COMMISSION OF THE EUROPEAN COMMUNITIES 
Brussels, 28.01.1998 
COM(1998) 38 final 
95/ 0245 (COD) 
Amended proposal for a 
EUROPEAN PARLIAMENT AND COUNCIL DIRECTIVE 
ON THE SUPPLEMENTARY SUPERVISION 
OF INSURANCE UNDERTAKINGS IN AN INSURANCE GROUP 
(presented by the Commission pursuant to Article 189 a (2) 
of the EC-Treaty) 

EXPLANATORY MEMORANDUM 
INTRODUCTION 
1. On 4 October 1995 the Commission adopted a Proposal for a Directive on the 
supplementary supervision of insurance undertakings in an insurance group1. The 
proposal was submitted to Parliament and Council by letter on 20 October 1995. 
2. At its 334th plenary session on 27 March 1996, the Economic and Social Committee 
adopted a favourable opinion2 on the Proposal for a Directive and suggested certain 
amendments. 
3. The Parliament adopted a legislative resolution embodying its opinion3 on the 
Commission's Proposal for a Directive at its plenary session on 23 October 1997. 
The Parliament's opinion includes 24 amendments. A large number of these 
amendments, which will contribute to clarify and improve the Proposal, were 
accepted by the Commission, some totally, others in part, either in accordance with 
their spirit or with some adaptation of their text. 
4. The amended proposal has been drafted to take account of the opinions of both 
institutions. 
COMMKNTS ON THE AMENDMENTS INTRODUCED INTO THE PROPOSAL 
5. Article 1 (b) [new] 
A definition of 'third country insurance undertaking' has been introduced in the text 
in order to be able to incorporate Parliament's Amendment N° 7, relating to the 
definition of'mixed activity insurance holding company'. This amendment refers to 
third country insurance undertakings, a term which was not defined in the initial 
Proposal, although it was implicitly referred to in Article 9(2). The definition will 
also contribute to a clearer understanding of Annex I. 
6. Article 1 (d) and (e) [formerly, Article 1(c) and (d)] 
A reference to the whole of Article 1 of Directive 83/349/RKC4 (the initial Proposal 
only referred to paragraph 1) has been introduced in the definitions of 'parent 
undertaking' and 'subsidiary' to take partial account of Parliaments' Amendment 
Nos 1 and 2. This change will permit the inclusion in the definition of cases of 
effective dominant influence as provided for in Article 1(2) of Directive 
83/349/EEC. However, since the application of Article 1(2) depends on Member 
States' discretion, the last sentence of the definitions contained in the initial 
1 OJN°C341, Î9.12.1995, p. 16. 
2 OJN°C 174, 17.06.1996, p. 16. 
3 A4-0295/97. Minutes of the plenary session of 23.10.1997 (PE 262.699). 
4 Seventh Company Law Directive: OJ N° 1-193, 18.07.1983, p. 1. 
1 
Proposal has been maintained in order to permit the competent authorities to assess 
where a dominant influence is exercised. This assessment by the competent 
authorities is considered necessary so that they can properly perform their prudential 
duties. 
7. Article I (0 |formerly. Article l(e)| 
A reference lo Article 17, lirsl sentence, of Directive 7X/660/f l',Cs has been 
introduced into the definition of a "participation" in order to take partial account of 
Amendment N" 3 adopted by the Parliament. In this way the qualitative criterion of 
""durable link" provided for in this Article is rellected in the definition. Nevertheless, 
the automatic criterion of the 20% threshold has been kept in the text. Legal 
certainty is required on such an important element to determine the scope of 
application of the Directive. 
8. Article 1 (j) [formerly, Article l(i)] 
In accordance with Amendment N° 7 as proposed by Parliament, the definition of 
'mixed activity insurance holding company' has been clarified by specifically 
excluding from its scope "third country insurance undertakings' and "reinsurance 
undertakings". 
9. Article 6 
As suggested by the Parliament (Amendment N" 10) changes have been introduced 
into paragraph I of this Article in order to ensure that direct access to the 
information concerning an undertaking of the group is only granted when such 
information is not communicated by the insurance undertaking subject to 
supplementary supervision. Minor drafting changes have also been made in this 
paragraph to avoid unnecessary repetition. 
A reference to paragraph 1 has been introduced into paragraph 3 of this Article to 
correct an omission in the initial Proposal. 
10. Article 9(1) 
The text has been improved to take account of Parliament's Amendment N° 11. 
11. Article II 
In paragraph 1 of this Article, the date of implementation of the Directive has been 
revised to lake account of the expected timetable. A new paragraph 2 has been 
introduced in order lo specify the lirsl financial year for which the supplementary 
supervision provided for in the Directive should apply. 
As requested by Parliament (Amendment N° 12) a new paragraph 6 has been 
included whereby the Commission shall submit a report to the Insurance Committee 
on the implementation of the Directive and, where appropriate, on any need for 
5 Fourth Company Law Directive: OJ N° L 222, 14.08.1978, p. 11. 
2 
further harmonization in this area. The deadline for the preparation of this report is 
live years. After consultation with the national experts, this deadline has been 
considered more appropriate in order properly to assess the functioning of the 
supervisory mechanism provided for in the Directive. 
12. Annex I, section l.A 
References lo the First Insurance Directives have been introduced in order to take 
account of Amendment N° 13 by Parliament. References to the Third Insurance 
Directives, also requested by Parliament, have not been included since, in 
accordance with the usual rules for drafting legal instruments in the Community, a 
reference to the original Directive is sufficient where a reference to the amending 
Directive is already contained in the recital or in other parts of the text. 
13. Annex I, section l.C [formerly, second part of section l.B] 
Changes to this section have been made in order to take partial account of 
Amendment N° 14 by Parliament, and have been incorporated in a separate section, 
under "C". Elements that were totally excluded from the calculation in accordance 
with the initial Proposal are now accepted with no restriction where they concern the 
participating insurance undertaking at the level of which the calculation of the 
adjusted solvency situation is being performed. They are also accepted, where they 
concern related insurance undertakings, insofar as they are eligible to cover the 
solvency margin requirement of that related undertaking. In addition, the 
admissibility of these elements must be consistent with the elimination of double 
gearing of capital: a sentence making reference to section B has therefore been 
introduced at the beginning of the new section C. 
Other elements whose inclusion was requested by the Parliament have not been 
mentioned in this section, since either they are already included in the general 
references contained in section LA of Annex I, or they are not admissible under the 
insurance directives for the cover of the solvency margin requirement. 
14. Annex I, section l.D [formerly, section l.C] 
The wording of this section has been modified as requested by Parliament 
(Amendment N° 15). The definition of the 'proportional share' (a footnote in the 
initial Proposal) has been inserted in the main text. In order to clarify the initial 
Proposal, explicit references have been made to the different calculation methods 
laid down in Annex I. 
15. Annex I, section l.K [formerly, section l.D| 
A reference to the Insurance Accounts Directive (Directive 91/674/EEC6) has been 
introduced in order to take into account Amendment N° 16 as requested by 
Parliament. 
OJN°L 374, 31.12.91, p. 7. 
16. Annex I, section 2.1 
The wording of the last paragraph of this section has been modified as also 
requested by Parliament (Amendment N° 17). The waiver provided for in the initial 
Proposal where participations are held within one Member State has been extended 
to the case where the participating undertaking of the insurance undertaking is 
located in another Member Stale. However, the use of the waiver in cross-border 
situations has been made subject to the condition that the competent authorities 
concerned have reached an agreement, in order to ensure that supervision is 
effective. Drafting changes have also been made with a view to facilitating the 
understanding of this section. 
17. Annex 1, section 2.3 
As requested by Parliament (Amendment Nos 18 and 19), funds of an insurance 
holding company arising from outside the group have been recognised. In order to 
avoid that any kind of debt held by an insurance holding company is automatically 
considered as equivalent to own funds, it has been provided that the debt has to fulfil 
the same conditions as in the First Insurance Directives (as amended by the Third 
Insurance Directives) concerning subordinated loan capital, cumulative preferential 
shares, other securities with no specified maturity date and other instruments. 
18. Annex I, section 3 
Following Amendment N° 27 requested by Parliament, the exact treatment of 
related third country insurance undertakings, which was implicit in Annex I of the 
initial Proposal, has been specified. In principle, the EU solvency margin rules, 
which apply to the participating insurance undertaking, should also be used in 
relation to related insurance undertakings in order to assess the adjusted solvency 
situation of that participating undertaking. However, where a related insurance 
undertaking is situated in a third country in which a solvency margin requirement 
comparable to that of the HU is enforced, that requirement may be recognised in 
performing the calculation. 
19. Annex I, section 4 
This section has been deleted in accordance with Amendment N° 21 of Parliament. 
20. Annex II, sections 2.1 and 2.2 
Changes have been made to these sections in order to take into account Amendment 
Nos 23 and 24 as requested by Parliament. The same comments as for section 2.3 of 
Annex I (paragraph 17 of this Explanatory Memorandum) apply. 
Amended Proposal for a European Parliament and Council Directive on the supplementary 
supervision of insurance undertakings in an insurance group 
INITIAL PROPOSAL AMUNDttl) PROPOSAL 
THE EUROPEAN PARLIAMENT AND THE THE EUROPEAN PARLIAMENT AND THE 
COUNCIL OF THE EUROPEAN UNION, COUNCIL OF THE EUROPEAN UNION, 
Having regard to the Treaty establishing the UNCHANGED 
European Community, and in particular 
Article 57 (2) thereof, 
Having regard to the proposal from the 
Commission, 
Having regard to the opinion of the Economic 
and Social Committee, 
Acting in accordance with the procedure referred 
to in Article 1 89b of the Treaty, 
UNCHANGED Whereas Council Directive 73/239/EEC of 24 
July 1973 on the coordination of laws, 
regulations and administrative provisions 
relating to the taking-up and pursuit of the 
business of direct insurance other than life 
assurance(1), as last amended by European 
Parliament and Council Directive 95/26/EC(2) 
and Council Directive 79/267/EEC of 5 March 
1979 on the coordination of laws, regulations 
and administrative provisions relating to the 
taking-up and pursuit of the business of direct 
life assurance, as last amended by Directive 
95/26/EC require insurance undertakings to 
possess a solvency margin; 
Whereas, as a result of Council Directive UNCHANGED 
92/49/EEC of IK June 1992 (in the coordination 
of laws, regulations and administrative 
provisions relating to direct insurance other than 
life assurance and amending Directives 
73/239/EEC and 88/357/EEC (third non-life 
assurance Directive)'4', and Council Directive 
92/96/EEC of 10 November 1992 on the 
coordination of laws, regulations and 
administrative provisions relating to direct life 
assurance and amending Directives 79/267/EEC 
and 90/619/EEC (third life assurance 
Directive)(D), the taking-up and the pursuit of the 
business of insurance is subject to the granting 
of a single authorization issued by the competent 
authorities of the Member State in which an 
insurance undertaking has its head office; 
whereas such authorization allows an 
undertaking to carry on business throughout the 
Community, under the right of establishment or 
the freedom to provide services; whereas the 
competent authorities of home Member States 
are responsible for monitoring the financial 
INITIAL PROPOSAL AMKNDKI) PROPOSAL 
health of insurance undertakings, including their 
state of solvency; 
Whereas measures involving supplementary 
supervision on insurance undertakings in a 
group should enable the authorities supervising a 
parent insurance undertaking to make a more 
soundly based judgement about the financial 
situation of that insurance undertaking; whereas 
supplementary supervision should take into 
account certain undertakings which are presently 
not subject to supervision under Community 
directives; whereas this Directive does not in 
any way imply thai Member Stales are required 
to play a supervisory role in relation to those 
undertakings standing alone; 
Whereas insurance undertakings in a single 
insurance market engage in direct competition 
with each other and the standards pertaining to 
capital requirements must therefore be 
equivalent; whereas, to that end, the criteria for 
determining supplementary supervision must not 
be left solely to Member States; whereas the 
adoption of common basic standards will be in 
the best interests of the Community in that it 
will prevent Distortions of competition and will 
strengthen the Community insurance system; 
whereas it is necessary to eliminate certain 
differences between the laws of the Member 
States as regards the prudential rules to which 
insurance undertakings that arc part of a group 
are subject; 
Whereas it is necessary to calculate an adjusted 
solvency situation for insurance undertakings in 
a group; whereas different methods are applied 
by some authorities in the Community to take 
into account the effects on the financial position 
of an insurance undertaking in a group; whereas 
the principle is accepted that these methods are 
prudentially equivalent; 
Whereas the approach adopted consists in 
bringing about such harmonization as is 
essential, necessary and sufficient to achieve the 
mutual recognition of prudential control systems 
in this field; 
Whereas certain provisions of this Directive 
define minimum standards; whereas a home 
Member State may lay down stricter rules for 
insurance undertakings authorized by its own 
competent authorities; UNCHANGED 
UNCHANGED 
UNCHANGED 
UNCHANGED 
UNCHANGED 
INITIAL PROPOSAL AMENDED PROPOSAL 
UNCHANGED 
UNCHANGED WTiereas this Directive is concerned solely with 
cases where one insurance undertaking is owned 
wholly or in part by another insurance 
undertaking or holding company; whereas the 
supervision of individual insurance undertakings 
by the competent authorities remains an 
essential principle of insurance supervision; 
Whereas the competent authorities must at least 
have the means of obtaining from all 
undertakings within a group (he information 
necessary for the performance of their function; 
whereas cooperation between the authorities 
responsible for the supervision of insurance 
undertakings as well as between the authorities 
responsible for the supervision of different 
financial sectors must be established; 
WTiereas certain types of intra-group UNCHANGED 
transactions can affect the financial position of 
an insurance undertaking; whereas the 
competent authorities should determine whether 
intra-group transactions are concluded in 
principle according to normal market conditions; 
whereas the application of this general principle 
does not imply that intra-group transactions 
concluded on other terms should be prohibited 
under all circumstances; whereas it is therefore 
desirable that the competent authorities monitor 
such transactions; 
Whereas this Directive will, in particular, ensure UNCHANGED 
the homogeneous application throughout the 
Community of prudential rules established by 
other Community legislation and facilitate the 
taking-up and pursuit of the business of 
insurance; whereas application of this Directive 
must be aimed at, in particular, protecting the 
interests of the policyholders of insurance 
undertakings; 
Whereas the application of this Directive UNCHANGED 
requires complicated adaptations to be made to 
the laws of certain Member States in the fields 
of prudential supervision, company law and 
taxation, and that these adaptations therefore 
justify that these Member States may apply the 
definition of a participation in another 
undertaking at the level of 25 % of the capital or 
the voting rights until 1 July 2001 at the latest, 
INITIAL PROPOSAL AMENDED PROPOSAL 
HAVE ADOPTED THIS DIRECTIVE: HAVE ADOPTED THIS DIRECTIVE: 
Article 1 
Definitions 
For the purpose of this Directive: Article 1 
Definitions 
UNCHANGED 
(a) 'insurance undertaking' means an UNCHANGED 
undertaking which has received official 
authorization in accordance with Article 6 of 
Directive 73/239/EEC or Article 6 of Directive 
79/267/EEC; 
(b) 'reinsurance undertaking' means an 
undertaking which only accepts risks ceded by 
an insurance undertaking or other reinsurance 
undertakings established in the Community or in 
a third country; 
(c) 'parent undertaking' means a parent 
undertaking within the meaning of Article 1 (1) 
of Council Directive 83/349/EEC(6) and any 
undertaking which, in the opinion of the 
competent authorities, effectively exercises a 
dominant influence over another undertaking; 
(d) 'subsidiary' means a subsidiary undertaking 
within the meaning of Article 1(1) of Directive 
83/349/EEC and any undertaking over which, in 
the opinion of the competent authorities, a 
parent undertaking effectively exercises a 
dominant influence. All subsidiaries of 
subsidiary undertakings shall also be considered 
subsidiaries of the undertaking that is their 
original parent; 
(e) 'participation' means the ownership, direct or 
indirect, of 20 % or more of the voting rights or 
capital of an undertaking; 
(f) 'participating undertaking' means an 
undertaking which is cither a parent undertaking 
or an undertaking which holds a participation; (b) 'third country insurance underlaking, means 
an undertaking which if IT had its registered 
office iiT~lhc Comnuiniy would require 
authorization in accordance with Article 6 of 
Directive 
79/z67/EEC; or Article 6 of Directive 
(c) 'reinsurance undertaking' means an 
undertaking which only accepts risks ceded by 
an insurance undertaking or other reinsurance 
undertakings established in the Community or in 
a third country; 
(d) 'parent undertaking means a parent 
undertaking within the meaning of Article 1 [...] 
of Council Directive 83/349/EEC(6) and any 
undertaking which, in the opinion of the 
competent authorities, effectively exercises a 
dominant influence over another undertaking; 
(e) 'subsidiary' means a subsidiary undertaking 
within the meaning of Article 1 [.."] of Directive 
83/349/EEC and any undertaking over which, in 
the opinion of the competent authorities, a 
parent undertaking effectively exercises a 
dominant influence. All subsidiaries of 
subsidiary undertakings shall also be considered 
subsidiaries of the undertaking that is their 
original parent; 
(f) 'participation' means participation within the 
meaning of Article 17, first sentence oT 
Directive 78/660/EEO/; or the ownershipTlïïrëct 
or indirect, of 20% or more of the voting rights 
or capital of an undertaking; 
(g) 'participating undertaking' means an 
undertaking which is either a parent undertaking 
or an undertaking which holds a participation; 
INITIAL PROPOSAL AMENDED PROPOSAL 
(g) 'related undertaking' means either a (h) 'related undertaking' means either a 
subsidiary or any other undertaking in which a subsidiary or any other undertaking in which a 
participation is held; participation is held 
(h) 'insurance holding company' means an (j) 'insurance holding company' means an 
undertaking other than an insurance undertaking, undertaking other than an insurance undertaking, 
the subsidiary undertakings of which are the subsidiary undertakings of which are 
exclusively or mainly insurance or reinsurance exclusively or mainly insurance or reinsurance 
undertakings, one at least of such subsidiaries undertakings, one at least of such subsidiaries 
being an insurance undertaking; being an insurance undertaking; 
(i) 'mixed activity insurance holding company' 
means a parent undertaking, other than an 
insurance holding company or an insurance 
undertaking, the subsidiaries of which include at 
least one insurance undertaking; Q} 'mixed activity insurance holding company' 
means a parent undertaking, other than an 
insurance undertaking, a third country insurance 
undertaking, a reinsurance undertaking or an 
insurance holding company, the subsidiaries of 
which include at least one insurance 
undertaking; 
(j) 'competent authorities' means the national (k) 'competent authorities' means the national 
authorities which are empowered by law or authorities which are empowered by law or 
regulation to supervise insurance undertakings. regulation to supervise insurance undertakings 
Article 2 
>e Article 2 
Scope 
Subject to the provisions of Article 3, this UNCHANGED 
Directive shall apply to insurance undertakings 
which have their registered offices in the 
Community. 
Article 3 
Supplementary supervision of insurance 
undertakings in a group 
1. In addition to the provisions of Directives 
73/239/EEC and 79/267/EEC laying down the 
rules for the supervision of insurance 
undertakings, Member States shall provide that 
the supervision of any insurance undertaking 
which is a participating undertaking of at least 
one insurance undertaking or reinsurance 
undertaking shall be supplemented to the extent 
and in the manner prescribed in Articles 5, 6, 8 
and 9. Article 3 
Supplementary supervision of insurance 
undertakings in a group 
UNCHANGED 
2. Every insurance undertaking the parent 
undertaking of which is an insurance holding 
company which has its registered office in the 
Community shall be subject, to the extent and in 
the manner prescribed in Articles 5 (2), 6, 8 
and 10, to supplementary supervision. UNCHANGED 
INITIAL PROPOSAL 
3. livery insurance undertaking the parent 
undertaking of which is a mixed activity 
insurance holding company which has its 
registered office in the Community shall be 
subject, to the extenl and in the manner 
prescribed in Articles 5 (2), 6 and 8, to 
supplementary supervision. 
4. The exercise of supplementary supervision in 
accordance with this Article shall not in any way 
imply that the competent authorities are required 
to play a supervisory role in relation to the 
insurance holding company or mixed activity 
insurance holding company or reinsurance 
undertaking standing alone. 
5. Member States or the competent authorities 
responsible for exercising supplementary 
supervision may decide that in the cases listed 
below an insurance undertaking or other 
undertaking which is a subsidiary or in which a 
participation is held need not be included in the 
supplementary supervision: 
- if the undertaking thai should be included is 
situated in a third country where there are legal 
impediments to the transfer of the necessary 
information; 
- if, in the opinion of the competent authorities, 
the undertaking that should be included is of 
negligible interest only with respect to the 
objective of monitoring insurance undertakings; 
or AMENDED PROPOSAL 
l INCHANGE! 
UNCHANGED 
JNCHANGED 
- if, in the opinion of the competent authorities, 
the inclusion of the financial situation of the 
undertaking in the calculation of the adjusted 
solvency situation would be inappropriate or 
misleading as far as the objectives of the 
supplementary supervision of insurance 
undertakings are concerned. 
Article 4 
Competent authorities for exercising 
supplementary supervision 
1. The supervision referred to in Article 3 shall 
be exercised by the competent authorities of the 
Member State that authorized the insurance 
undertaking under Article 6 of Directive 
73/239/EEC or Article 6 of Directive 
79/267/EEC. Article 4 
Competent authorities for exercising 
supplementary supervision 
UNCHANGED 
2. Where Member States have more than one UNCHANGED 
10 
INITIAL PROPOSAI, AMKNDKI) PROPOSAL 
competent authority for the prudential 
supervision of insurance undertakings and 
reinsurance undertakings. Member States shall 
take the requisite measures to organize 
coordination between such authorities. 
Article 5 
Availability and quality of information Article 5 
Availability and quality of information 
1. Member States shall prescribe that the UNCHANGED 
competent authorities shall require that, in any 
insurance undertaking, which is a participating 
undertaking or related undertaking of one or 
more insurance undertakings, insurance holding 
companies or reinsurance undertakings, there are 
adequate internal control mechanisms for the 
production of any data and information which 
would be relevant for the purposes of 
supervision in accordance with this Directive. 
2. Member States shall take the necessary steps 
to ensure that there are no legal impediments 
preventing the undertakings that are subject to 
the supervision referred to in Article 3, and their 
related undertakings and participating 
undertakings, from exchanging amongst 
themselves any information which would be 
relevant for the purposes of supervision in 
accordance with this Directive. 
Article 6 
Access to information 
1. Member States shall provide that their 
competent authorities responsible for exercising 
the supervision referred to in Article 3 shall have 
access to any information which wouid be 
relevant for the purpose of supervision of an 
insurance undertaking which has participating 
undertakings, related undertakings or related 
undertakings of participating undertakings in the 
insurance undertaking. The competent 
authorities may address themselves to the 
undertakings concerned directly to ensure the 
communication of the required information, or 
they may receive such information through the 
insurance undertaking. 
2. Member States shall provide that their 
competent authorities may carry out, within their 
territory, themselves or through the intermediary 
of persons they appoint for that purpose, an-the-
spot verification of the information received 
under paragraph 1. 
3. Where, in applying paragraph 2, the 
competent authorities of one Member State wish UNCHANGED 
Article 6 
Access to information 
1. Member Slates shall provide that their 
competent authorities responsible for exercising 
supplementary supervision referred to in 
Article 3 shall have access to any information 
which would be relevant for the purpose of 
supervision of an insurance undertaking [...] 
subject to such supplementary supervision. The 
competent authorities may address themselves to 
the undertakings concerned directly to ensure the 
communication of the required information, [...] 
only when such information has been requested 
from the insurance undertaking and it has not 
been supplied by it! 
UNCHANGED 
3. Where, in applying paragraphs 1 and 2, the 
competent authorities of one Member State wish 
11 
INITIAL PROPOSAL AMENDED PROPOSAL 
in specific cases to verify the information 
concerning an insurance undertaking situated in 
another Member Slate, they must ask the 
competent authorities of that other Member 
State to have that verification carried out. The 
authorities which receive such a request, must, 
within the framework of their competence, act 
upon it either by carrying out the verification 
themselves, by allowing the authorities who 
made the request to carry it out, or by allowing 
an auditor or expert to carry it out. 
Article 7 
* dopera lie m between competent authorities 
1. Where insurance undertakings are directly or 
indirectly related, or have a common 
participating undertaking and are established in 
different Member States, the competent 
authorities of each Member State shall 
communicate to each other all relevant 
information which may allow or aid the exercise 
of supervision in the framework cf this 
Directive. 
2. Where an insurance undertaking and a credit 
institution as defined in Council Directive 
77/780/EEC(7) or investment firm as defined in 
Council Directive 93/22/EECw are directly or 
indirectly related, or have a common 
participating undertaking, the competent 
authorities and the authorities entrusted with the 
public task of supervising ihose other 
undertakings shall cooperate closely. Without 
prejudice to their respective responsibilities, 
those authorities shall provide one another with 
any information likely to simplify their task, in 
particular in the framework of this Directive. in specific cases to verify the information 
concerning an insurance undertaking situated in 
another Member State, they must ask the 
competent authorities of rhat other Member 
State to have that verification carried out. The 
authorities which receive such a request, must, 
within the framework of their competence, act 
upon it either by carrying out the verification 
themselves, by allowing the authorities who 
made the request to carry it out, or by allowing 
an auditor or expert to carry it out. 
Article 7 
Cooperation between competent authorities 
UNCHANGED 
2. WTiere an insurance undertaking and a credit 
institution as defined in Council Directive 
77/780/EECffi or investment firm as defined in 
Council Directive 93/22/EEC® are directly or 
indirectly related, or have a common 
participating undertaking, the competent 
authorities and the authorities entrusted with the 
public task of supervising those other 
undertakings shall cooperate closely. Without 
prejudice to their respective responsibilities, 
those authorities shall provide one another with 
any information likely to simplify their task, in 
particular in the framework of this Directive. 
3. Information received pursuant to this UNCHANGED 
Directive and, in particular, any exchange of 
information between competent authorities 
which is provided for in this Directive shall be 
subject to the obligation of professional secrecy 
defined in Article 16 of Directive 92/49/EEC 
and Article 15 of Directive 92/96/EEC. 
12 
INITIAL PROPOSAI, AMENDED PROPOSAL 
Article 8 Article 8 
Intra-group transactions Intra-group transactions 
1. With a view to establishing whether UNCHANGED 
transactions arc, in principle, carried out 
according lo normal market conditions. Member 
Stales shall provide that the competent 
authorities monitor: 
(a) the transactions referred to in paragraph 2 
between an insurance undertaking and: 
(i) a related undertaking of the insurance 
undertaking; 
(ii) a participating undertaking in the insurance 
undertaking; 
(iii) a related undertaking of a participating 
undertaking in the insurance undertaking; 
(b) the transactions referred to in paragraph 2 
between the insurance undertaking and a natural 
person which holds a participation in: 
(i) the insurance undertaking or any of its related 
undertakings; 
(ii) a participating undertaking in the insurance 
undertaking; 
(iii) a related undertaking of a participating 
undertaking in the insurance undertaking. 
2. Member States shall require at least an annual UNCHANGED 
reporting by the insurance undertaking to the 
competent authorities of the transactions as 
described in paragraph 1, concerning in 
particular significant: 
- loans, 
- guarantees and other off-balance sheet 
transactions, 
- elements eligible for the solvency margin, 
- investments. 
13 
INITIAL PROPOSAI, AMENDED PROPOSAI, 
Article 9 
Aili"sled solvency requirement Article 9 
Adjusted solvency requirement 
1. Subject to Article 3 (1), Member Stales shall 1. In the cases referred to in Article 3 (1). 
require that an adjusted solvency calculation Member Stales shall require thai an adjusted 
shall be carried out in accordance with Annex I. solvency calculation shall be carried out in 
accordance with Annex I. 
2. The calculation described in Annex 1 shall 
include a related undertaking or participating 
undertaking which has its registered office in a 
third country and which is: 
- an undertaking which, if it were established in 
the Community, would be required to have an 
authorization in accordance with Article 6 of 
Directive 73/239/EEC or Article 6 of Directive 
79/267/EEC, 
- a reinsurance undertaking, or 
- an insurance holding company. 
3. If the adjusted solvency situation is negative, 
the competent authorities shall take appropriate 
measures at the level of the relevant insurance 
undertaking. 
Article 10 
Insurance holding companies JNC1IANGED 
UNCHANGED 
Article 10 
Insurance holding companies 
1. In the case referred to in Article 3 (2), UNCHANGED 
Member States shall require the application of 
one of the supplementary methods of 
supervision in accordance with Annex II. 
2. In the case referred to in Article 3 (2), the UNCHANGED 
calculation shall include all related undertakings 
of the insurance holding company referred to in 
Article 9 (2). 
3. If, as a result, the competent authorities are of UNCHANGED 
the opinion that the state of solvency of a related 
insurance undertaking of the insurance holding 
company is affected, the competent authorities 
shall take appropriate measures at the level of 
that insurance undertaking. 
Article 11 
Implementation Article ! 1 
Implementation 
the laws, 1. Member States shall adopt the laws, 
provisions regulations and administrative provisions 1. Member States shall adopt 
regulations and administrative 
necessary to comply with this Directive no later necessary to comply with this Directive no later 
than ! January 1997, and bring them into force than I Januarv 1999 '•••). They shall 
no later than 1 July 1997. They shall immediately inform ihc Commission thereof, 
immediately inform the Commission thereof. 
14 
INITIAL PROPOSAI, AMUNDFJ) PROPOSAL 
2. Member_ States shall provide that the 
provisï(>ns refcijed^ io in paragraph I shall first 
apply to the supervision of accounts for financial 
years beginning on I January 2000 or during 
that calendar year. 
2. Member States may decide to apply the 3. Member States may decide to apply the 
definition of a 'participation' at a level of 25 % definition of a 'participation' at a level of 25 % 
for a period expiring not later than 1 July 2001. for a period expiring not later than 1 July 2001. 
3. When Member States adopt the measures 
referred to in paragraph 1, these shall contain a 
reference to this Directive, or shall be 
accompanied by such reference at the time of 
their official publication. The procedure for such 
reference shall be adopted by Member States. 4. When Member States adopt the measures 
referred to in paragraph 1, these shall contain a 
reference to this Directive, or shall be 
accompanied by such reference at the time of 
their olTicial publication. The procedure for such 
reference shall be adopted by Member States. 
4. Member States shall communicate to the 5. Member States shall communicate to the 
Commission the texts of the main provisions of rommission the texts of the main provisions of 
national law which they adopt in the field national law which they adopt in the field 
covered by this Directive. covered by this Directive. 
6. hive years at the latest after the deadline for 
implementation of this Directive, the 
Commission shall submit to the Insurance 
Committee a report on its implementation and, if 
need for further 
Article 12 
Entry into force 
This Directive shall enter into force on the 
twentieth day following that of its publication in 
the Official Journal of the European 
Communities. 
Article 13 
Addressees appropriate, on any need tor iurther 
harmonization of supplementary supervision of 
insurance undertakings in an insurance group. 
Article 12 
Entry into force 
UNCHANGED 
Article 13 
Addressees 
This Directive 
States. is addressed to the Member UNCHANGED 
(1) OJ No L 228, 16. 8. 1973, p. 3. 
(2)OJNoL168, 18. 7. 1995, p. 7. 
(3) OJ No L 63, 13.3. 1979, p. 1. 
(4) OJ No L 228, 11.8. 1992, p. 1. 
(5) OJ No L 360, 9. 12. 1992, p. 1. 
(6)OJNoL 193, 18.7. 1983, p. 1. 
(7) OJ No L 322, 17.12.1977, p. 30. 
(8)OJNoL 141, 11.6. 1993, p. 27. (l)OJNoL228, 16. 8. 1973, p. 3. 
(2)OJNoL168, 18. 7. 1995, p. 7. 
(3)OJNoL63, 13.3. 1979, p. 1. 
(4) OJ No L 228, 11.8. 1992, p. 1. 
(5) OJ No L 360, 9. 12. 1992, p. 1. 
(6)OJNoL193, 18. 7. 1983, p. 1. 
(7) OJ No L 222, 14.08.1978, p. 11. 
(8} OJ No L 322, 17. 12. 1977, p. 30. 
(9}OJNoL 141, 11.6. 1993, p. 27. 
15 
INITIAL PROPOSAL AMENDED PROPOSAL 
ANNEX I ANNEX I 
CALCULATION OF THE ADJUSTED 
SOLVENCY SITUATION CALCULATION OF THE ADJUSTED 
SOLVENCY SITUATION 
1. Choice of method 
gene nil principles 
A of calculation and I. Choice of method of calculation 
general principles and 
One or more of the methods described below 
shall be applied for the calculation of the 
adjusted solvency situation of insurance 
undertakings referred to in Article 3(1). For this 
purpose, the elements eligible for the solvency 
margin shall be adjusted an compared with an 
adjusted solvency margin. 
B. Regardless of the method applied, the intra-
group creation of elements eligible for the 
solvency margin must be eliminated in the 
calculation of the adjusted solvency situation. 
For this purpose, where the methods do not UNCHANGED 
already provide for this, for Ihe calculation of 
the elements eligible for the adjusted solvency 
situation no account shall be taken of: 
(i) all elements eligible for the solvency margin UNCHANGED 
of the insurance undertaking for which the 
adjusted solvency situation is calculated, which 
ultimately originate from: 
- a related undertaking of this insurance 
undertaking, or 
- a related undertaking of a participating 
undertaking in the insurance undertaking; 
and A. One or more of the methods described below 
shall be applied for the calculation of the 
adjusted solvency situation of insurance 
undertakings referred to in Article 3 (1). For this 
purpose, the elements eligible for the solvency 
margin mentioned in Article 16 paragraph 1 of 
Directive 73/239/EEC or in Article 18 of 
Directive 79/267/EEC shall be adjusted an 
compared with an adjusted solvency margin. 
B. UNCHANGED 
(ii) all elements eligible for the solvency margin 
of a related insurance undertaking or the 
notional solvency requirement of a related 
reinsurance undertaking, of a participating 
insurance undertaking for which the adjusted 
solvency situation is calculated, originating 
from: 
- the participating insurance undertaking, 
- related undertakings of the participating 
insurance undertaking, 
- a related undertaking of a participating 
undertaking in the participating insurance 
undertaking for which the adjusted solvency 
situation is calculated. 
Applying the same rules mutatis mutandis, the 
calculation shall also not take into account: UNCHANGED 
C. Without prejudice to the provisions of 
"thi section B of this Annex: 
16 
INITIAL PROPOSAI, AMENDED PROPOSAL 
- all subscribed but non paid-in parts ol 
capital. the - [...J subscribed but non paid-in parts of the 
capital of a related insurance undertaking of the 
insimmcc undertaking for which the adjusted 
solvency is calculated" and 
- pro lit reserves and 
assurance undertakings. future profits of life - profit reserves and future profits arising in a 
related life insurance undertaking of the 
insurance undertaking for which the adjusted 
solvency is calculated 
may only be included in the calculation insofar 
is they are eligible to cover the solvency margin 
requirement of that related undertaking 
C. With the exception of calculating a solvency 
deficit in a subsidiary, the calculation shall be 
carried out on a proportional basis(1) taking into 
account the relevant percentages of the 
mediating participations. 
(I) Where this Annex refers to a proportional 
share or relevant percentage, the calculation 
shall be based on the basis of the percentage 
used for the establishment of the consolidated 
accounts. D. The calculation of the adjusted solvency of an 
insurance undertaking shall take account of the 
proportional share held by the relevant 
participating undertaking in the related 
undertakings concerned. 
D. The competent authorities shall ensure that 
the adjusted solvency situation is calculated at 
the same frequency as the calculation of the 
solvency margin for insurance undertakings 
according to Directives 73/239/EEC and 
79/267/EEC. The value of the assets and 
liabilities shall be assessed according to the 
relevant provisions of Directives 73/239/EEC 
and Directive 79/267/EEC, as amended by 
Directives 92/49/EEC and 92/96/EEC. 
2. Methods and relevant situations 
2.1. Related insurance undertakings Proportional share means either, where method 1 
or method~2 is used, the proportion of the 
subscribed capital that is owned, directly "or 
indirectly, by the relevant participating 
undertaking or, where method 3 is used, the 
percentages used in drawing up the consolidated 
accounts. 
However, whichever method is used, when the 
related undertaking is a subsidiary and has~i 
solvency deficit, the total solvency deficit of the 
subsidiary has to be taken into account. ~ 
E. The competent authorities shall ensure that 
the adjusted solvency situation is calculated at 
the same frequency as the calculation of the 
solvency margin for insurance undertakings 
according to Directives 73/239/EEC and 
79/267/EEC. The value of the assets and 
liabilities shall be assessed according to the 
relevant provisions of Directives 73/239/EEC, 
J_] 79/267/EEC \...] and 91/674/EEC. 
2. Methods and relevant situations 
2.1. Related insurance undertakings 
In the case of an insurance undertaking which is UNCHANGED 
a directly participating undertaking in another 
insurance undertaking, the adjusted solvency 
calculation shall be carried out in accordance 
with one of the following methods. 
In all methods and in the case that the insurance UNCHANGED 
undertaking has more than one directly related 
17 
INITIAL PROPOSAL AMENDED PROPOSAL 
insurance undertaking, the adjusted solvency 
calculation shall be carried out by integrating 
each of these directly related undertakings. 
In cases of successive participations (c. g. an 
insurance undertaking is a participating 
undertaking in another insurance undertaking 
which is also a participating undertaking in an 
insurance undertaking) the adjusted solvency 
calculation shall be carried out at the level of 
each participating undertaking which has at least 
one related insurance or reinsurance 
undertaking. 
If method 3 is applied, and without prejudice to 
specific provisions contained in other Directives, 
Member States may waive calculation of the 
adjusted solvency situation for an insurance 
undertaking, if this undertaking is a related 
undertaking of another insurance undertaking in 
the same Member State, which calculates an 
adjusted solvency situation taking into account 
its related insurance undertakings and 
reinsurance undertakings. The same waiver shall 
be allowed where the participating undertaking 
is an insurance holding company which has its 
head office in the same Member State as the 
insurance undertaking, provided that it is subject 
to the same standard of supervision as that 
exercised over insurance undertakings. In both 
cases, steps must be taken to ensure that capital 
is distributed adequately within the insurance 
group, and is genuinely available for transfer 
between the related and participating 
undertaking or undertakings concerned. UNCHANGED 
[...] Member States may waive calculation of the 
adjusted solvency [...] of an insurance 
undertaking^ 
- either if the undertaking is a related 
undertaking of another insurance undertaking 
authorized in the same Member State, and that 
related undertaking is taken into account in the 
calculation of the adjusted solvency of The 
participating insurance undertaTcmg; 
- or if the undertaking is a related undertaking of 
an insurance holding company which has its 
registered office in the same Member State as 
the insurance undertaking, and both the holding 
company and the related insurance undertaking 
are taken into account in the calculation carried 
out. 
Member State may also provide for the waiver 
involved in the above two cases to be granted in 
the case of an insurance undertaking which is a 
related undertaking of another insurance 
undertaking or insurance holding company that 
has its registered office in another Member 
Stated IT the competent authorities of ~thc 
Ivlcinber States conccrnëdlïavc agreed to allow 
the competent authorities of the other Member 
State to carry out supplementary supervision. 
In all cases, the waiver may only be granted if 
the competent authorities are satisfied that the 
elements eligible for the solvency margin of the 
insurance undertakings to be included in the 
calculation are distributed adequately [...l~and 
genuinely available for transfer between those 
undertakings. 
METHOD 1: Deduction and aggregation METHOD 1: Deduction . and aggregation 
method method 
The adjusted solvency situation of the UNCHANGED 
participating insurance undertaking is the 
INITIAL PROPOSAI, 
di(Terence between: AMENDED PROPOSAL 
(i) the sum of: 
1. (he elements eligible lor the solvency margin 
of the participating undertaking; 
2. the proportional share of the participating 
undertaking in the solvency margin of the 
related undertaking, which originates from the 
participating undertaking; 
and 
(ii) the sum of: 
(a) the book value in the participating 
undertaking of all elements eligible for the 
solvency margin of the related undertaking; 
(b) the solvency requirement of the participating 
undertaking; 
(c) the proportional share of the solvency 
requirement of the related undertaking; if the 
related undertaking is a subsidiary and has a 
solvency deficit, the total requirement has to be 
taken into account. 
METHOD 2: Requirement deduction method METHOD 2: Requirement deduction method 
The adjusted solvency situation of the UNCHANGED 
participating insurance undertaking is the 
difference between(2): 
(i) the sum of the elements eligible for the 
solvency margin of the participating 
undertaking; 
and 
(ii) the sum of: 
(a) the solvency requirement of the participating 
undertaking; 
(b) the proportional share of the solvency 
requirement of the related undertaking; if the 
related undertaking is a subsidiary and has a 
solvency deficit, the total requirement has to be 
taken into account. 
(2) The participation in a related undertaking 
must be included at the net asset value of shares. 
METHOD 3: Accounting consolidation-based METHOD 3: Accounting consolidation-based 
method method 
The calculation of the adjusted solvency UNCHANGED 
situation of the participating undertaking shall 
start from the consolidated accounts in order to 
19 
INITIAL PROPOSAL AMENDED PROPOSAL 
calculate the consolidated elements eligible for 
the solvency margin of the participating and the 
related undertakings concerned in accordance 
with Directive 9Î/674/EEC and Directive 
73/239/EEC and Directive 79/267/EEC, as 
amended by Directives 92/49/EEC and 
92/96/EEC. 
The adjusted solvency situation of the 
participating undertaking is the difference 
between: 
(i) the elements eligible for the solvency margin 
as shown in the consolidated accounts; 
and 
(ii) the sum of the solvency requirement of the 
participating undertaking, and (he full or 
relevant proportional share of the solvency 
requirement of the related undertaking. If the 
related undertaking is a subsidiary and has a 
solvency deficit, its solvency requirement shall 
be taken into account in full. 
2.2. Related reinsurance undertaking 
For each related reinsurance undertaking of an 
insurance undertaking, a notional solvency 
requirement shall be established according to the 
same rules that have been laid down in Article 
16 (3) of Directive 73/239/EEC or Article 18 (3) 
of Directive 79/267/EIIC. The same own funds 
elements for the reiaied reinsurance undertaking 
shall be recognized as eligible for its national 
own funds, as those according to the rules laid 
down in Article 24 of Directive 92/49/EEC or 
Article 25 of Directive 92/96/EEC. The value of 
the assets and liabilities shall be assessed 
according to the same rules that have been laid 
down in Directive 73/239/EEC and Directive 
79/267/EEC, as amended by Directives 
92/49/EEC and 92/96/EEC. 
The adjusted solvency situation of the 
participating insurance undertaking is obtained 
by applying the methods and general principles 
described above. 2.2. Related reinsurance undertaking 
UNCHANGED 
UNCHANGED 
2.3. Intermediate insurance holding company 2.3. Intermediate insurance holding company 
Methods 1 and 2 Methods 1 and 2 
For each participating insurance undertaking in For each participating insurance undertaking in 
an insurance holding company which is a an insurance holding company which is a 
participating undertaking in an insurance participating undertaking in an insurance 
undertaking or reinsurance undertaking, the undertaking or reinsurance undertaking, the 
adjusted solvency situation shall be calculated adjusted solvency situation shall be calculated 
applying the methods and genera! principles applying the methods and general principles 
20 
INITIAL PROPOSAL AMENDED PROPOSAL 
described above, mutatis mutandis. 
Method 3 described above, mutatis mutandis. When 
carrying out this calculation, resources of the 
insurance holding company which fulfil the 
same conditions as laid down in Article 15 
paragraph 1 of Directive 73/239/EEC or in 
Article 18 of Directive 79/267/EEC shall be 
recognized as elements eligible for the solvency 
margin. 
Method 3 
The insurance holding company shall be taken 
into account in the assessment by integration in 
the accounting consolidation applying the 
methods and general principles described above, 
mutatis mutandis. 
3. Undertakings in third countries 
Where there are legal impediments to the 
transfer of the information necessary for the 
inclusion of a related undertaking situated in a 
third country as referred to in Article 9 (2), the 
calculation shall, in applying the methods 
referred to in this Annex, deduct from the 
elements eligible for the adjusted solvency 
margin, the book value in the participating 
undertaking- of all elements eligible for the 
solvency margin of the related undertaking. The insurance holding company shall be taken 
into account in the assessment by integration in 
the accounting consolidation applying the 
methods and general principles described above, 
mutatis mutandis. When carrying out this 
calculation, resources of the insurance holding 
company which fulfil the same conditions as laid 
down in Article 16 paragraph 1 of Directive 
73/239/EEC or in Article 18 of Directive 
79/267/E"EC shall be recognized as elements 
eligible for the solvency margin. 
3. Undertakings in third countries 
W1 îen calculating the adjusted solvency of an 
nich is a participating insurance undertaking w 
undertaking m a third country insurance undertaking, the latter shall be treated, for the 
sole purpose of that calculation, in a similar way 
to a related insurance undertaking, by applying 
)ds the general principles and methods described m 
this Annexe 
However, when the third country in which that 
undertaking is established makes it subject "to 
authorization and imposes on it a solvency 
requirement comparable to that laid down In 
Directives 73/239/EEC or 79/267/EEC, taking 
into account the elements of cover of that 
requirement, Member States may provide that 
the calculation shall take into account, as regards 
that undertaking, the solvency requirement and 
the elements eligible to satisfy that requirement 
as laid down by the third country in question. 
UNCHANGED 
21 
INITIAL PROPOSAL AMENDED PROPOSAL 
4. Non-spcciHed cases DELETED 
The competent authorities shall require in cases 
that are not covered in 2.1-2.3, an appropriate 
combination of the described methods. 
ANNEX II ANNEX II 
SUPPLEMENTARY SUPERVISORY 
METHODS FOR INSURANCE 
UNDERTAKINGS THAT ARE 
SUBSIDIARIES OF AN INSURANCE 
HOLDING COMPANY WHICH IS THE 
ULTIMATE PARENT OF AN INSURANCE 
UNDERTAKING IN A GROUP SUPPLEMENTARY SUPERVISORY 
METHODS FOR INSURANCE 
UNDERTAKINGS THAT ARE 
SUBSIDIARIES OF AN INSURANCE 
HOLDING COMPANY WHICH !S THE 
ULTIMATE PARENT OF AN INSURANCE 
UNDERTAKING IN A GROUP 
1. Choice of supplementary supervisory method 1. UNCHANGED 
- One of the methods described below shall be 
applied in order to check that its capital is 
sufficient. 
- In the case of insurance undertakings referred 
to in Article 3 paragraph 2, which are the 
subsidiaries of an insurance holding company 
and which are established in different Member 
States, the competent authorities shall ensure 
that the methods described in this Annex are 
applied in a coherent manner. 
- The competent authorities shall exercise the 
supplementary supervision in the same 
frequency as (he calculation of the solvency 
margin for insurance undertakings according to 
Directives 73/239/1 -EC and 79/267/EEC. 
2. Methods 
2.I. 'Solvency warning test ' 
The capital of an insurance holding company 
shall equal or exceed the sum of the solvency 
requirements of its related insurance 
undertakings and the notional solvency 
requirements of its related reinsurance 
undertakings. 
2.2. 'Accounting consolidation test * 2. Methods 
2.1. 'Solvency warning tesf 
The resources of an insurance holding company 
which fulfil the same conditions as laid down in 
Article 16 paragraph 1 of Directive 73/23 9/EEC 
or in Article 18 of Directive 79/267/EEC shall 
equal or exceed the sum oT~tEë sôTv ency 
requirements of its related insurance 
undertakings and. the notional solvency 
requirements of its related reinsurance 
undertakings, 
2.2. 'Accountingconsolidation lest^ 
The capital situation of an insurance holding The resources of an insurance holding company 
company must equal or exceed the sum of the must equaF or exceed the sum of the solvency 
solvency requirements of its related insurance requirements of its related insurance 
undertakings and the notional solvency undertakings and the notional solvency 
requirements of its related reinsurance requirements of its related reinsurance 
22 
INITIAL PROPOSAL AMENDED PROPOSAL 
undertakings. The capital situation of this 
insurance holding company is calculated in 
accordance with the accounting consolidation 
method in Annex 1, under 2.3, method 3. undertakings. The resources of this insurance 
holding company, including the elements which 
fulfil the same conditions as laid down in Article 
16 paragraph 1 of Directive 73/239/EEC orTn 
Article 18 of Directive 79/267/EEC, are 
calculated in accordance with the accounting 
consolidation method in Annex 1, under 2.3, 
method 3. 
3. Undertakings in third countries 
Where there are legal impediments to the 
transfer of the information necessary for the 
inclusion of a related undertaking situated in a 
third country as referred to in Article 10 (2), the 
calculation shall, in applying the methods 
referred to in this Annex, deduct from the 
elements eligible for the adjusted solvency 
margin the book value of the participation and of 
all other elements eligible for the solvency 
margin of the related undertaking, which are 
held by the insurance undertaking. 3. Undertakings in third countries 
UNCHANGED 
23 
ISSN 0254-1475 
COM(98) 38 final 
DOCUMENTS 
EN 10 09 
Catalogue number : CB-CO-98-036-EN-C 
ISBN 92-78-30358-5 
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