaccordingtoclassesofinsurance
1.Accident (including industrial injury and occupational diseases)
— fixed pecuniary benefits
— benefits in the nature of indemnity— combinations of the two
— injury to passengers
2.Sickness
— fixed pecuniary benefits
— benefits in the nature of indemnity— combinations of the two
3.Landvehicles (other than railway rolling stock)
All damage to or loss of
— land motor vehicles
— land vehicles other than motor vehicles
4.Railway rollingstock
All damage to or loss of railway rolling stock
5.Aircraft
All damage to or loss of aircraft
6.Ships(sea,lake andriverandcanalvessels)
All damage to or loss of
— river and canal vessels
— lake vessels
— sea vessels
7.Goodsintransit (including merchandise, baggage, and all other goods)
All damage to or loss of goods in transit or baggage, irrespective of the
form of transport
8.Fireandnaturalforces
All damage to or loss of property (other than property included in
classes 3, 4, 5, 6 and 7) due to
— fire
— explosion
— storm— natural forces other than storm— nuclear energy
— land subsidence
9.Otherdamagetoproperty
All damage to or loss of property (other than property included in
classes 3, 4, 5, 6 and 7) due to hail or frost, and any event such as theft,
other than those mentioned under 8
10.Motorvehicle liability
All liability arising out of the use of motor vehicles operating on the
land (including carrier's liability)
11.Aircraftliability
All liability arising out of the use of aircraft (including carrier's liability)1973L0239 — EN — 20.03.2002 — 012.001 — 28
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12.Liability forships(sea,lake andriverandcanalvessels)
All liability arising out of the use of ships, vessels or boats on the sea,
lakes, rivers or canals (including carrier's liability)
13.Generalliability
All liability other than those forms mentioned under Nos 10, 11 and 12
14.Credit
— insolvency (general)
— export credit
— instalment credit— mortgages— agricultural credit
15.Suretyship
— suretyship(direct)
— suretyship(indirect)
16.Miscellaneous financialloss
— employment risks
— insufficiency of income (general)— bad weather— loss of benefits— continuing general expenses
— unforeseen trading expenses
— loss of market value— loss of rent or revenue— indirect trading losses other than those mentioned above— other financial loss (non-trading)
— other forms of financial loss
17.Legalexpenses
Legal expenses and costs of litigation
18.Assistance
Assistance for persons who get into difficulties while travelling, while
away from home or while away from their permanent residence
The risks included in a class may not be included in any other class
except in the cases referred to in point C.
B.Description of authorizations granted for more than one class of insur-
ance
Where the authorization simultaneously covers:
(a) Classes Nos 1 and 2, it shall be named ‘Accident and Health Insurance’;
(b) Classes Nos 1 (fourth indent), 3, 7 and 10, it shall be named ‘Motor
Insurance’;
(c) Classes Nos 1 (fourth indent), 4, 6, 7 and 12, it shall be named ‘Marine
and Transport Insurance’;
(d) Classes Nos 1 (fourth indent), 5, 7 and 11, it shall be named ‘Aviation
Insurance’;
(e) Classes Nos 8 and 9, it shall be named ‘Insurance against Fire and other
Damage to Property’;
(f) Classes Nos 10, 11, 12 and 13, it shall be named ‘Liability Insurance’;
(g) Classes Nos 14 and 15, it shall be named ‘Credit and SuretyshipInsur-
ance’;
(h) All classes, it shall be named at the choice of the Member State in ques-
tion, which shall notifiy the other Member States and the Commission of
its choice.1973L0239 — EN — 20.03.2002 — 012.001 — 29
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C.Ancillaryrisks
An undertaking obtaining an authorization for a principal risk belonging to
one class or a groupof classes may also insure risks included in another
class without an authorization being necessary for them if they:
— are connected with the principal risk,
— concern the object which is covered against the principal risk, and— are covered by the contract insuring the principal risk.
However, the risks included in classes 14, 15 and 17 in point A may not be
regarded as risks ancillary to other classes.
Nonetheless, the risk included in class 17 (legal expenses insurance) may be
regarded as an ancillary risk of class 18 where the conditions laid down in
the first subparagraph are fulfilled, where the main risk relates solely to the
assistance provided for persons who fall into difficulties while travelling,
while away from home or while away from their permanent residence.
Legal expenses insurance may also be regarded as an ancillary risk under the
conditions set out in the first subparagraph where it concerns disputes or
risks arising out of, or in connection with, the use of seagoing vessels.
D.Methods of calculating the equalization reserve for the credit insurance
class
MethodNo11. In respect of the risks included in the class of insurance in point A No 14
(hereinafter referred to as ‘credit insurance’), the undertaking shall set up
an equalization reserve to which shall be charged any technical deficit
arising in that class for a financial year.
2. Such reserve shall in each financial year receive 75 % of any technical
surplus arising on credit insurance business, subject to a limit of 12 %
of the net premiums or contributions until the reserve has reached 150 %
of the highest annual amount of net premiums or contributions received
during the previous five financial years.
MethodNo2
1. In respect of the risks included in the class of insurance listed in point A
No 14 (hereinafter referred to as ‘credit insurance’) the undertaking shall
set upan equalization reserve to which shall be charged any technical
deficit arising in that class for a financial year.
2. The minimum amount of the equilization reserve shall be 134 % of the
average of the premiums or contributions received annually during the
previous five financial years after subtraction of the cessions and addition
of the reinsurance acceptances.
3. Such reserve shall in each of the successive financial years receive 75 %
of any technical surplus arising in that class until the reserve is at least
equal to the minimum calculated in accordance with paragraph 2.
4. Member States may lay down special rules for the calculation of the
amount of the reserve and/or the amount of the annual levy in excess of
the minimum amounts laid down in this Directive.
MethodNo31. An equalization reserve shall be formed for class 14 in point A (herein-
after referred to as ‘credit insurance’) for the purpose of offsetting any
above-average claims ratio for a financial year in that class of insurance.
2. The equalization reserve shall be calculated on the basis of the method
set out below.
All calculations shall relate to income and expenditure for the insurer's
own account.
An amount in respect of any claims shortfall for each financial year shall
be placed to the equalization reserve until it has reached, or is restored to,
the required amount.
There shall be deemed to be a claims shortfall if the claims ratio for a
financial year is lower than the average claims ratio for the reference
period. The amount in respect of the claims shortfall shall be arrived at
by multiplying the difference between the two ratios by the earned
premiums for the financial year.1973L0239 — EN — 20.03.2002 — 012.001 — 30
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The required amount shall be equal to six times the standard devition of
the claims ratios in the reference period from the average claims ratio,
multiplied by the earned premiums for the financial year.
Where claims for any financial year are in excess, an amount in respect
thereof shall be taken from the equalization reserve. Claims shall be
deemed to be in excess if the claims ratio for the financial year is higher
than the average claims ratio. The amount in respect of the excess claims
shall be arrived at by multiplying the difference between the two ratios
by the earned premiums for the financial year.
Irrespective of claims experience, 3,5 % of the required amount of the
equalization reserve shall be first placed to that reserve each financial
year until its required amount has been reached or restored.
The lenght of the reference period shall be not less than 15 years and not
more than 30 years. No equalization reserve need be formed if no under-
writing loss has been noted during the reference period.
The required amount of the equalization reserve and the amount to be
taken from it may be reduced if the average claims ratio for the reference
period in conjunction with the expenses ratio show that the premiums
include a safety margin.
MethodNo41. An equalization reserve shall be formed for class 14 in point A (herein-
after referred to as ‘credit insurance’) for the purpose of offsetting any
above-average claims ratio for a financial year in that class of insurance.
2. The equalization reserve shall be calculated on the basis of the method
set out below.
All calculations shall relate to income and expenditure for the insurer's
own account.
An amount in respect of any claims shortfall for each financial year shall
be placed to the equalization reserve until it has reached the maximum
required amount.
There shall be deemed to be a claims shortfall if the claims ratio for a
financial year is lower than the average claims ratio for the reference
period. The amount in respect of the claims shortfall shall be arrived at
by multiplying the difference betwen the two ratios by the earned
premiums for the financial year.
The maximum required amount shall be equal to six times the standard
deviation of the claims ratio in the reference period from the average
claims ratio, multiplied by the earned premiums for the financial year.
Where claims for any financial year are in excess, an amount in respect
thereof shall be taken from the equalization reserve until it has reached
the minimum required amount. Claims shall be deemed to be in excess
if the claims ratio for the financial year is higher than the average claims
ratio. The amount in respect of the excess claims shall be arrived at by
multiplying the difference between the two ratios by the earned premiums
for the financial year.
The minimum required amount shall be equal to three times the standard
deviation of the claims ratio in the reference from the average claims
ratio multiplied by the earned premiums for the financial year.
The length of the reference period shall be not less than 15 years and not
more than 30 years. No equalization reserve need be formed if no under-
writing loss has been noted during the reference period.
Both required amounts of the equalization reserve and the amount to be
placed to it or the amount to be taken from it may be reduced if the
average claims ratio for the reference period in conjunction with the
expenses ratio show that the premiums include a safety margin and that
safety margin is more than one-and-a-half times the standard deviation of
the claims ratio in the reference period. In such a case the amounts in
question shall be multiplied by the quotient or one-and-a-half times the
standard deviation and the safety margin.1973L0239 — EN — 20.03.2002 — 012.001 — 31