COMMISSION OF THE EUROPEAN COMMUNITIES 
C0M(91) 57 final - SYN 329 
Brussels,22 March 1991 
Proposal for a 
THIRD COUNCIL DIRECTIVE 
on the coordination of laws, regulations and administrative 
provisions relating to direct life assurance and amending 
Directives 79/267/EEC and 90/619/EEC 
(presented by the Commission) 
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EXPLANATORY MEMORANDUM 
I • INTRODUCTION - GENERAL CONSIDERATIONS 
A) The completion of the Internal market in insurance is one of the 
Commission's priority objectives given the increasing importance of 
this industry, which, especially on the life insurance side, is 
expanding rapidly, and the work already undertaken in other fields 
with a view to creating a single financial market. 
In the direct non-life insurance sector, the Second Directive, 
Directive 88/357/EEC, has already made a significant contribution 
towards the formation of the internal market. That Directive lays 
down rules to facilitate freedom to provide services in direct 
non-life insurance in the form of two separate sets of arrangements. 
The first, intended for large risks and based on the approach - as 
mapped out in the White Paper - of home country control, provides for 
application of the law of the country of establishment of the insurer 
covering the risk. The second set of arrangements concerns "mass 
risks" and is based on application of the supervisory rules of the 
country in which the risk insured is located (host country control). 
When the Second Directive was adopted, the Commission formally 
undertook to present at the earliest opportunity proposals which would 
permit the application of the principle of home country control to all 
direct non-iife insurance business and its subjection to a single set 
of legal arrangements. A proposal for a Third Non-Life Insurance 
Directive was accordingly approved by the Commission on 18 July 1990 
and transmitted to the Council.1 
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As regards life insurance, the second stage has just been reached with 
the adoption, on 8 November last, of the Second Directive, 
Directive 90/619/EEC,1 which governs freedom to provide services in 
life insurance, likewise on the basis of two sets of arrangements: the 
first, resting on the principle of application of the rules of, and 
supervision by, the home country, being concerned with insurance 
buyers who take the initiative in seeking "services" cover-, the second 
providing for application of the rules of, and supervision by, the 
country in which the service is provided when it is the undertaking 
that takes the initiative in entering into a contractual relationship. 
For the achievement of this, the third stage in life insurance, which 
will result in the full completion of the internal market, the general 
strategy adopted is, as in non-life insurance, that provided for in 
the White Paper: 
(a) coordination of the essential rules on the prudential and 
financial supervision of direct life insurance business; 
(b) mutual recognition, on the basis of such harmonization at 
Community level, of the authorizations granted to insurance 
undertakings and of the prudential supervision systems of 
the different Member States; 
(c) the grant of a single authorization valid throughout the 
Community and supervision of an undertaking's entire 
business by its home Member State (home country control). 
This strategy has already been used to complete the internal market in 
other areas of financial services. Such is the case with UCITS 
(Directive 85/611/EEC, OJ No L 375, 31.12.1985), banking (Second 
Directive 89/646/EEC, OJ No L 386, 30.12.1989) and investment 
services (OJ No C 43, 22.2.1989), where considerations of the 
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protection of the savers, investors and consumers are as much to the 
fore as they are in insurance. It is therefore considered Justified, 
while not denying the distinctness of insurance, to apply to all 
financial institutions a regime based on the same principles. 
Once this objective has been attained, the free movement of insurance 
products will be possible within the Community and it will afford 
every person seeking insurance the opportunity of turning to any 
Community insurer in order to find the cover best suited to his needs, 
while providing him with adequate protection. 
The introduction of this regime into the direct life insurance sector 
involves substantial amendment of the rules currently in force under 
the First and Second Directives. Those Directives make no provision 
for either a single authorization system or genuine home country 
control. Nor has any coordination been carried out yet as regards the 
essential harmonization of prudential supervision rules concerning 
insurance companies' technical, and in particular mathematical, 
provisions and investments. 
The present proposal for a Third Directive addresses these issues and 
amends the first two Directives so as to produce a cohesive system 
applicable to all life insurance business, whether transacted under 
conditions of establishment or under conditions of provision of 
services. 
The structure of this proposal for a Directive is the same as that 
already adopted by the Second Banking Directive, the proposal for a 
Directive on investment services and the proposal for a Third Non-Life 
Directive. It consists, therefore, of five titles: 
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TITLE I: Definitions and scope 
(Art icles 1 and 2) 
TITLE II: The taking-up of the business of life insurance 
(Articles 3-7) 
TITLE III: Harmonization of conditions governing pursuit of business 
(Articles 8 - 27) 
TITLE IV: Provisions relating to freedom of establishment and freedom 
to provide services 
(Articles 28 - 39) 
TITLE V: Final provisions 
(Articles 40 - 46) 
B) Harmonization of the rules concerning the technical provisions of 
undertakings carrying on the business of direct life insurance 
The introduction of a system of a single authorization and home 
country control calls for harmonization of Member States' rules on the 
definition and calculation of technical provisions and on the currency 
matching, diversification, spread and localization of the assets 
representing them. 
As regards the definition and calculation of technical provisions, 
this proposal for a Directive establishes coordination on the basis of 
actuarial principles that have to be respected by every insurance 
undertaking. 
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As regards the assets representing the technical provisions, the 
proposal lays down coordinated rules on their admissibility, 
diversification and valuation and on currency matching requirements. 
The requirement that assets be located in the Member State in which 
business is carried on is deleted to take account of the measures 
adopted in the field of the liberalization of capital movements. For 
the same reason, any requirement that a minimum proportion of assets 
be invested in specific categories can no longer be maintained. 
- law applicable to contracts and policy conditions 
This proposal for a Directive does not undertake any harmonization of 
the substantive law applicable to contracts and policy conditions. 
The work on non-life insurance carried out within the Council in 
recent years has shown that it is not essential to achieve such 
harmonization at this stage. The system proposed in this Directive is 
based on the rules laid down in the Second Directive on choice of law 
applicable to insurance contracts. This system makes it possible to 
ensure satisfactorily the requisite consumer protection because, in 
principle, the Member State of the commitment can, if it so wishes, 
apply its own law to an insurance contract covering a policy-holder 
resident in its territory. 
At the same time, the Commission considers that, in order that they 
might find the cover best suited to their specific needs, it is of the 
utmost importance that persons seeking insurance should have access to 
every insurance product lawfully marketed in the Community provided it 
does not conflict with legal provisions protecting the general good in 
force in the Member State of the commitment. 
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"Material control" over insurance policies and premium rates 
As part of this drive to achieve greater freedom of movement of insurance 
products in the Community while maintaining an adequate level of consumer 
protection, the methods of vetting contracts and premium rates should be 
adapted to the requirements of a genuine single market. 
As indicated above, the proposal for a Directive provides for coordination 
of the prudential principles applicable to technical provisions and 
investments. As far as policy conditions are concerned, in the absence of 
harmonization of contract law, the proposal permits Member States to 
request the application, in the vast majority of cases, of their own law to 
commitments concerning their residents, in so far as such application is 
Justified by considerations of the general good, and subject ultimately to 
review by the Court of Justice. 
The Commission considers that it has thus complied with the Court's 
Judgments of 4 December 1986. 
The Commission proposes, therefore, henceforth to extend to all commitments 
the arrangements for vetting contracts and premium rates already accepted 
by the Member States in respect of contracts concluded on the 
policy-holder's initiative, i.e. the abolition of all systems of prior 
approval of such documents and their replacement by systems of 
non-systematic, subsequent notification. 
That is not to say that Member States must abolish all checks on life 
insurance products and that they will be deprived of every means of 
monitoring and ensuring observance of the law. However, with a view to 
protecting policy-holders in the single market it is necessary to adapt 
existing methods of supervision, which were designed for purely national 
situations, to take account of requirements arising from the welding of the 
twelve national markets into a large economic and financial area without 
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internal frontiers. From this standpoint checks should be organized in 
such a way that the needs of protection are reconciled with those of 
competition between products, be it on premiums or on the product itself. 
There are four cornerstones to the proposed system for vetting the content 
of contracts and policy conditions, a system geared to the single market 
with its proper functioning in mind: 
(i) The power of each Member State to require observance of the rules 
of law applicable in its territory. The supervisory authorities of 
the State in which the insurance undertaking conducts business will 
be able, in collaboration with the supervisory authorities of the 
home Member State, or even directly in urgent cases, to impose 
penalties on an offending insurer, the ultimate penalty being a ban 
on the conclusion of any new life insurance contracts in its 
territory (Article 35). An insurance company contemplating doing 
business in the Member State concerned will therefore be 
well-advised to observe the contract law in force there. 
(ii) Secondly, when a branch is being set up, the authorities of the 
Member State in which the branch will be situated may spell out the 
legal environment in which it will be called upon to operate, 
indicating the conditions under which, in the interest of the 
general good, its activities must be carried on (Article 28(4)). 
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(ill) Thirdly, the present proposal provides for greater transparency of 
insurance products, stipulating that in all Member States a 
policy-holder must be informed, before finalising the contract or, 
if necessary, during the term of the contract, of the elements 
essential to a proper understanding of the commitment he is 
entering into (Article 27). 
(iv) Lastly, the option given to policy-holders to cancel the contract 
within a period of between 14 and 30 days from its commencement. 
This provision has already been incorporated in Community law by 
the Second Life Directive 90/619/EEC. 
premium rates 
Prior vetting of premium rates is likewise incompatible with the logic of 
the single market. 
Once the essential elements of the calculation of technical provisions and 
of the investment rules have been coordinated, the supervisory authority of 
the home Member State will be responsible for the overall solvency of the 
undertaking. The principal task of the home Member State supervisory 
authority is, therefore, to make sure that the insurance undertaking has 
established sufficient technical provisions to meet all its liabilities, 
invested the assets representing those provisions in accordance with the 
rules in force, and correctly constituted its solvency margin. 
But beyond this prudential basis, which ensures the safety of the products 
on offer, it is in the consumer's interest that he should be able to 
benefit from the broadest possible premium competition, given that the 
Treaty's general competition rules apply, of course, to insurance and 
ensure that such competition is fair. 
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abolition of the prohibition of the simultaneous pursuit of business 
by way of right of establishment and by way of freedom to provide 
services 
The Second Directive authorized, in the interests of protecting 
policy-holders, Member States to prohibit the simultaneous pursuit in their 
territory of insurance business by way of establishment and by way of 
freedom of services as far as the covering of commitments entered into on 
the insurer's initiative is concerned. This option was Justified by the 
situation which prevailed, when the Second Directive was adopted, with 
regard to the harmonization of the essential rules on technical provisions 
and the law governing insurance contracts and policy conditions. 
This proposal for a Directive brings about the coordination considered 
necessary to afford policy-holders the requisite degree of protection. At 
the same time, and as with other financial services, it introduces into the 
insurance sector the system of a single authorization and prudential 
supervision of all business by the home Member State. The option is 
therefore abolished by this proposal for a Directive. 
composite undertakings 
In 1979 it was decided that the principle should be laid down of the 
segregation of the activities of life and non-life insurance by prohibiting 
the authorization of undertakings carrying on both types of activity 
simultaneously. This position was adopted at the time as being likely to 
afford lives assured the best possible protection against sums accumulated 
on their behalf being used to cover a deficit on the non-life side. 
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This principle was not, however, unqualified: those Member States 
which so wished could permit existing composite offices to continue 
operating provided they adopted separate management and did not set up 
any life insurance branches; the situation was, moreover, to be 
reviewed in the light of a report, to be drawn up by the Commission, 
taking stock of ten years' experience of the functioning of 
composites. 
The report having shown that policy-holders are no less well protected 
when they contract with a composite undertaking than when they 
contract with a specialized one, the present Directive, while 
retaining the requirement of separate management, proposes to remove 
the restrictions on composite undertakings and affords those Member 
States which so wish the opportunity of authorizing new composites. 
- exercise of implementing powers 
This proposal for a Directive is silent about the procedure to be 
followed for the exercise of the implementing powers it confers on the 
Commission. The question is dealt with in a separate proposal for a 
Directive, which will apply to all Directives concerning life and 
non-life insurance providing for such powers (OJ No C 230, 15.9.1990). 
C) Two factors help explain the urgency of action at Community level 
along the lines of that proposed in this proposal for a Third 
Direct ive. 
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The first is a major political factor, the Single European Act. When 
this was signed, Member States expressed their firm political will to 
take, before 1 January 1993, the decisions needed to create a genuine 
internal market. 
The second factor concerns the development of financial services and 
their increasing importance. Within the Community, this development 
has already led to adoption of the provisions needed to complete the 
internal market in the field of credit institutions and UCITS. 
Such financial institutions will thus be able to propose throughout 
the Community products benefiting from a "European passport", thereby 
creating a distortion of competition to the detriment of those 
insurers, and in particular life insurers, with whom, in the case of 
certain products, they compete directly. 
The insurance industry is currently at a disadvantage compared with 
other financial services when it comes to facing the challenge of the 
single market. Insurance undertakings are to a large extent still 
obliged to operate In twelve isolated markets subject to different 
rules and procedures as regards the taking-up and pursuit of business, 
whether it be by way of establishment or by way of freedom of 
services. This involves a variable degree of intervention in relation 
to insurance products and the freedom of insurers and those seeking 
insurance to enter into insurance contracts. This state of affairs 
can no longer be tolerated if the Community's commitments as regards 
attaining the objectives of the EEC Treaty are to be met. 
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II. COMMENTARY ON THE ARTICLES 
TITLE I 
Definitions and scope 
Article 1 - Definitions 
This Article contains definitions of certain terms used in the proposal for 
a Directive, the aim being to clarify their meaning and hence contribute to 
a better understanding of the Directive. 
Art icle 2 - Scope 
This Article defines the scope of the proposal for a Directive. The scope 
coincides with that of the First Directive 79/267/EEC. Article 1(2) of the 
First Directive is amended so as to permit any insurer duly authorized by 
the home Member State to pursue activities falling within the scope of the 
Directives anywhere in the Community. 
The operations and activities referred to in Article 2 of the First 
Directive are excluded from the scope of the proposal, as are the 
organizations and mutual associations referred to in Articles 3 and 4 of 
that Directive. 
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TITLE il 
The taking-up of the business of life insurance 
AUTHORIZATION CONDITIONS 
Articles 3 and 4 - The single authorization 
These Articles introduce the fundamental concept of the single insurance 
licence by amending Articles 6 and 7 of the First Life Directive 
79/267/EEC. Article 6 as amended now states that the authorization to take 
up the business of direct life insurance is to be granted by the competent 
authorities of the home Member State. This system still has as its 
premises that an official authorization is a pre-condition for the 
taking-up and pursuit of direct life insurance business. Article 7 has 
been amended to state that the authorization is to be valid throughout the 
Community. This extended territorial scope will apply both to 
establishment and to pursuit of the activities covered by this proposal for 
a Directive by way of provision of services (paragraph 1). The role of the 
competent authorities of the home Member State (defined in Article 1 as the 
Member State in which the head office of the insurance undertaking covering 
the commitment is situated) is consistent with the principle of home 
country supervisory control of the financial position of the undertaking, 
including its insurance activities undertaken by way of branches or by free 
provision of services (see Article 8). The task of supervising the 
undertaking's entire business falls to the insurer's home authorities, 
which are those that granted the authorization. 
The authorization will continue to be given for a particular class of 
insurance as listed in the Annex to the First Directive. The option for 
Member States to also grant authorization for a group of classes has been 
maintained in this proposal (paragraph 2). 
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Any undertaking seeking to extend its business to other classes will be 
required to request a new authorization in accordance with the procedure 
laid down in Article 6 of the First Directive (point b). 
Article 5 - Conditions for receipt of authorization 
The home Member State must require any insurance undertaking seeking 
authorization to fulfil the conditions laid down in Article 8 of the First 
Directive. That is to say, to adopt a specific legal form, to which this 
proposal adds the legal form of the European Company, to limit its business 
activities to the business of insurance, submit a scheme of operations and 
possess a minimum guarantee fund. 
An additional mandatory condition, which was facultative in the First 
Directive, has. been added to the requirements, concerning adequate 
technical qualifications and soundness of the managers and directors of any 
undertaking seeking authorization. 
These conditions are considered necessary to safeguard the general quality 
of business of an insurance company, as well as the day-to-day management 
of the company (paragraph 1). 
An important step forward concerning authorization conditions is the 
proposal to abolish the possibility for Member States to require the prior 
approval or systematic notification of general and special policy 
conditions, scales of premiums, or forms and other printed documents which 
the undertaking uses in its dealings with policy-holders (paragraph 3). 
Member States may require only non-systematic notification of such 
information in exercising their supervisory tasks, but this may not amount 
to a prior condition for an undertaking to be able to carry on its 
act ivitles. 
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Article 6 - Adaptation of the scheme of operations 
This provision replaces Article 9 of the First Directive and sets out the 
requirements for the scheme of operations. In accordance with the amended 
Article 8 of the First Directive, insurance undertakings seeking 
authorization do not have to state in their scheme of operations either the 
premium rates or the contract documents which they propose to apply for 
each category of business they engage in. 
Article 7 - Supervision of shareholders of insurance undertakings 
The ownership and control of an insurance undertaking by non-insurance 
interests is an issue of concern for the Community supervisors, especially 
in a period when highly complex group structures are a widespread 
phenomenon. Thus the risks of cross-financing and conflicts of interest 
are particularly evident in an environment of vast changes in the structure 
of financial systems. For these reasons the current proposal stipulates 
that the competent authorities, before granting an authorization, should be 
informed of the identity of shareholders and members holding a qualified 
participation in the proposed insurance undertaking as well as of the 
amount of such participations. This applies to direct or indirect 
shareholders or members and irrespective of whether they are physical or 
legal persons. This procedure enables the competent authority to appraise 
the suitability of the shareholders and members and if necessary to reject 
any particular group structures as improper at the moment of the setting-up 
of the institution. Closely linked with this provision is Article 14 of 
the present proposal which provides for an information procedure regarding 
the prospective acquisition of an insurance undertaking which is already in 
operat ion. 
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TITLE III 
Harmonization of conditions governing pursuit of business 
Chapter 1 
Article 8 - Supervision of the business of insurance 
The introduction of a system of a single official authorization granted by 
the competent authorities of the home Member State and valid throughout the 
Community calls for devolution of the power of supervision, and of the 
means to that end, on the competent authorities which granted the 
authorization so as to guarantee full compliance with the conditions 
governing the pursuit of business by the insurance undertaking, whether it 
be by way of establishment or by way of freedom of services. 
Article 8 of this proposal for a Directive contains a new provision which 
replaces Article 15 of the First Directive 79/267/EEC. It specifies that 
the financial supervision of an insurance undertaking, including that of 
the activities it carries on either through branches or by way of freedom 
of services, is to be the responsibility of the competent authorities of 
the home Member State, that is to say, the authorities which granted the 
authorization to the undertaking. In addition, this provision specifies 
what the financial supervision of the undertaking consists of: it includes 
verification of (a) the undertaking's solvency, (b) the establishment of 
sufficient technical provisions for the undertaking's entire business and 
(c) the matching of assets in accordance with the provisions existing in 
that respect in the home Member State, which are coordinated in this 
proposal for a Directive. 
Lastly, the existence of sound administrative and accounting procedures and 
adequate internal control mechanisms is a guarantee of an orderly and 
healthy pursuit of insurance business. This proposal for a Directive 
therefore requires the home Member State to ensure that this need is 
sat isf ied. 
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Without making any inroads into this exclusive competence, the Article also 
provides that the supervisory authorities of the Member State of the 
commitment may inform the competent authorities of the home Member State if 
they think, for whatever reason, that the activities of an undertaking 
carrying on business in their territory might affect its financial 
soundness. Naturally, in such circumstances, the home Member State 
authorities have sole power to determine the state of the undertaking's 
f inances. 
Article 9 - On-the-spot monitoring of branches 
This proposal for a Directive provides for the possibility for the 
authorities of the insurance undertaking's home Member State to carry out, 
after having first informed the authorities of the Member State of the 
branch, on-the-spot monitoring of the branches of the undertakings they 
have authorized, with a view to obtaining the information necessary to 
ensure the financial supervision of the undertakings whose entire business 
they supervise. 
This provision also meets a need for consistency in the approach adopted by 
the Community for the completion of the internal market in financial 
services. The Second Banking Directive contains a similar provision 
(Article 15). The same applies to the proposal for a Directive on 
investment services in the securities field (Article 19). 
Article 10 - Sanctions 
This Article introduces into the First Directive a new Article 23a which 
provides that Member States must impose suitable penalties on insurance 
undertakings or those who effectively control the business of insurance 
undertakings found to be in breach of the rules on supervision. 
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Article 11 - Transfers of portfolios 
The Second Directive 90/619/EEC on direct life insurance contains a set of 
complex and detailed provisions on the transfer of portfolios tailored to 
the legal regimes introduced in respect of the taking-up and pursuit of the 
business of direct life insurance, both by way of establishment and by way 
of freedom of services. The introduction of a new, single legal regime for 
all direct life insurance business, irrespective of the way in which it is 
pursued, means that the provisions on portfolio transfer have to be 
adjusted. 
Articles 12 and 13 - Withdrawal of authorization and financial recovery 
measures 
Article 12 adapts to the system of a single official authorization and 
supervision of all insurance business by the authorities of the insurer's 
home Member State the provisions of Article 24 of the First 
Directive 79/267/EEC concerning the powers of the competent authorities to 
adopt measures to ensure the solvency of an insurance undertaking. 
This same aim of adaptation to the single official authorization system is 
pursued by Article 13, which amends Article 26 of the First Directive, on 
the conditions under which the authorization granted to the insurance 
undertaking may be withdrawn. 
Article 14 - Supervision of malor shareholders or members 
This Article introduces into the life insurance sector specific provisions 
the purpose of which is to ensure that the prudent and sound management of 
an insurance undertaking is not called into question by the existence of 
major holdings. 
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To that end, Article 14 lays down an obligation to furnish information in 
two sets of circumstances. First of all, shareholders or members who 
propose to acquire, directly or indirectly, a qualifying holding in an 
insurance undertaking must first inform the competent authorities of the 
size of the intended holding. The same applies where natural or legal 
persons wish to increase their qualifying holding so that it exceeds 
certain thresholds or the insurance undertaking becomes their subsidiary 
(Article 14(1)). This obligation to furnish information is also provided 
for in the event of a reduction in or disposal of a qualifying holding 
causing it to fall below the thresholds laid down (Article 14(2)). 
Moreover, in order to ensure the effectiveness of supervision, insurance 
undertakings must, on becoming aware of them, inform the competent 
authorities of any acquisitions or disposals of holdings in their capital 
that cause holdings to exceed or fall below the thresholds laid down. They 
must also inform the competent authorities each year of the names of 
shareholders and members possessing qualifying holdings and the sizes of 
such holdings as shown by the information received at annual general 
meetings or as a result of compliance with the specific rules to which 
companies listed on stock exchanges are subject (Article 14(3)). 
If the competent authorities consider that the influence exercised by 
shareholders or members works to the detriment of the prudent and sound 
management of the insurance undertaking, the Member States may take a 
series of measures to put an end to that state of affairs (Article 14(4)). 
Those measures will also be taken where the obligation to furnish 
information in advance is not complied with or where the competent 
authorities have opposed the acquisition of the shareholding. 
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Articles 14a and 14b - Composites 
In accordance with the findings of the report drawn up by the Commission on 
the basis of Article 39(2) of the First Directive, these Articles provide 
for the abolition of restrictions on the right of composite undertakings to 
establish branches or on their freedom to provide life insurance services. 
Article 14a also allows those Member States which so wish to authorize new 
composite undertakings. 
At all events, composite undertakings, whether existing or new, must have 
separate management, the results of their life and non-life activities 
being shown separately, and must comply with the prudential rules relating 
to both act ivit ies. 
Chapter 11 
Article 15 - Home country control of technical provisions and coordination 
of the actuarial principles applied when calculating technical provisions 
Paragraph 1 of this Article introduces the principle of home country 
control for the definition and calculation of technical provisions. 
In comparison with non-life insurance, Council Directive on the 
annual accounts and consolidated accounts of insurance undertakings lays 
down few rules on the determination of technical provisions in life 
insurance. This Article therefore harmonizes national laws to the extent 
necessary to permit mutual recognition and home country control in this 
field. 
Many different actuarial methods and bases are used at present in the 
Member States of the Community to calculate technical provisions in life 
insurance, and a wide variety of products are available. However, 
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comparative studies, in particular that by the Consultative Group of 
Actuaries of Countries of the European Communities, have shown that the 
results of calculations are often very similar where similar products are 
concerned and that the methods are all based on the same actuarial 
principles, including that of prudence in the face of uncertainty. The 
conclusion reached by the Consultative Group's study is that harmonization 
on the basis of these actuarial principles would be sufficient to ensure 
the effective protection of lives assured in the context of a single 
licence system. The Consultative Group considers, moreover, that any 
attempt to standardize throughout the Community the methods and bases used 
for calculating technical provisions would be inappropriate, unnecessary 
and counterproductive. 
Apart from these considerations of prudence and the protection of lives 
assured, the Consultative Group also concluded that there is no risk of 
competition being distorted significantly by the use in the Member States 
of different methods and bases for calculating technical provisions, 
provided that sound actuarial principles continue to be applied. This 
Article therefore lays down these sound and prudent principles on the basis 
of suggestions made by the Consultative Group. 
Even after this harmonization has been carried out, there will remain a 
large number of actuarial methods and bases capable of satisfying these 
principles. Paragraph 2 of this Article therefore provides that the 
methods and bases used by each undertaking must be published. Even if this 
information is too technical to be readily understood by most 
policy-holders, the mere fact that it is freely available is an added 
inducement to the undertaking to exercise prudence. It might, for example, 
be analysed and compared by trade associations, consumer protection bodies, 
the press or insurance intermediaries. 
Paragraph 3 introduces the principle of home country control for the 
investment of the assets representing the technical provisions. These 
assets are required to be invested in accordance with the rules laid down 
in Articles 17 - 21 of this proposal for a Directive. 
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Those rules cover: 
(i) a general principle for the investment of the assets representing the 
technical provisions, 
(ii) the admissibility of investments, 
(iii)the diversification of investments, 
(iv) currency matching requirements. 
Furthermore, paragraph 3 of this Article extends the requirement of 
localization of assets in the country where the business is carried on to a 
localization within the European Community. This extension is to be seen 
both in the context of freedom of capital movements within the European 
Community, which is fully applicable to institutional investors, and in the 
context of the negative effects of national localization on the performance 
and regional spread of insurance companies' investments. 
Article 16 - Premiums for new business 
The establishment and the supervision of technical provisions are the best 
guarantee of the strength of insurance undertakings and of the security of 
policy-holders. It is therefore important that the supervisory authority 
should be able to ascertain that the undertaking has sufficient resources 
to finance these provisions, notably for new business, and to meet all its 
liabilities, including the solvency margin. 
In this context, premiums receivable for new business are obviously of 
considerable importance. In assessing an undertaking's capacity to meet 
its liabilities, it is nevertheless important to consider the undertaking's 
overall financial position. 
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This Article therefore stresses the importance of the adequacy of premium 
rates for new business, taking account of every aspect of the undertaking's 
financial situation. 
Article 17 - Investment of technical provisions 
This Article establishes a general principle for the investment of 
technical provisions, which is to be found in the current legislation of 
most Member States. 
Articles 18(2) and 19(3) of this proposal for a Directive provide that, in 
particular circumstances and at the insurance undertaking's request, the 
home Member State may allow exceptions to the rules on the admissibility 
and spread of investments. These exceptions may, however, only be allowed 
when the home Member State is satisfied that the general requirement of 
Article 17 is fulfiI led. 
Article 18 - Admissible investments 
This Article contains a list of assets in which the home Member State may 
allow insurance undertakings to invest their technical provisions. With a 
view to retaining the parallelism between the arrangements for supervising 
life and non-life activities, the list is similar to that in the proposal 
for a third non-life insurance coordination Directive. 
The list of admissible assets is to be regarded as a maximum list. This 
means that the home Member State is free to prohibit certain categories of 
investments included on the list, but only for insurance undertakings 
having their head office in its territory. In order to provide the list 
with a sufficient degree of flexibility, paragraph 2 of this Article allows 
Member States to permit other categories of investments on a case-by-case 
basis and subject to Article 17 of this proposal for a Directive. 
- 25 -
Article 19 - Diversification of investments 
This Article lays down a set of rules on the diversification of 
investments. Again, the diversification rules laid down in paragraph 1 are 
to be regarded as a prudential minimum. Home Member States are thus free 
to impose lower maximum percentages for certain or all categories of 
investments, but only for insurance undertakings whose head office is in 
their territory. The diversification criteria are likewise similar to 
those of the proposal for a third non-life insurance coordination 
Direct ive. 
For some categories of investments, especially government bonds, there are 
no maximum percentages. For other categories, however, especially debt 
securities and other bonds issued by undertakings, secured loans to natural 
persons, transferable shares and other transferable variable yield 
participations, units in UCITs, etc., paragraph 1 establishes a set of 
maximum percentages both for the category of investments and for units of 
any one undertaking, any one piece of real property„ etc. 
Paragraph 2 provides that no Member State may require insurance 
undertakings to invest in particular categories of investments, which is 
still common supervisory practice in some Member States, especially as 
regards government or local authority bonds. 
The purpose of the final paragraph is to make the diversification rules 
sufficiently flexible by allowing the home Member State to permit higher 
percentages on a case-by-case basis and subject to Article 17. 
- 26 -
Article 20 - Valuation of investments 
This Article states that, under certain conditions, Member States may allow 
hidden reserves resulting from the undervaluation of assets as cover for 
technical provisions. The purpose of this Article is to allow 
Member States which currently require purchase price valuation of assets to 
put their undertakings on an equal competitive footing with undertakings of 
those Member States which allow or require the valuation of investments on 
the basis of current values. 
Article 21 - Currency matching 
In contrast to the position in direct non-life insurance, the Second 
Directive 90/619/EEC1 on direct life insurance did not carry out any 
coordination of national currency matching rules. 
This Article is intended to introduce such rules, with appropriate 
relaxations, into life insurance. The rules are similar to those which 
will apply in the non-life insurance sector, allowing for the peculiarities 
of life insurance, for example the existence of contracts linked to a 
particular unit of account. 
Article 22 - Subordinated loan capital 
This Article updates the list of assets recognized for the purpose of 
covering the solvency margin by including subordinated loan capital. The 
conditions under which subordinated loan capital may be recognized as 
own funds are identical to those laid down in Council Directive 89/299/EEC 
(OJ No L 124, 5.5.1989, p. 16) on the own funds of credit institutions. 
OJ No L 330, 29.11.1990, p. 50, 
- 27 -
Article 23 
This Article amends Article 21 of the First Directive in order to bring it 
into line with the principle of home country control. 
Chapter 3 
Article 24 - Legal provisions protecting the general good 
The aim of this Article is to specify that any person seeking insurance can 
conclude any contract allowed by the law of a Member State, provided that 
the contract does not conflict with legal provisions protecting the general 
good in the Member State of the commitment. In accordance with the 
established case law of the Court of Justice, such provisions concerning 
the general good can only be enforced, in the absence of more detailed 
harmonisation of the provisions of Member States,, if they satisfy the 
following conditions: the provisions for the general good must be applied 
in a non-discriminatory manner to all undertakings operating on the 
territory of the Member State, they must be objectively necessary for the 
protection of that general good, they must also be proportionate in 
relation to the desired objective and the existing provisions in the Member 
State of origin of the product must be insufficient to protect that general 
good. The public authorities must also interpret this concept of general 
good in the light of these criteria. It is clearly for the Court to 
determine in the last resort whether the authorities' interpretation is in 
keeping with Community law. 
Article 25 - Abolition of the prior approval of premium scales and policies 
Consumer protection also includes the right to the widest possible choice 
of innovative insurance products at the most reasonable prices. This right 
- 28 -
is given practical effect in regard to supervision by the abolition of any 
prior approval of premium scales and policies and by the replacement of 
such approval by a system better suited to the requirements of mutual 
recognition to the needs of the internal market. 
The prior authorization system is tantamount to issuing a "quality label", 
and it is inconsistent with the logic of the single market to confer on the 
supervisory authority of a Member State the right to give its endorsement 
to, or withhold its endorsement from, products developed and already 
distributed in other Member States. 
This holds true all the more in relation to the approval of premium scales: 
with the principle of the single licence, the supervisory authority of the 
home Member State vouches for the overall solvency of the undertaking and 
it is for that authority to ensure that the undertaking's financial policy 
does not jeopardize that solvency. This approach does not deny the 
supervisory authority of the State of the commitment the right to protect 
its consumers: that authority can still prove ex post facto and 
non-systematically that such and such a clause of a contract freely entered 
into is not in keeping with a legal provision protecting the general good. 
This "shifting of the burden of proof will have the effect of making 
insured persons more aware of their responsibilities vis-à-vis the products 
offered to them, and hence of increasing the real level of their 
protection. 
Article 26 - Cooling-off period 
The Second Life Insurance Directive 90/619/EEC afforded a policy-holder who 
entered into a commitment under the services arrangements the possibility 
of cancelling the contract within a period of between 14 and 30 days from 
the time when he was informed that the contract had been concluded. 
- 29 -
As part of the process of completing the internal market, this option must 
be extended to every policy-holder regardless of the way in which the 
contract is concluded, i.e. whether on an establishment or on a services 
basis, in order to afford policy-holders adequate protection. 
Article 27 - Transparency 
Life insurance differs from non-life insurance in the length of the 
commitments entered into, extending as they do in many cases over several 
decades. In addition, some products resemble rival financial products sold 
by economic operators other than insurance undertakings. 
The upshot of this is that, if he is to profit fully from increased 
competition between a growing number of contracts, the consumer must be 
provided with clear and accurate information about the essential 
characteristics of products offered to him, both during the pre-contractual 
phase in order to guide him in his choice, and during the term of the 
contract in the event of any change or amendment. 
The list set out in Annex 2 is a minimum list which Member States may add 
to in respect of commitments concerning their residents, although it must 
be understood that the aim of the obligation to provide information is to 
protect the consumer through a better understanding by the policy-holder of 
the essential elements of his particular contract, and not to limit the 
choice of products available. 
TITLE IV 
Provisions relating to freedom of establishment and 
freedom to provide services 
Articles 28 and 29 - Freedom of establishment 
Article 28 contains a set of detailed provisions amending Article 10 of 
the First Directive and organizing cooperation between the competent 
- 30 -
authorities of the Member States, based on home country control, in the 
context of freedom of establishment. 
In this context it is stipulated that an insurance undertaking wishing to 
establish a branch in another Member State must notify the authorities of 
its home country, providing at the same time the required information (e.g. 
scheme of operations, amount of the guarantee fund, state of the solvency 
margin, names and addresses of managers) (Article 10(1) - (3)). 
After examining the notification, the competent authority may, if it has 
reason to doubt the viability of the project or the adequacy of the 
structures of the insurance undertaking, refuse to send the information to 
the prospective host authorities. In any such case it should give reasons 
for its refusal to the institution within three months of receipt of the 
notification (Article 10(3)). 
Article 29 repeals Article 11 of the First Directive, thereby abolishing 
the detailed requirements the scheme of operations should fulfil for 
setting up a branch in another Member State. These requirements are now 
limited to, notably, the types of business the branch intends to carry on 
and information on the structural organization of the branch. 
Articles 30 - 32 - Freedom to provide services 
These Articles set out the procedure to be followed and cooperation between 
the home and host country authorities with regard to freedom to provide 
services. The relevant provisions of the Second Directive are amended and 
extended to cover not only activities carried on by way of freedom to 
- 31 -
provide services on the initiative of the policy-holder, but all types of 
commitment falling within the scope of this proposal for a Directive, and 
thus to set up a single regime for the whole business of life insurance; 
those Articles of the Second Directive which have become superfluous are to 
be deleted (Article 33). 
Thus any insurer wishing to pursue life business by way of cross-border 
services must indicate to the home authorities the Member State in which it 
is intended to provide services and the business that will be pursued there 
(Article 11 of the Second Directive, as amended). The host country 
authorities will be provided with information regarding the undertaking's 
solvency margin, the classes of business the undertaking is allowed to 
transact and the nature of the commitments it proposes to cover (Article 14 
of the Second Directive as amended). 
Article 33 - Technical adjustments, abolition of the prohibition of the 
simultaneous pursuit of business by way of establishment and by way of 
freedom of services 
This Article deletes those provisions of the Second Directive 90/619/EEC 
which have been nullified by the introduction of a uniform system of 
supervision applicable to all direct life insurance business and by the 
extension of the scope to include all the activities referred to in the 
First Directive 79/267/EEC. 
Article 10 of the Second Directive, which concerns the scope of the 
provisions on freedom to provide services, is thus deleted. 
The same goes for Article 16 of the Second Directive, which entitles 
Member States to prohibit the simultaneous pursuit of insurance business by 
way of establishment and by way of services, and for Article 22, which 
- 32 -
concerns the information to be supplied to policy-holders, inasmuch as 
Article 27 of this proposal for a Directive lays down more detailed rules 
on the subject. 
Article 24 of the Second Directive, which provides for home country control 
of the technical provisions in the case of commitments entered into on a 
services basis on the initiative of the policy-holder and for host country 
control in all other cases, is likewise deleted. 
Lastly, Article 14 of the Second Directive, which lays down the prior 
authorization arrangements governing the pursuit of business on an active 
provision of services basis, must also be repealed on identical grounds. 
Henceforth the only legal regime applicable to the taking-up of business 
under conditions of freedom to provide services is that provided for in 
Articles 30 - 32 of this proposal. 
Article 34 - Approval of contract documents used by the insurer 
This Article contains provisions concerning the means Member States may use 
to verify whether the policies and contract documents an insurer proposes 
to use in the course of his business comply with their legal provisions 
protecting the general good. The Article takes up the principle laid down 
in Articles 5 and 25 of this proposal for a Directive. The Member State of 
the commitment cannot, therefore, require prior approval of such documents 
as that would hinder considerably the free movement of products and the 
development of innovative products. Moreover, the provisions on the 
compulsory provision of information by insurers laid down in Article 27, 
and the option of cancelling the contract, afford policy-holders adequate 
protection. For the purpose of monitoring compliance with those 
provisions, the Member States may require only non-systematic communication 
- 33 -
of policies and contract documents. These arrangements are better suited 
to the requirements of a single market and ensure an effective level of 
protection of policy-holders. 
Article 35 - Sanctions 
Article 20 of the Second Directive 90/619/EEC introduced rules on the 
adoption of measures and sanctions against insurance undertakings which 
infringe the provisions applicable to them when carrying on business by way 
of freedom to provide services. 
The rules are based on the principles of devolution of the general power to 
adopt measures and sanctions to the home Member State and on collaboration 
between the different Member States concerned. The host Member State 
retains, however, the possibility of taking measures directly against an 
undertaking operating in its territory in order to prevent or correct 
irregularities committed by that undertaking in its territory. The same 
applies where the measures taken by the home Member State are insufficient 
or non-existent. 
Within the framework of a single authorization system steps must also be 
taken to ensure compliance with the rules applicable to insurance business, 
whether it be carried on by way of establishment or by way of freedom of 
services. It is therefore necessary to extend the arrangements provided 
for in Article 20 of the Second Directive 90/619/EEC to cover all business. 
These arrangements are the same as those applicable to other financial 
services (Article 21, Second Banking Directive 89/646/EEC). 
Article 36 - Advertising 
Publicity for insurance products is an essential means of enabling 
insurance activities to be carried on effectively within the Community. 
- 34 -
This Article allows any duly authorised insurance undertaking full access 
to all the normal means of mass-advertising of its services and products 
within the Community. The Article recalls the position that Member States 
may require that their national rules on the form and content of 
advertising be respected. These may be requirements resulting from 
Community legislation on advertising, in particular Directive 84/450/EEC on 
misleading advertising, and Chapter IV of Directive 890/552/EEC on cross-
border television, or they may be national requirements adopted by Member 
States for reasons of the general good. Once again, this notion of the 
general good must be interpreted in accordance with the requirements of the 
case law of the Court of Justice as explained in the commentary on Article 
24 and as expressed, for instance, in Case 352/85, Bond van Adverteerders 
and in Case 362/88, GB-INNO-BM. 
Article 37 - Equality of treatment In the event of the winding-up of an 
insurance undertaking 
This provision confirms the principle of equality of treatment of all 
insurance creditors in the event of the winding-up of an insurance 
undertaking and, where this case arises, in the event of the intervention 
of a guarantee system without any distinction being made on grounds of the 
nationality of insured persons or beneficiaries or on grounds of the way in 
which insurance contracts are underwritten. The principle has already been 
incorporated in other insurance Directives, notably the Second Directives 
88/357/EEC and 90/619/EEC. 
Article 38 - Statistical Information 
This Article provides that every undertaking will have to furnish the 
supervisory authority of its home Member State with information on its 
turnover in each Member State, whether it be achieved through an 
establishment or under conditions of freedom to provide services. 
- 35 -
The supervisory authorities of the Member States in whose territory the 
insurer in question operates may ask the supervisory authority of the home 
Member State to supply them with such information, which is essential if 
they are to gauge properly the relative size of the various markets. A 
similar provision is contained in the proposal for a Third Non-Life 
Insurance Directive (Article 39). 
ArtIcle 39 - Taxât ion 
This Article extends to the establishment regime the system provided for in 
the Second Directives in respect of freedom to provide services. 
This proposal for a Directive thus states that, subject to future 
harmonization, the principle to be applied in respect of indirect taxes and 
parafiscal charges is that of the territoriality of the tax, that is to say 
the application of the system of taxation of the Member State of the 
commitment and for the benefit of that State. 
Moreover, each State will apply to undertakings operating in its territory, 
whether by way of establishment or by way of freedom to provide services, 
its own national provisions concerning measures to ensure the collection of 
such taxes. 
TITLE V 
FINAL PROVISIONS 
Article 40 - Implementing powers of the Commission 
This provision indicates the Articles of the First Directive and of this 
proposal for a Directive which may be adapted when the moment is right. 
- 36 -
The procedures for adapting those Articles are set out in the Council 
Directive setting up a Committee on Insurance. 
Article 41 
This Article contains a provision which states that this Directive does not 
affect existing rights acquired by authorized branches and in the field of 
freedom of services. 
Article 42 - Transfers of portfolios of Community branches of undertakings 
sublect to the law of a third country 
Title III of the First Directive 79/267/EEC lays down rules applicable to 
branches set up in the Community by third-country undertakings. This 
Article introduces into that Title III, with a view to providing 
policy-holders with the same safeguards in all cases, rules on how the 
transfer of such branches' portfolios of contracts must be effected. 
Article 43 - Right of appeal 
This Article provides for a right to apply to the courts in respect of 
decisions taken by competent authorities in the field covered by this 
proposal for a Directive. 
Articles 44 - 46 - Implementation of the Directive 
These Articles contain the final provisions. 
The date of entry into force should not be later than 31 December 1992. 
- 37 -
Proposal for a 
THIRD COUNCIL DIRECTIVE 
on the coordination of laws, regulations and administrative 
provisions relating to direct life assurance and 
amending Directives 79/267/EEC and 90/619/EEC 
THE COUNCIL OF THE EUROPEAN COMMUNITIES, 
Having regard to the Treaty establishing the European Economic Community, 
and in particular Articles 57(2) and 66 thereof, 
Having regard to the proposal from the Commission, 
In cooperation with the European Parliament, 
Having regard to the opinion of the Economic and Social Committee, 
1. Whereas it is necessary to complete the internal market in direct life 
assurance, from the point of view both of freedom of establishment and 
freedom to provide services, so as to make it easier for assurance 
undertakings whose head office is in the Community to cover 
commitments in the Community; 
2. Whereas the Second Council Directive 90/619/EEC of 8 November 1990 on 
the coordination of laws, regulations and administrative provisions 
relating to direct life assurance, laying down provisions to 
facilitate the effective exercise of freedom to provide services and 
amending Directive 79/267/EEC1, hereinafter called the "Second 
Directive", has contributed substantially to the formation of the 
internal market in direct life assurance by already granting policy­
holders who, by virtue of the fact that they take the initiative in 
- 38 -
entering into a commitment in another country, do not require special 
protection in the Member State of the commitment, complete freedom to 
avail themselves of the widest possible life assurance market; 
3. Whereas the Second Directive therefore represents an important stage 
in the merging of national markets into a single, integrated market; 
whereas it must be supplemented by other Community instruments with a 
view to enabling all policy-holders, whether or not they themselves 
take the initiative, to have recourse to any assurer having his head 
office in the Community and carrying on business there, whether he 
conducts business by way of freedom of establishment or by way of 
freedom to provide services, while guaranteeing them adequate 
protect ion*, 
4. Whereas the approach adopted consists in bringing about such 
harmonization as is essential, necessary and sufficient to achieve 
mutual recognition of authorizations and prudential control systems, 
thereby making it possible to grant a single authorization valid 
throughout the Community and apply the principle of home country 
control ; 
5. Whereas, as a result, the taking-up and pursuit of the business of 
life assurance is henceforth to be subject to the grant of a single 
official authorization issued by the authorities of the Member State 
in which the assurance undertaking has its head office; whereas such 
authorization enables the undertaking to carry on business everywhere 
in the Community, whether under conditions of freedom of establishment 
or under conditions of freedom to provide services; whereas the host 
Member State may no longer require assurance undertakings which have 
already been authorized in the home Member State and which wish to 
carry on assurance business there to seek a fresh authorization; 
whereas the First and Second Directives should therefore be amended 
along those Iines; 
- 39 -
6. Whereas responsibility for monitoring the financial health of the 
assurance undertaking, including its state of solvency, the 
establishment of sufficient technical provisions and the covering of 
those provisions by matching assets, henceforth lies with the 
competent authority of its home Member State; 
7. Whereas the home Member State may lay down stricter rules than those 
provided for in Articles 7, 14, 15, 18, 19(1) and (3) and 20 in 
respect of assurance undertakings authorized by its own competent 
authorities; 
8. Whereas this Directive fits into the pattern of Community legislation 
already set by the First Council Directive 79/267/EEC2, as last 
amended by the Second Directive 90/619/EEC, and by Council Directive 
.../.../EEC [on the annual accounts and consolidated accounts of 
insurance undertakings]3; 
9. Whereas the competent authorities must therefore have at their 
disposal such means of supervision as are necessary to ensure the 
orderly pursuit of business by the assurance undertaking throughout 
the Community, whether it be carried on by way of freedom of 
establishment or by way of freedom to provide services; whereas, in 
particular, they must be able to introduce appropriate safeguards or 
impose sanctions aimed at preventing irregularities and infringements 
of the provisions on insurance supervision; 
10. Whereas it is necessary to adjust the provisions on transfers of 
portfolios to bring them into line with the single authorization 
system introduced by this Directive; 
2 OJ No L 63, 13.3.1979, p. 1. 
3 OJ No 
- 40 -
11. Whereas it is clear from the report drawn up on the basis of 
Article 39(2) of the First Directive that there are no grounds for 
maintaining the current restrictions on composite undertakings or for 
opposing the formation of new composite undertakings provided they 
manage separately, and show separately the results of, the activity of 
life assurance and that of non-life insurance and comply with the 
prudential rules relating to both activities; 
12. Whereas it is necessary from the point of view of the protection of 
lives assured that every assurance undertaking should establish 
sufficient technical provisions; whereas the calculation of such 
provisions is based for the most part on actuarial principles-, whereas 
those principles should be coordinated in order to facilitate mutual 
recognition of the prudential rules applicable in the various 
Member States-, 
13. Whereas the rules concerning the valuation of the assets used to cover 
the technical provisions and their diversification, the rules on 
localization and currency matching rules must be coordinated in order 
to facilitate mutual recognition of Member States' provisions; whereas 
such coordination must take account of the measures adopted in the 
field of the liberalization of capital movements in Council 
Directive 88/361/EEC4 and the work undertaken by the Community with a 
view to achieving economic and monetary union; 
14. Whereas, however, the home Member State may not require assurance 
undertakings to invest the assets covering their technical provisions 
in particular categories of assets, such a requirement being 
incompatible with the free movement of capital measures provided for 
in Directive 88/361 /EEC-, 
- 41 -
15. Whereas the list of items of which the solvency margin required by the 
First Directive may be made up must be supplemented to take account of 
new financial instruments and of the facilities granted to other 
financial institutions for the constitution of their own funds; 
16. Whereas it is at present neither necessary nor appropriate to 
harmonize the law covering the contract; whereas in the absence of 
such harmonization the opportunity afforded to the Member States of 
imposing the application of their law to assurance contracts covering 
commitments in their territory is likely to provide a sufficient 
safeguard for policy-holders; 
17. Whereas within the framework of an internal market it is in the 
policy-holder's interest that he should have access to the widest 
possible range of life assurance products available in the Community 
so that he can choose that which is best suited to his need; whereas 
therefore the Member State in which the commitment is entered into 
must allow all life assurance products offered for sale in the 
Community to be marketed in its territory as long as they do not 
conflict with the legal provisions protecting the general good in 
force in that Member State, insofar as that good is not already 
protected by the rules in the Member State of origin, that these 
provisions are applied in a non-discriminatory manner to all 
undertakings carrying on business in that Member State and that they 
are objectively necessary and proportionate to the desired objective; 
18. Whereas Member States must ensure that the life assurance products and 
contract documents used for covering, whether by way of establishment 
or by way of freedom to provide services, commitments entered into in 
their territory comply with such specific legal provisions protecting 
the general good as are applicable; whereas the systems of supervision 
to be employed must be in keeping with the requirements of an 
integrated market; whereas their employment may not, however, 
- 42 -
constitute a prior condition for carrying on life assurance business; 
whereas from this standpoint systems of prior approval of policy 
conditions are unjustified; whereas it is necessary as a result to 
provide for other systems which are better suited to the requirements 
of a single market and which enable every Member State to guarantee 
policy-holders adequate protection; 
19. Whereas in a single insurance market the consumer will have a wider 
and more varied choice of contracts; whereas If he is to profit fully 
from this diversity and from increased competition, he must be 
provided with whatever information is necessary to enable him to 
choose the contract best suited to his needs-, whereas this information 
requirement is all the more important as the duration of commitments 
can be very long-, whereas the minimum provisions must therefore be 
coordinated in order that the consumer receive clear and accurate 
information about the essential characteristics of the products 
proposed to him as well as the address of the body or bodies, to which 
any complaints of policy-holders, lives assured or beneficiaries of 
the contract may be addressed; 
19a. Whereas publicity for insurance products is an essential means of 
enabling insurance business to be carried on effectively within the 
Community; whereas it is necessary to leave open to insurance 
companies the use of all normal means of advertising in the Member 
State of the branch or of provision of services; whereas Member States 
may nevertheless require compliance with their national rules on the 
form and content of advertising, whether required by Community 
legislation on advertising or adopted for reasons of the general good; 
- 43 -
20. Whereas within the framework of a single market no Member State may 
continue to prohibit the simultaneous carrying-on of life assurance 
business in its territory by way of freedom of establishment and of 
freedom to provide services; whereas the option given to Member States 
in this connection by the Second Directive should therefore be 
abo I i shed -, 
21. Whereas provision should be made for a system of penalties to be 
imposed when, in the Member State in which the commitment is entered 
into, the assurance undertaking does not comply with the provisions 
protecting the general good that are applicable to it; 
21a. Whereas work is in progress on the subject of winding-up insurance 
undertakings (Amended Commission proposal COM(89) 394 final of 
18 September 1989); whereas it is essential at this stage to provide, 
in the event of the winding-up of an insurance undertaking, that the 
systems of protection in place in Member States must guarantee 
equality of treatment for all insurance creditors, irrespective of 
nationality and of the method of entering into the commitment; 
22. Whereas some Member States do not subject life assurance transactions 
to any form of indirect taxation, while others apply special taxes and 
other forms of contribution; whereas the structure and rate of these 
taxes and contributions vary considerably between the Member States in 
which they are applied; whereas it is desirable to avoid a situation 
in which existing differences lead to distortions of competition in 
insurance services between Member States; whereas, pending subsequent 
harmonization, the application of the tax system and of other forms of 
contribution provided for by the Member State in which the commitment 
is entered into is likely to remedy such mischief; whereas it is for 
the Member States to establish the method of ensuring that such taxes 
and contributions are collected; 
- 44 -
23. Whereas, technical adjustments to the detailed rules laid down in this 
Directive may be necessary from time to time to take account of fresh 
developments in the insurance industry; whereas the Commission will 
make such adjustments as and when necessary, after consulting the 
Committee on Insurance set up by , in the exercise of the 
implementing powers conferred on it by the Treaty, 
24. Whereas it is necessary to lay down specific provisions to ensure a 
smooth transition from the legal regime existing at the time of 
application of this Directive to the regime introduced by it, taking 
care not to place an additional workload on Member States' competent 
authorities, 
- 45 -
HAS ADOPTED THIS DIRECTIVE 
TITLE I 
Definitions and scope 
Article 1 
For the purposes of this Directive: 
(a) "First Directive" means Directive 79/267/EEC; 
(b) "Second Directive" means Directive 90/619/EEC; 
(c) "assurance undertaking" means an undertaking which has received 
official authorization in accordance with Article 6 of the First 
Directive; 
(d) "branch" means an agency or branch of an assurance undertaking, having 
regard to Article 3 of the Second Directive; 
(e) "commitment" means a commitment represented by one of the kinds of 
insurance or operation referred to in Article 1 of the First 
Direct ive; 
(f) "home Member State" means the Member State in which the head office of 
the assurance undertaking covering the commitment is situated; 
(g) "Member State of the branch" means the Member State in which the 
branch covering the commitment is situated; 
- 46 -
(h) "Member State of provision of services" means the Member State of the 
commitment, as defined in Article 2 (e) of the Second Directive, if 
the commitment is\ covered by an assurance undertaking or a branch 
situated in another Member State; 
(I) "control" means the relationship between a parent undertaking and a 
subsidiary, as defined in Article 1 of Council Directive 83/349/EEC5, 
or a similar relationship between any natural or legal person and an 
undertaking; 
(J) "qualifying holding" means a direct or Indirect holding in an 
undertaking which represents 10% or more of the capital or of the 
voting rights or which makes It possible to exercise a significant 
influence over the management of the undertaking in which a holding 
subsists. 
For the purposes of this definition, in the context of Articles 7 and 
14 and of the other levels of holding referred to in Article 14, the 
voting rights referred to in Article 7 of Council 
Directive 88/627/EEC6 shall be taken into consideration; 
(k) "parent undertaking" means a parent undertaking as defined in 
Articles 1 and 2 of Directive 83/349/EEC; 
(I) "subsidiary" means a subsidiary undertaking as defined in Articles 1 
and 2 of Directive 83/349/EEC; any subsidiary of a subsidiary 
undertaking shall also be regarded as a subsidiary of the parent 
undertaking which is at the head of those undertakings. 
Article 2 
1. This Directive shall apply to the commitments and undertakings 
referred to in Article 1 of the First Directive. 
5 OJ No L 193, 18.7.1983, p. 1. 
6 OJ No L 348, 17.12.1988, p. 62. 
- 47 -
2. In Article 1(2) of the First Directive the words "and are authorized 
in the country concerned" are deleted. 
3. This Directive shall not apply to operations, undertakings or entities 
to which the First Directive does not apply, nor to the entities 
referred to in Article 4 of that Directive. 
TITLE II 
The taking-up of the business of life assurance 
Article 3 
Article 6 of the First Directive is replaced by the following: 
"Article 6 
1. The taking-up of the business of direct life assurance shall be subject to 
prior official authorization. 
Such authorization shall be sought from the authorities of the home Member 
State by: 
(a) any undertaking which establishes its head office in the territory 
of such State; 
(b) any undertaking which, having received the authorization required, 
under (a) above, extends its business to other classes. 
2. Member States shall not make authorization subject to the lodging of a 
deposit or the provision of security." 
- 48 -
Article 4 
Article 7 of the First Directive is replaced by the following: 
"Article 7 
1. An authorization shall be valid for the whole Community. It shall 
permit an undertaking to carry on business there, either by way of 
right of establishment or by way of freedom to provide services. 
2. An authorization shall be granted for a particular class of assurance 
as listed in the Annex. It shall cover the entire class, unless the 
applicant wishes to cover only part of the risks pertaining to that 
class. 
The supervisory authorities may restrict an authorization requested 
for one of the classes to the operations set out in the scheme of 
operations referred to in Article 9. 
Each Member State may grant an authorization for two or more of the 
classes, where its national laws permit such classes to be carried on 
simultaneously." 
Article 5 
Article 8 of the First Directive is replaced by the following: 
"Article 8 
1. The home Member State shall require that any assurance undertaking for 
which an authorization is sought shall: 
(a) adopt one of the following forms: 
- 49 -
in the case of the Kingdom of Belgium: "société anonyme/naamloze 
vennootschap", "société en commandite par actions/commanditaire 
vennootschap op aandelen", "association d'assurance 
mutuelle/onderI Inge verzekeringmaatschappiJ", "société 
coopérât ive/cooperatieve vennootschap"; 
in the case of the Kingdom of Denmark: "aktieselskaber", "gensidige 
selskaber"; 
in the case of the Federal Republic of Germany: 
"AktiengeselIschaft", "Versicherungsverein auf GegenseItIgkeIt", 
"OffentIich-rechtIiches Wettbewerbs-Versicherungsunternehmen"; 
in the case of the French Republic: "société anonyme", "société 
d'assurance mutuelle"; 
in the case of Ireland: incorporated companies limited by shares or 
by guarantee or unlimited; 
In the case of the Italian Republic: "société per azioni", "société 
coopérâtiva", "mutua di assicurazione"; 
in the case of the Grand Duchy of Luxembourg: " société anonyme", 
"société en commandite par actions", "association d'assurances 
mutuelles", "société coopérative"; 
in the case of the Kingdom of the Netherlands: "naamloze 
vennootschap", "onderlinge waarborgmaatschappiJ"; 
- 50 -
in the case of the United Kingdom: incorporated companies limited 
by shares or by guarantee or unlimited, societies registered under 
the Industrial and Provident Societies Acts, societies registered 
under the Friendly Societies Act, the association of underwriters 
known as Lloyd's-, 
in the case of the Hellenic Republic: 
" avûvuun etaipla " 
in the case of the Kingdom of Spain: "sociedad anonima", "sociedad 
mutua", "sociedad coopérâtiva"; 
in the case of the Portuguese Republic: "sociedade anonima", mutua 
de seguros". 
Assurance undertakings may also adopt the form of a European company (SE), 
as provided for in Council Regulation (EEC) No .../...* and Council 
Directive .../.../EEC**. 
Furthermore, Member States may set up, where appropriate, undertakings 
under any known public-law form provided that such institutions have as 
their object insurance operations in conditions equivalent to those under 
which private-1 aw undertakings operate; 
(b) limit its business activities to the business of insurance and 
operations directly arising therefrom, to the exclusion of all other 
commercial business; 
(c) submit a scheme of operations in accordance with Article 9; 
(d) possess the minimum guarantee fund provided for in Article 20(2); 
- 51 -
(e) be run by technically-qualified persons of good repute. 
2. An undertaking seeking authorization to extend its business to other 
classes 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 19 and the guarantee fund 
referred to in Article 20(1) and (2). 
3. Nothing in this Directive shall prevent Member States from maintaining 
in force or introducing laws, regulations or administrative provisions 
requiring the approval of the memorandum and articles of association 
and the communication of any other documents necessary for the normal 
exercise of supervision. 
Member States shall not, however, lay down provisions requiring the 
prior approval or systematic notification of general and special 
policy conditions, the technical bases used inter al la for calculating 
scales of premiums and technical provisions, and forms and other 
printed documents which an undertaking intends to use in its dealings 
with policy-holders. They may require only non-systematic 
notification of those conditions and other documents for the purpose 
of verifying compliance with laws, regulations and administrative 
provisions in respect of assurance contracts, and this requirement may 
not constitute a prior condition for an undertaking to be able to 
carry on its activities. 
4. The abovementioned provisions may not require that any application for 
authorization be dealt with in the light of the economic requirements 
of the market. 
* OJ No L 
** OJ No L 
- 52 -
Article 6 
Article 9 of the First Directive is replaced by the following: 
"Article 9 
The scheme of operations referred to in Article 8(1)(c) and (2) shall 
contain the following particulars or proof concerning: 
(a) the nature of the commitments which the undertaking 
proposes to cover; 
(b) the guiding principles as to reinsurance; 
(c) the items constituting the minimum guarantee fund; 
(d) estimates relating to the cost of installing the 
administrative services and the organization for securing 
business and the financial resources intended to meet such 
cost; 
and, in addition, for the first three financial years: 
(e) a plan setting out detailed estimates of income and 
expenditure in respect of direct business, reinsurance 
acceptances and reinsurance cessions; 
(f) a forecast balance sheet; 
(g) estimates relating to the financial resources intended to 
cover underwriting liabilities and the solvency margin." 
- 53 -
Article 7 
The competent authorities of the home Member State shall not grant 
authorization for taking up the business of assurance before they have been 
informed of the identities of the shareholders or members, whether direct 
or indirect, natural or legal persons, who have qualifying holdings and of 
the amounts of those holdings. 
Those same authorities shall refuse authorization if, taking into account 
the need to ensure the sound and prudent management of an assurance 
undertaking, they are not satisfied as to the suitability of the said 
shareholders or members. 
- 54 -
TITLE III 
Harmonization of conditions governing pursuit of business 
Chapter 1 
Article 8 
Article 15 of the First Directive is replaced by the following: 
"Article 15 
1. The financial supervision of an assurance undertaking, including that 
of the activities it carries on either through branches or by way of 
freedom to provide services, shall be the sole responsibility of the 
home Member State. If the authorities of the Member State of the 
commitment have reason to suspect that the activities of an assurance 
undertaking might affect its financial soundness, they shall inform 
the authorities of the undertaking's home Member State. The latter 
authorities shall determine whether the undertaking is complying with 
the prudential principles laid down in this Directive. 
2. The financial supervision shall include verification, with respect to 
the entire business of the assurance undertaking, of its state of 
solvency, the establishment of technical provisions, including 
mathematical provisions, and of the assets covering them, in 
accordance with the rules laid down or practices followed in the home 
Member State pursuant to provisions adopted at Community level. 
3. The competent authorities of the home Member State shall require every 
assurance undertaking to have sound administrative and accounting 
procedures and adequate internal control mechanisms." 
- 55 -
Article 9 
Article 16 of the First Directive is replaced by the following: 
"Article 16 
Member States of the branch shall provide that, where an assurance 
undertaking authorized in another Member State carries on its activities 
through a branch, the competent authorities of the home Member State may, 
after having first informed the competent authorities of the Member State 
of the branch, carry out themselves or through the intermediary of persons 
they appoint for that purpose on-the-spot verification of the information 
necessary to ensure the financial supervision of the undertaking." 
Article 10 
The following Article 23a is inserted in the First Directive: 
"Article 23a 
Without prejudice to the procedures for the withdrawal of authorizations 
and the provisions of criminal law, Member States shall provide that their 
respective competent authorities may, as against assurance undertakings or 
those who effectively control the business of assurance undertakings which 
breach laws, regulations or administrative provisions concerning the 
supervision or pursuit of their activities, adopt or impose in respect of 
them penalties or measures aimed specifically at ending observed breaches 
or the causes of such breaches." 
- 56 -
Article 11 
1. Article 6, paragraphs 2 to 7, of the Second Directive are deleted. 
2. Each Member State shall, under the conditions laid down by national 
law, authorize assurance undertakings whose head office is established 
in its territory to transfer all or part of their portfolios of 
contracts, whether concluded by way of freedom of establishment or by 
way of freedom to provide services, to an accepting office established 
in the Community, if the supervisory authorities of the home Member 
State of the accepting office certify that the latter possesses the 
necessary solvency margin after taking the transfer into account. 
3. Where a branch proposes to transfer all or part of its portfolio of 
contracts, whether concluded by way of freedom of establishment or by 
way of freedom to provide services, the Member State of the branch 
shalI be consulted. 
4. In the circumstances referred to in paragraphs 2 and 3, the 
supervisory authorities of the home Member State of the transferring 
undertaking shall authorize the transfer after obtaining the agreement 
of the supervisory authorities of the Member States of commitment. 
5. The supervisory authorities of the Member States consulted shall 
inform the competent authorities of the home Member State of the 
transferring assurance undertaking of their opinion within three 
months of receipt of the request for an opinion; if no response is 
forthcoming by the end of that period, the opinion of the authorities 
consulted shall be deemed to be favourable. 
6. A transfer authorized in accordance with this Article shall be 
published, under the conditions laid down by national law, in the 
Member State of the commitment. Such transfer shall be automatically 
valid against the policy-holders, the lives assured and any other 
person having rights and obligations arising out of the contracts 
transferred. 
- 57 -
Member States may provide policy-holders with the option of cancelling 
the contract within a given period after the transfer. 
Article 12 
Article 24 of the First Directive is replaced by the following: 
"Article 24 
1. If an undertaking does not comply with the provisions of Article 17, 
the supervisory authority of its home Member State may prohibit the free 
disposal of assets after having informed the supervisory authorities of the 
Member States of commitment. 
2. For the purposes of restoring the financial situation of an undertaking 
whose solvency margin has fallen below the minimum required under 
Article 19, the supervisory authority of the home Member State shall 
require a plan for the restoration of a sound financial position to be 
submitted for its approval. 
3. If the solvency margin falls below the guarantee fund as defined in 
Article 20, the supervisory authority of the home Member State shall 
require the undertaking to submit a short-term finance scheme for its 
approval. 
It may also restrict or prohibit the free disposal of the assets of the 
undertaking. It shall inform the authorities of other Member States in 
whose territories the undertaking carries on business of any measures and 
the latter shall, at the request of the former, take the same measures. 
4. The competent supervisory authorities may further take all measures 
necessary to safeguard the interests of the lives assured in the cases 
provided for in paragraphs 1 and 3. 
- 58 -
5. Each Member State shall also take the measures necessary to be able to 
prohibit the free disposal of assets located in its territory at the 
request of the undertaking's home Member State." 
Article 13 
Article 26 of the First Directive is replaced by the following: 
"Article 26 
1. An authorization granted to an assurance undertaking by the competent 
authority of the home Member State may be withdrawn by that authority 
if the undertaking: 
(a) does not make use of the authorization within 12 months, 
expressly renounces the authorization or has ceased to 
engage in business for more than six months, unless the 
Member State concerned has made provision for the 
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 contained in the restoration plan or finance 
scheme referred to in Article 24-, 
(d) fails seriously in its obligations under the regulations to 
which it is subject. 
In the event of withdrawal of the authorization, the supervisory 
authority of the home Member State shall notify such withdrawal to 
the supervisory authorities of the other Member States, which shall 
- 59 -
take appropriate measures to prevent the undertaking from 
commencing new operations in their territory, whether by way of 
freedom of establishment or by way of freedom to provide services. 
The home Member State supervisory authority shall, in conjunction 
with those authorities, take all necessary measures to safeguard 
the interests of the lives assured and, in particular, shall 
restrict the free disposal of the assets of the undertaking in 
accordance with Article 24(1) and (3), second subparagraph. 
2. Any decision to withdraw an authorization shall be supported by 
precise reasons and notified to the undertaking in question. 
Each Member State shall make provision for a right to apply to the 
courts against such a decision." 
Article 14 
1. Member States shall require any natural or legal person who proposes 
to acquire, directly or indirectly, a qualifying holding in an 
assurance undertaking to inform the competent authorities of the home 
Member State, indicating the size of the intended holding. Such a 
person must likewise inform the competent authorities of the home 
Member State if he proposes to increase his qualifying holding so that 
the proportion of the voting rights or of the capital held by him 
would reach or exceed 20%, 33% or 50% or so that the assurance 
undertaking would become his subsidiary. 
The competent authorities of the home Member State shall have a 
maximum of three months from the date of the notification provided for 
in the first subparagraph to oppose such a plan if, in view of the 
need to ensure sound and prudent management of the assurance 
undertaking, they are not satisfied as to the suitability of the 
person referred to in the first subparagraph. If they do not oppose 
the plan referred to in the first subparagraph, they may fix a maximum 
period for Its implementation. 
- 60 -
2. Member States shall require any natural or legal person who proposes 
to dispose, directly or indirectly, of a qualifying holding in an 
assurance undertaking first to inform the competent authorities of the 
home Member State, indicating the size of his intended holding. Such 
a person must likewise inform the competent authorities if he proposes 
to reduce his qualifying holding so that the proportion of the voting 
rights or of the capital held by him would fall below 20%, 33% or 50% 
or so that the assurance undertaking would cease to be his subsidiary. 
3. On becoming aware of them, assurance undertakings shall inform the 
competent authorities of the home Member State of any acquisitions or 
disposals of holdings in their capital that cause holdings to exceed 
or fall below one of the thresholds referred to in paragraphs 1 and 2. 
They shall also, at least once a year, inform them of the names of 
shareholders and members possessing qualifying holdings and the sizes 
of such holdings as shown, for example, by the information received at 
the annual general meetings of shareholders and members or as a result 
of compliance with the regulations relating to companies listed on 
stock exchanges. 
4. Member States shall require that, where the influence exercised by the 
persons referred to in paragraph 1 is likely to operate to the 
detriment of the prudent and sound management of the assurance 
undertaking, the competent authorities of the home Member State shall 
take appropriate measures to put an end to that situation. Such 
measures may consist, for example, in injunctions, sanctions against 
directors and managers, or the suspension of the exercise of the 
voting rights attaching to the shares held by the shareholders or 
members in question. 
- 61 -
Similar measures shall apply to natural or legal persons failing to 
comply with the obligation to provide prior information, as laid down 
in paragraph 1. If a holding is acquired despite the opposition of 
the competent authorities, the Member States shall, regardless of any 
other sanctions to be adopted, provide either for exercise of the 
corresponding voting rights to be suspended, or for the nullity of 
votes cast or for the possibility of their annulment. 
Article 14a 
Article 13 of the First Directive is replaced by the following: 
"Article 13 
1. Undertakings which, in accordance with Article 6 of the first non-life 
insurance coordination Directive and of this Directive, receive 
authorizations permitting them to carry on simultaneously the 
activities referred to in the Annex to the first non-life insurance 
coordination Directive and those listed in Article 1 of this Directive 
shall manage each activity separately in accordance with Article 14. 
2. Where an undertaking carrying on the activities referred to in the 
Annex to the first non-life insurance coordination Directive has 
financial, commercial or administrative links with an undertaking 
carrying on the activities covered by this Directive, the supervisory 
authorities of the Member States in whose territory the head offices 
of those undertakings are situated shall ensure that the accounts of 
the undertakings in question are not distorted by agreements between 
these undertakings or by any arrangement which could affect the 
apportionment of expenses and income. 
3. Subject to paragraph 4, undertakings which at the time of notification 
of this Directive carry on simultaneously in a Member State both of 
- 62 -
the activities referred to in paragraph 1 may continue to do so there 
provided that each activity is separately managed in accordance with 
Article 14. 
4. Any Member State may require undertakings whose head offices are 
established in its territory to cease, within a period to be 
determined by the Member State concerned, the simultaneous pursuit of 
activities in which they were engaged at the time of notification of 
this Directive." 
Article 14b 
Article 18 of the Second Directive is deleted with effect from 
1 January 1996. 
Chapter 2 
Article 15 
Article 17 of the First Directive is replaced by the following: 
"Article 17 
1. The home Member State shall require every assurance undertaking to 
establish sufficient technical provisions, including mathematical 
provisions, in respect of its entire business. 
The amount of such provisions shall be determined according to the 
following principles: 
- 63 -
A.(i) The amount of the mathematical provisions shall be 
calculated by a sufficiently prudent actuarial valuation of 
all future liabilities for all existing policies, 
including: 
all guaranteed benefits, including guaranteed surrender 
values; 
bonuses which have already been guaranteed, whether 
described as vested, declared or allotted; 
options available to the policy-holder under the terms of 
the contract; 
expenses, including commissions; 
taking credit for future premiums due. 
(ii) The use of a retrospective method is allowed, if it can be 
shown that the resulting technical provisions are not lower 
than would be required under a sufficiently prudent 
prospective calculation or if a prospective method cannot 
be used for the type of policy involved. 
(iii) A prudent valuation is not a 'best estimate' valuation, but 
shall include an appropriate margin for adverse deviation 
of the relevant factors. 
(iv) The valuation shall take account of the method of valuation 
of the corresponding assets, depending on the type of 
policy, and the extent to which specific assets can be 
identified. 
(v) Technical provisions shall be calculated separately for 
each contract. The use of appropriate approximations or 
generalizations is allowed however, where they are likely 
- 64 -
to give approximately the same result as the individual 
calculations. The principle of separate calculation shall 
in no way prevent the establishment of additional 
provisions for general risks which are not individualized. 
(vi) Where the surrender value of a policy if guaranteed, the 
amount of the mathematical provisions for the policy shall 
be at least as great as that value. 
B. The rate of interest used in the calculation of the 
technical provisions shall be chosen prudently, taking into 
account the currency In which the policy is denominated, 
and having regard to the yield on the corresponding 
existing assets and to the yield which it is expected will 
be obtained on sums to be invested in the future. 
C. The elements of the statistical basis and the allowance for 
expenses used in the calculation of the technical 
provisions shall be chosen prudently, having regard to the 
State of the commitment, the type of policy, and the 
administrative costs and commissions expected to be 
incurred. 
D. In the case of participating policies, the valuation method 
shall take into account, either implicitly or explicitly, 
future bonuses of all kinds, in a manner consistent with 
the other assumptions on future experience and with the 
current method of distribution of bonus. Where no explicit 
allowance is made for future bonuses a technical rate of 
interest shall be used which is lower than the rate chosen 
according to principle B by an appropriate amount. 
- 65 -
E. Allowance for future expenses may be made implicitly, for 
instance by the use of an appropriate net premium. However 
the overall allowance, implicit or explicit, shall be not 
less than a prudent estimate of the relevant future 
expenses. 
F. The method of calculation of technical provisions from year 
to year shall be such as to recognize profit in an 
appropriate way over the duration of each policy, and shall 
not be subject to discontinuities arising from arbitrary 
changes to the method or the bases of calculation. 
2. Assurance undertakings shall publish the bases and methods used in the 
calculation of the technical provisions, including provisions for 
bonuses. 
3. The home Member State shall require every assurance undertaking to 
cover the technical provisions in respect of its entire business by 
matching assets, in accordance with Article 21. In respect of 
business written in the Community, these assets must be localized on 
the territory of the Community. The home Member State may, however, 
permit relaxations in the rules on the localization of assets." 
Article 16 
Premiums for new business shall be sufficient, on reasonable actuarial 
assumptions, to enable undertakings to meet all their commitments having 
regard to all aspects of their financial situation. 
- 66 -
Article 17 
Assets representing the technical provisions shall be invested having 
regard to the kind of business transacted, and the nature and duration of 
the assets, including possible future variations in their yield and value. 
Article 18 
1. The home Member State shall allow every assurance undertaking to cover 
the technical provisions only from amongst the following categories of 
assets: 
(a) debt securities, bonds and other money market instruments 
issued by a State or local authority; loans to or 
guaranteed by a State or local authority-, 
(b) debt securities, bonds and other money market instruments 
issued by undertakings; secured loans to or guaranteed by 
undertakings; 
(c) secured loans to natural persons other than those listed 
under (h); 
(d) transferable shares and other transferable variable yield 
part icipations; 
(e) units in undertakings for collective investments in 
transferable securities and other investment pools; 
(f) hedging instruments, such as options, futures, swaps-, 
(g) land and buildings-, 
- 67 -
(h) loans guaranteed by mortgage on land, buildings, ships or 
aircraft; 
(i) cash at bank and in hand, deposits with credit 
institutions; 
(J) reinsurance amounts of technical provisions, determined in 
accordance with the stipulations of the underlying 
reinsurance contracts; 
(k) deposits with and debts owed by ceding undertakings; 
(I) debts owed by policy-holders and intermediaries arising out 
of direct and reinsurance operations, up to 30% of premiums 
earned in the financial year; 
(m) accrued interest and rent and other prepayments and accrued 
i ncome; 
(n) deferred acquisition costs; 
(o) amounts receivable as a result of salvage and subrogation-, 
(p) recognized tax recoveries; 
(q) claims against guarantee funds; 
(r) tangible fixed assets, other than land and buildings; 
(s) reversionary interests; 
(t) loans on policies. 
- 68 -
2. Notwithstanding paragraph 1, in particular circumstances and at the 
assurance undertaking's request, the home Member State may, on the 
basis of a duly motivated decision, allow other categories of assets 
for the purpose of covering technical provisions, subject to 
Article 17. 
Article 19 
1. The home Member State shall require every assurance undertaking to 
invest no more than: 
(a) 50% of the total of the technical provisions, net of 
reinsurance, in the category of assets listed in 
Article 18(1)(b); 
(b) 50% of the total of the technical provisions, net of 
reinsurance, in the categories of assets listed in 
Article 18(1 )(g) and (h), taken together-, 
(c) 80% of the total of the technical provisions, net of 
reinsurance, in the categories of assets listed in 
Article 18(1)(d), (e) and (f), taken together, of which no 
more than 10% shall comprise the category of assets listed 
in Article 18(1)(f) or unlisted transferable shares and 
other transferable variable yield participations taken 
together; 
The home Member State may waive the 80% limit, on condition 
that the 10% limit laid down in point (g) is reduced to 5%. 
(d) 5% of the total of the technical provisions, net of 
reinsurance, in the category of assets listed in 
Article 18(1)(c); 
- 69 -
(e) 10% of the total of the technical provisions, net of 
reinsurance, in any one piece of land or buildings, or a 
number of pieces of such buildings; 
(f) 10% of the total of the technical provisions, net of 
reinsurance, in any one loan guaranteed by a mortgage on 
land, buildings, ships or aircraft; 
(g) 10% of the total of the technical provisions, net of 
reinsurance, taken together in transferable shares, other 
transferable variable yield participations, debentures and 
other bonds of any one undertaking and loans to any one 
undertaking. 
2. Member States shall not require assurance undertakings to invest in 
particular categories of assets or to localize their assets in a 
particular Member State. 
3. Notwithstanding paragraph 1, in particular circumstances and at the 
assurance undertaking's request, the home Member State may, on the 
basis of a duly motivated decision, allow exceptions to the rules laid 
down in points (a) to (g) of paragraph 1 of this Article, subject to 
Article 17. 
Article 20 
At the request of, and upon proof being shown by, the assurance 
undertaking, the home Member State may allow any hidden reserves resulting 
from the undervaluation of assets as cover for technical provisions in so 
far as those hidden reserves are not of an exceptional nature. 
If hidden reserves are recognized as cover for technical provisions, an 
adequate amount of latent taxes and selling expenses shall be deducted. 
- 70 -
Article 21 
For the purposes of Article 17(3) and Article 28 of the First Directive, 
Member States shall comply with Annex 1 to this Directive as regards the 
matching rules. 
Article 22 
Article 18(1) of the First Directive is replaced by the following: 
"1. the assets of the undertaking free of any foreseeable liabilities, 
less any intangible items. In particular the following shall be 
considered: 
the paid-up share capital or, in the case of a mutual concern, the 
effective fund; 
one-half of the share capital or the fund which is not yet paid-up, 
once the paid-up part reaches 25% of this capital or fund; 
reserves (statutory reserves and free reserves) not corresponding to 
underwriting liabilities; 
any carry-forward of profits; 
subordinated loan capital, up to an overriding limit of 25% of the 
margin, if the following criteria are met: 
there must be a binding agreement by which, in the event of 
bankruptcy or liquidation of the assurance undertaking, the 
subordinated loan capital ranks after the claims of all 
other creditors and is not to be repaid until all other 
debts outstanding at that time have been settled; 
- 71 -
only fully paid-up funds may be taken into account; 
the original maturity must be of at least five years, after 
which the subordinated loan capital may be repaid; if its 
maturity is not fixed, it shall be repayable only subject 
to five years' notice unless it is no longer considered as 
own funds or unless the prior consent of the home 
Member State is specifically required for early repayment. 
The home Member State may grant permission for the early 
repayment of such loans provided the request is made on the 
initiative of the issuer and the solvency of the assurance 
undertaking in question is not affected; 
the extent to which subordinated loan capital may rank as 
own funds must be gradually reduced during at least the 
last five years before the agreed repayment date; 
the loan agreement must not include any clause providing 
that in specified circumstances, other than the winding-up 
of the assurance undertaking, the debt will become 
repayable before the agreed repayment date." 
Article 23 
Article 21 of the First Directive is replaced by the following: 
"Article 21 
1. Member States shall not prescribe any rules as to the choice of the 
assets in excess of those representing the technical provisions 
referred to in Article 17. 
- 72 -
2. Subject to Article 17(3), Article 24(1), (3) and (5) and the second 
subparagraph of Article 26(1), Member States shall not restrain the 
free disposal of the assets, whether movable or immovable property, 
forming part of the assets of authorized businesses. 
3. This Article shall not preclude any measures which Member States, 
while safeguarding the interests of the lives assured, are entitled to 
take as owners, members or associates of the undertakings in 
quest ion." 
Chapter 3 
Article 24 
The Member State of the commitment shall not prevent the policy-holder from 
concluding a contract conforming with the rules of the home Member State, 
as long as it does not conflict with legal provisions protecting the 
general good in the Member State of the commitment. 
Article 25 
Member States shall not lay down provisions requiring the prior approval or 
systematic notification of general and special policy conditions, the 
technical bases used Inter al la for calculating scales of premiums and 
technical provisions, and forms and other printed documents which an 
assurance undertaking intends to use in its dealings with policy-holders. 
- 73 -
They may require only non-systematic notification of those conditions and 
other documents for the purpose of verifying compliance with laws, 
regulations and administrative provisions in respect of assurance 
contracts, and this requirement may not constitute a prior condition for an 
undertaking to be able to carry on its activities. 
Article 26 
In the first subparagraph of Article 15(1) of the Second Directive the 
words "in one of the cases referred to in Title III" are deleted. 
Article 27 
1. Before any commitment is finalised, the policy-holder shall receive at 
least the information listed in point A of Annex 2. 
2. The policy-holder shall be kept informed throughout the term of the 
contract of any change concerning the information listed in point B of 
Annex 2. 
3. The Member State of the commitment may require assurance undertakings 
to furnish information in addition to that listed in Annex 2 only if 
it is indispensable to a proper understanding by the policy-holder of 
the essential elements of the commitment. 
- 74 -
TITLE IV 
Provisions relating to freedom of establishment 
and freedom to provide services 
Article 28 
Article 10 of the First Directive is replaced by the following: 
"Article 10 
1. An assurance undertaking wishing to establish a branch in another 
Member State shall notify the competent authorities of its home 
Member State. 
2. Member States shall require every assurance undertaking wishing to 
establish a branch in another Member State to provide the following 
information when effecting the notification referred to in 
paragraph 1 : 
(a) the Member State in whose territory it plans to establish a 
branch; 
(b) a scheme of operations setting out inter al la the types of 
business envisaged and the structural organization of the 
branch; 
(c) the address in the Member State of the branch from which 
documents may be obtained; 
- 75 -
(d) the name of the person responsible for the management of 
the branch and possessing sufficient powers to bind the 
undertaking in relation to third parties and to represent 
it in relations with the authorities and courts of the 
Member State of the branch. 
With regard to Lloyd's, in the event of any litigation in 
the Member State of the branch resulting from underwritten 
commitments, the lives assured must not be more 
unfavourably treated than if the litigation had been 
brought against businesses of a more conventional type. 
The authorized agent must, therefore, possess sufficient 
powers to enable proceedings to be instituted against him 
and must in that capacity be able to bind the Lloyd's 
underwriters concerned. 
3. Unless the competent authorities of the home Member State have reason 
to doubt the adequacy of the administrative structure or the financial 
situation of the assurance undertaking, taking into account the 
activities envisaged, they shall within three months of receipt of the 
information referred to in paragraph 2 communicate that information to 
the competent authorities of the Member State of the branch and shall 
inform the undertaking concerned accordingly. 
The home Member State competent authorities shall also communicate the 
amount of the guarantee fund and solvency margin of the assurance 
undertaking, calculated in accordance with Articles 19 and 20. 
Where the competent authorities of the home Member State refuse to 
communicate the information referred to in paragraph 2 to the 
competent authorities of the Member State of the branch, they shall 
give reasons for their refusal to the undertaking concerned within 
three months of receipt of all the information. That refusal or 
failure to reply shall be subject to a right to apply to the courts in 
the home Member State. 
- 76 -
4. Before the branch of an assurance undertaking commences its 
activities, the competent authorities of the Member State of the 
branch shall, within two months of receiving the information mentioned 
in paragraph 3, if necessary indicate the conditions under which, in 
the interest of the general good, those activities must be carried on 
in the Member State of the branch. 
5. On receipt of a communication from the competent authorities of the 
Member State of the branch, or, if no communication is received from 
them, on expiry of the period provided for in paragraph 4, the branch 
may be established and commence its activities. 
6. In the event of a change in any of the particulars communicated 
pursuant to paragraph 2(b), (c) or (d), an assurance undertaking shall 
give written notice of the change to the competent authorities of the 
home Member State and Member State of the branch at least one month 
before making the change so as to enable the competent authorities of 
the home Member State to take a decision pursuant to paragraph 3 and 
the competent authorities of the Member State of the branch to take a 
decision on the change pursuant to paragraph 4." 
Article 29 
Article 11 of the First Directive is deleted. 
Article 30 
Article 11 of the Second Directive is replaced by the following: 
- 77 -
"Article 11 
Any undertaking intending to carry on business for the first time by way of 
freedom to provide services shall first inform the competent authorities of 
the home Member State, indicating the Member State or Member States within 
the territory of which it contemplates providing services and the nature of 
the commitments it proposes to cover." 
Article 31 
Article 14 of the Second Directive is replaced by the following: 
"Article 14 
1. The competent authorities of the home Member State shall communicate, 
within one month of the notification provided for in Article 11, to 
the Member State or Member States within the territory of which the 
undertaking intends to carry on business by way of freedom to provide 
services: 
(a) the amount of the solvency margin calculated in accordance 
with Articles 19 and 20 of the First Directive-, 
(b) the classes which the undertaking has been authorized to 
transact; 
(c) the nature of the commitments which the undertaking 
proposes to cover in the Member State of provision of 
services. 
At the same time, they shall inform the undertaking concerned 
accordingly. 
- 78 -
2. Where the competent authorities of the home Member State do not 
communicate the information referred to in paragraph 1 within the 
period laid down, they shall give the reasons for their refusal to the 
undertaking within that same period. The refusal shall be subject to 
a right to apply to the courts in the home Member State. 
3. The undertaking may commence activities as from the certified date on 
which it is informed of the communication provided for in the first 
subparagraph of paragraph 1." 
Article 32 
Article 17 of the Second Directive is replaced by the following: 
"Article 17 
Any amendment which the undertaking intends to make to the information 
referred to in Article 11 shall be subject to the procedure provided for in 
Articles 11 and 14." 
Article 33 
Articles 10, 12, 13, 16, 22 and 24 of the Second Directive are deleted. 
Article 34 
1. Article 19 of the Second Directive is deleted. 
- 79 -
2. Member States of the branch or of provision of services shall not lay 
down provisions requiring the prior approval or systematic 
notification of general and special policy conditions, the technical 
bases used inter al la for calculating scales of premiums and technical 
provisions, and forms and other printed documents which an undertaking 
intends to use. For the purpose of verifying compliance with their 
national provisions, they shall require of any undertaking wishing to 
carry on assurance business in their territory, whether by way of 
freedom of establishment or by way of freedom to provide services, 
only non-systematic notification of the conditions it proposes to use, 
although this requirement may not constitute a prior condition for an 
undertaking to carry on its activities. 
Article 35 
1. Article 20 of the Second Directive is deleted. 
2. Any undertaking carrying on business by way of freedom of 
establishment or freedom to provide services shall submit to the 
competent authorities of the Member State of the branch and/or of the 
Member State of provision of services all documents requested of it 
for the purposes of this Article in so far as undertakings whose head 
office is in those Member States are also obliged to do so. 
3. If the competent authorities of a Member State establish that an 
undertaking with a branch or providing services in its territory is 
not complying with the legal provisions applicable to it in that 
State, they shall require the undertaking concerned to put an end to 
the irregular situation. 
- 80 -
4. If the undertaking in question fails to take the necessary steps, the 
competent authorities of the Member State concerned shall inform the 
competent authorities of the home Member State accordingly. The 
latter authorities shall, at the earliest opportunity, take all 
appropriate measures to ensure that the undertaking concerned puts an 
end to that irregular situation. The nature of those measures shall 
be communicated to the competent authorities of the Member State 
concerned. 
5. If, despite the measures taken by the home Member State or because 
such measures prove inadequate or are lacking in that State, the 
undertaking persists in violating the legal provisions in force in the 
Member State concerned, the latter may, after informing the competent 
authorities of the home Member State, take appropriate measures to 
prevent or punish further irregularities, including, in so far as is 
strictly necessary, the prevention of the further conclusion of new 
assurance contracts by that undertaking in its territory. 
Member States shall ensure that in their territories it is possible to 
serve the legal documents necessary for these measures on assurance 
undertakings. 
6. Paragraphs 2 to 5 shall not affect the power of the Member States 
concerned to take - in the case of urgency - appropriate measures to 
prevent or punish irregularities committed within their territories. 
This shall include the possibility of preventing assurance 
undertakings from continuing to conclude new assurance contracts 
within their territories. 
7. If the undertaking which has committed the irregularity has an 
establishment or possesses property in the Member State concerned, the 
competent authorities of the latter may, in accordance with national 
legislation, apply the administrative penalties prescribed for that 
offence by way of enforcement against that establishment or property. 
- 81 -
8. Any measure adopted pursuant to paragraphs 4 to 7 involving penalties 
or restrictions on the carrying-on of assurance business must be 
properly Justified and communicated to the undertaking concerned. 
Provision shall be made for a right to apply in respect of any such 
measure to the courts in the Member State in which it was adopted. 
9. Every two years the Commission shall submit to the Council a report 
summarizing the number and type of cases in which, in each 
Member State, decisions refusing authorization have been communicated 
under Article 28 or measures have been taken under paragraph 4. 
Member States shall cooperate with the Commission by providing it with 
the information required for the report. 
Article 36 
Nothing in this Directive shall prevent assurance undertakings with head 
offices in other Member States from advertising their services through all 
available means of communication in the Member State of the branch or 
Member State of provision of services, subject to any rules governing the 
form and content of such advertising adopted in the interest of the general 
good. 
Article 37 
1. Article 21 of the Second Directive is deleted. 
2. In the event of an assurance undertaking being wound up, commitments 
arising from contracts underwritten through a branch or by way of 
freedom to provide services shall be met in the same way as those 
arising from that undertaking's other assurance contracts, without 
distinction of nationality as far as the lives assured and the 
beneficiaries are concerned. 
- 82 -
Article 38 
1. Article 23 of the Second Directive is deleted. 
2. Every assurance undertaking shall inform the supervisory authority of 
its home Member State, separately in respect of operations effected by 
way of freedom of establishment and in respect of those effected by 
way of freedom to provide services, of the amount of the premiums, 
without deduction of reinsurance, receivable by Member State and by 
each of classes I to VI, as defined in the Annex to the First 
Directive. 
The supervisory authority of the home Member State shall forward this 
information to the supervisory authorities of each of the 
Member States concerned which so request. 
Article 39 
1. Article 25 of the Second Directive is deleted. 
2. Without prejudice to any subsequent harmonization, every assurance 
contract shall be subject exclusively to the indirect taxes and 
parafiscal charges on assurance premiums in the Member State of the 
commitment within the meaning of Article 2(e) of the Second Directive, 
and also, with regard to Spain, to the surcharges legally established 
in favour of the Spanish "Consorcio de Compensaciôn de Seguros" for 
the fulfilment of its functions relating to the compensation of losses 
arising from extraordinary events occurring in that Member State. 
The law applicable to the contract pursuant to Article 4 of the Second 
Directive shall not affect the fiscal arrangements applicable. 
- 83 -
Each Member State shall, subject to future harmonization, apply to 
those undertakings which carry on business in its territory, its own 
national provisions for measures to ensure the collection of indirect 
taxes and parafiscal charges referred to in the first subparagraph. 
TITLE V 
Final provisions 
Article 40 
1. The technical adjustments to be made to the First and Second 
Directives and to this Directive in the following areas shall be 
adopted in accordance with the procedure laid down in Article ... of 
Council Directive ... (Committee on Insurance): 
amendments to the list set out in the Annex to the First 
Directive, or adaptation of the terminology used in that 
list to take account of developments on assurance markets; 
clarification of the items constituting the solvency margin 
listed in Article 18 of the First Directive to take account 
of the creation of new financial instruments; 
alteration of the minimum guarantee fund provided for in 
Article 20(2) of the First Directive to take account of 
developments In the economic and financial field; 
amendments to the list of admissible assets which may cover 
the technical provisions, set out in Article 18 of this 
Directive, and of the rules on the spreading of investments 
laid down in Article 19 of this Directive; 
- 84 -
changes to the exceptions to the matching principle, 
provided for in Annex 1 to this Directive, to take account 
of the development of new currency hedging instruments or 
progress towards economic and monetary union; 
clarification of the definitions in order to ensure uniform 
application of the First and Second Directives and of this 
Directive throughout the Community; 
consolidation of the First and Second Directives, and this 
Direct ive. 
Article 41 
1. Branches which have commenced their activities, in accordance with the 
provisions in force in their Member State of establishment, before the 
entry into force of the provisions adopted in implementation of this 
Directive shall be presumed to have been subject to the procedure laid 
down in Article 10(1) to (5) of the First Directive. They shall be 
governed, from the date of that entry into force, by Articles 17, 23a, 
24 and 26 of the First Directive and by Article 35 of this Directive. 
2. Articles 30 and 31 shall not affect rights acquired by assurance 
undertakings transacting business by way of freedom to provide 
services before the entry into force of the provisions adopted in 
implementation of this Directive. 
Article 42 
The following Article is inserted in the First Directive: 
"Article 31a 
- 85 -
1. Each Member State shall, under the conditions laid down by national 
law, authorize agencies and branches set up in its territory and 
referred to in this Title to transfer all or part of their portfolios 
of contracts to an accepting office established in the Community, if 
the supervisory authorities of the Member State of the accepting 
office certify that the latter possesses the necessary solvency margin 
after taking the transfer into account. 
2. A transfer authorized in accordance with paragraph 1 shall be 
published, under the conditions laid down by national law, in the 
Member State of the commitment. Such transfer shall be automatically 
valid against the policy-holders, the lives assured and any other 
person having rights and obligations arising out of the contracts 
transferred. 
This provision shall not affect the right of Member States to provide 
policy-holders with the option of cancelling the contract within a 
given period after the transfer." 
Article 43 
Member States shall ensure that decisions taken in respect of an assurance 
undertaking in pursuance of laws, regulations and administrative provisions 
adopted in accordance with this Directive may be subject to the right to 
apply to the courts. 
Article 44 
Member States shall bring into force the laws, regulations and 
administrative provisions necessary to comply with this Directive not later 
than ... They shall forthwith inform the Commission thereof. 
When Member States adopt these provisions, 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. 
- 86 -
Article 45 
Upon notification of this Directive, Member States shall communicate to the 
Commission the texts of the main laws, regulations or administrative 
provisions which they adopt in the field covered by this Directive. 
Article 46 
This Directive is addressed to the Member States. 
Done at Brussels, For the Council 
The President 
- 87 -
ANNEX 1 
MATCHING RULES 
The currency in which the assurer's commitments are payable shall be 
determined in accordance with the following rules: 
1. Where the cover provided by a contract is expressed in terms of a 
particular currency, the assurer's commitments are considered to be 
payable in that currency. 
2. Where the cover provided by a contract is directly linked to the value 
of units in a UCITS or some other reference value, the technical 
provisions must be represented by directly equivalent assets. 
3. Member States may authorize undertakings not to cover their technical 
provisions, including their mathematical provisions, by matching 
assets if application of the above procedures would result in the 
undertaking being obliged, in order to comply with the matching 
principle, to hold assets in a currency amounting to not more than 7% 
of the assets existing in other currencies. 
4. Member States may choose not to require undertakings to apply the 
matching principle where commitments are payable in a currency other 
than the currency of one of the Community Member States, if 
investments in that currency are regulated, if the currency is subject 
to transfer restrictions or if, for similar reasons, it is not 
suitable for covering technical provisions. 
5. Undertakings are authorized not to hold matching assets to cover an 
amount not exceeding 20% of their commitments in a particular 
currency. 
- 88 -
However, total assets in all currencies combined must be at least 
equal to total commitments in all currencies combined. 
6. Each Member State may provide that, whenever under the preceding 
procedures a commitment has to be covered by assets expressed in the 
currency of a Member State, this requirement shall also be considered 
to be satisfied when the assets are expressed in ecus. 
- 89 -
Information for policy-holders ANNEX 2 
The policy-holder must be informed of the following information before 
finalising the contract (A), or during the term of the contract (B). The 
information must be provided in a clear and accurate manner, in writing, and in 
the official language of the Member State of the commitment: 
A. Before finalising the contract 
Information about the 
assurance company Information about the 
assurance policy 
a.1 The name of the company and 
its legal form a.4 Definition of each benefit 
and each opt ion 
a.2 The name of the Member State 
in which the head office, and 
where appropriate the agency 
or branch which issues the 
policy, is situated 
a.3 The address of the head office 
and where appropriate of the 
agency or branch which issues 
the policy a.5 Term of the policy 
a.6 Means of terminating the 
contract 
a.7 Means of payment of 
premiums 
a.8 Means of calculation and 
distribution of profit 
participation 
a.9 Indications of surrender and 
paid-up values, and the extent to 
which they are guaranteed 
a. 10 Information on the premiums for 
each benefit, both main benefits 
and supplementary benefits 
a. 11 For un 11-11nked poIi c i es, 
definition of the units to which 
the benefits are linked 
a.12 Indication of the nature of the 
underlying assets for un it-1 inked 
poIi c i es 
- 90 -
a.13 Application of the cooling-off 
per iod 
a.14 Indication of the tax arrangements 
applicable to the policy 
a. 15 The address of the body or bodies 
in the Member State of the 
commitment to which any complaints 
of policyholders, lives assured or 
beneficiaries of the contract 
should be addressed 
B. During the term of the contract 
In addition to the policy conditions, both general and specific, the 
policy-holder must receive the following information throughout the term of the 
contract. 
Information about the 
assurance company Information about the 
assurance policy 
b.1 Any change in the name of the 
company, its legal form or 
the address of its head office, 
and where appropriate of the 
agency or branch which issues 
the policy b.2 All the information listed 
in points a.4 to a.13 of A in 
the event of a change in the 
policy conditions or 
amendment of the law 
applicable to the policy 
The detailed application of the above requirements is to be determined according 
to the law of the Member State of the commitment. 
- 91 -
FICHE FINANCIERE 
(délai de consultation requis pour la DG XIX : 10 Jours ouvrables) 
VOLET 1 : IMPLICATIONS FINANCIERES 
1. Intitulé de I'action 
Prop, de directive du Conseil : 3ème directive de coordination dans 
le domaine de l'assurance directe sur la vie. 
2. Lignes budgétaires concernées : crédits de fonctionnement 
3. Base légale : Art. 57 para 2 et 66 du Traité CEE 
4. Description de l'action 
4.1. Objectifs spécifiques de l'action : acte législatif 
4.2. Durée : pas d'application 
4.3. Population visée par l'action : autorités dans les E.M. 
5. Classification de la dépense ou des recettes 
5.1. DO/DNO 
5.2. CD/CND 
5.3. Types de recettes visées 
Réponse : pas d'application 
6. Nature de la dépense ou des recettes 
6.1. Subvention à 100 % 
6.2. Subvention pour co-fInancement avec d'autres sources du 
secteur public et/ou privé 
6.3. Bonification d'Intérêt 
6.4. Autres 
6.5. En cas de réussite économique de l'action, un remboursement 
partiel ou total de l'apport financier communautaire est-
II prévu ? 
6.6. L'action proposée Implique-t-elle une modification du 
niveau des recettes? SI oui, de quelle nature est la 
modification et quel type de recettes est visé ? 
Réponse : pas d'application 
7. Incidence financière sur les crédits d'intervention (partie B du 
budget) 
7.1. Indiquez le mode de calcul du coût total de l'action 
7.2. Indiquez la part du "mini-budget" dans le coût total de 
l'action, explicitez le mode de calcul. 
7.3. Echéancier Indicatif des crédits d'engagement et de 
paiement 
Réponse : pas d'application 
8. Quelles sont les dispositions anti-fraude prévues dans la 
proposition d'action ? 
Réponse : pas d'application 
- 92 -
VOLET 2 : DEPENSES ADMINISTRATIVES 
(partie A du budget) 
(Volet à transmettre à la DG IX pour avis-, celle-ci le transmet ensuite 
à la DG XIX) 
1. L'action prorposée ImpIique-t-elle une augmentation du nombre 
d'effectifs de la Commission ? Si oui, de combien 7 
Non. 
2. Indiquez le montant des dépenses de fonctionnement et de personnel 
généréres la proposition d'action. Explicitez le mode de calcul. 
Pas d'applIcat ion 
- 93 -
VOLET 3 : ELEMENTS D'ANALYSE COUT-EFFICACITE 
1. Objectifs et cohérence avec la programmation financière 
1.1. Objectifs spécifiques de l'action proposée. Il doit être 
quantifié dans la msure du possible et présenté pour 
chacune des années concernées s'il s'agit d'une action 
plurlannuel le. 
Réponse : acte législatif comportant harmonisation des législations 
1.2. L'action est-elle prévue dans la programmation financière 
de la DG pour les années concernées 7 
Réponse : pas d'application 
1.3. Indiquez à quel objectif plus général défini dans la 
programmation financière de la DG correspond l'objectif de 
I'action proposée 
Réponse : programme de travail législatif de la DG XV 
2. Justification de l'action 
2.1. Justification de l'action choisie par rapport à une 
alternative qui permettrait d'atteindre les mêmes 
objectifs. La justification doit se baser notamment sur 
trois critères : 
a) coût 
b) effets dérivés (Impact au-delà des objectifs 
spécifiques) 
c) effet multiplicateur (capacité de mobilisation d'autres 
sources de financement 
Réponse : pas d'application; proposition faite dans le cadre du 
droit d'initiative de la Commission en matière législative. 
3. Suivi et évaluation de l'action 
3.1. Indicateurs de performance sélectionnés 
3.2. Modalités et périodicité de l'évaluation prévues 
3.3. Principaux facteurs d'Incertitude pouvant affecter les 
résultats spécifiques de l'action 
Réponse : pas d'application 
94 -
THE IMPACT OF TEE PROPOSAL CM BUSINESS 
with special reference to small and medium-sized enterprises (SMEs) ' 
Title of proposal: Proposal for a Third Council Directive on the 
coordination of lavs, regulations and 
administrative provisions relating to direct life 
assurance and amending Directives 79/267/EEC and 
90/619/EBC 
Reference number (Répertoire): <Xt£(91) 
1. Taking account of the principle of subsidiarity, *hy Is Community 
législation necessary in this area and uhat are Its main alms? 
To complete the Internal market in direct life assurance in accordance 
with the principles laid down in the White Paper, in order to create a 
genuine single market in this important area of financial services. 
This proposal for a Third Directive fits into a wider pattern of work to 
be undertaken with a view to completing the single market in Insurance, 
both life and non-life. 
The adoption of the Second Directives on non-life insurance (1988) and 
life assurance (1990) contributed substantially to the attainment of 
this fundamental objective of the Community. Those Instruments laid 
down two different sets of arrangements for the pursuit of business 
under conditions of freedom of services. The first, based on the 
approach - as mapped out in the White Paper - of home country control, 
is applicable to policy-holders who are in no need of specific 
protection by the application of their own national rules (large risks, 
provision of services on the policy-holder's Initiative). The second, 
based an application of the rules of the country In which the service is 
provided, concerns policy-holders who do need speclfio protection (mass 
risks, life assurance commitments entered Into by the policy-holder 
without his taking the Initiative in seeking cover abroad). 
When these two Directives were adopted, the Commission formally 
undertook to present new proposals aimed at completing the Internal 
market within the time-limits prescribed by the White Paper. 
- 95 -
A proposal for a third non-life insurance coordination Directive was 
transmitted to the Council on 27 July 1990. The present proposal for a 
Third Directive concerns life assurance and Is designed to lay down the 
provisions necessary to complete the Internal market in that branch of 
insurance. 
The arrangements proposed are based on the strategy already used to 
create the Internal market in hanking and in Investment servioes (Second 
Banking Directive and proposal for a Directive on Investment servioes), 
namely the Introduction of a single authorization system and a system of 
home country control. Once this Directive has been adopted, all direct 
life assurance business will be subject to a single regime under which 
life assurance undertakings will be able to sell their products anywhere 
In the Community and purchasers of life assurance will have aooess to 
the widest possible market in which to find the product best suited to 
their needs at the most reasonable price. 
The Impact nn frisinfiPR 
2. Who will be affected by the proposal? 
which sectors of hiffinflss 
Insurance undertakings authorized to carry on life assurance 
activities within the meaning of the First Directive 79/267/EEC. 
Moreover, the proposal will enable buyers of insurance, many of 
whom are SMEs, to benefit from the final completion of the Internal 
market and to have aooess as a result to the full range of life 
assurance products available In the the EBC. 
which sizes of hnslnass (what Is the concentration of snail and 
medium-sized firms) 
All insurance undertakings falling within the scope of the 
Directive. Very small undertaking 
market share are excluded (of. 5a Directive. Very small undertakings with a local base and a small 
a). 
are there particular geographical areas of the Community where 
these businesses are found 
One measures contained in the proposal for a Directive are not 
likely to affect the regions of the Community unequally. 
3. What will businesses have to do to comply with the proposal? 
The proposal for a Directive Introduces into the direct life assurance 
sector, as Is the oase with other financial servioes, the system of a 
96 -
single official authorization for an undertaking's entire business in 
the Community, and prudential supervision by the authorities of the home 
Member State. 
This approach simplifies considerably the present situation as regards 
the taking-up and pursuit of this business, characterized as it Is by a 
multiplicity of authorizations and controls. 
At the same time, home country control, on the basis of coordinated 
rules, of the holding by insurance undertakings of adequate technical 
and mathematical provisions, and of the valuation of those provisions 
and their representation by matching assets located In the Community, 
will reduce the multiplicity of arrangements now in existence. The 
strength of insurance undertakings will be increased and safeguarded, 
and policy-holders will be better protected as a result. 
4. What eoanoBdo effects is the proposal likely to have? 
— on employment 
No direct effect. 
an Investment and the creation of new businesses 
The Introduction of a system of home country control will reduce 
the operating costs of insurance undertakings owing to the 
calculation at head-office level of the technical provisions In 
respect of an undertaking's entire business. 
The measures proposed for the constitution of the solvency margin 
(Inclusion of subordinated loan capital) will facilitate the 
financing of undertakings, notably mutuals and Insurance 
cooperatives, by external resources. 
— an the competitive position of businesses 
Community insurance undertakings will be subject to coordinated 
rules an the taking-up and pursuit of the activities of direct life 
assurance and direct non-life Insurance. Through the creation of a 
single market they will be able to offer their Insurance products 
anywhere In the Community to any Insurance buyer. There is 
therefore likely to be Increased competition between insurance 
undertakings and between Insurance undertakings and other financial 
institutions offering similar products. 
SHE buyers of Insurance will have a much wider range of products 
from which to choose that which is best suited to their needs in 
terms of both cover proposed and price. 
- 97 -
5. Does the proposal contain measures to take account of the specific 
situation of email and medium-sized firms (reduced or different 
requirements, eto.)? 
(a) frigvrarme undertakings 
The First Directive 79/267/EBC has already laid down a series of 
provisions specifioally aimed at small or medium-sized Insurance 
undertakings. Article 3 states that the Directive does not apply 
to pertain small and medium-sized mutual associations. Moreover, 
the Directive permits a one-quarter reduction in the minimum 
guarantee fund required of Insurance undertakings In the case of 
mutual associations and mutual-type associations. 
The proposal for a Third Directive does not modify this treatment 
of certain Insurance undertakings. 
(b) Insurance buyers 
The proposal for a Third Directive contains provisions aimed at 
giving Insurance buyers the necessary degree of protection when 
they concise Insurance contracts. Insurance undertakings will 
have to render the contract subject to the law that Is applicable 
In accordance with the provisions of the proposal (as a rule, the 
law of the country in which the policy-holder Is resident). They 
will also have to provide the policy-holder with essential 
Information about the product (Article 27). lastly, there is a 
cooling-off period of between 14 and 30 days within which the 
policy-holder can cancel the contract. 
Consultation 
6. List the organizations which have been consulted about the proposal and 
outline their main views. 
European Insurance Committee (EIC). 
The ETC is In favour of the present proposal for a Directive, notably as 
regards the coordination of technical provisions and of the rules 
concerning the representation, valuation and looallTation of the assets 
covering the technical provisions. 

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COM (91) 57 final 
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