20.1.92 OfficialJournaloftheEuropeanCommunities NoC14/11
OpinionontheproposalforaThirdCouncilDirectiveontheCo-ordination ofLaws,
RegulationsandAdministrative ProvisionsrelatingtoDirectLifeAssuranceandamending
Directives79/267/EECand90/619/EEC(*)
(92/C14/06)
TheCouncildecidedon15April1991,inaccordancewithArticle57(2)oftheEECTreaty,
toasktheEconomicandSocialCommitteeforanOpinionontheabovementioned proposal.
TheSectionforIndustry,Commerce,CraftsandServices,whichwasresponsibleforthe
preparatorywork,adopteditsOpinionon9October1991.RapporteurwasMrRamaekers.
Atits290thplenarysession(meetingof30October1991)theEconomicandSocialCommittee
adoptedunanimouslythefollowingOpinion.
1.Introduction 2.Generalcomments
2.1.TheoptionsadoptedbytheCommissionpro­
posalarebasedonabsoluteprioritybeinggiventothe
'freemovementofgoodsandservices'.
2.1.1.TheCommission considersthatconsumers'
interestsarebestserved,amongotherthings,bysetting
upamarketfreeofallconstraints,wheremaximum
competitionprovidesthebestguaranteeforcustomers.1.1.Theproposalforathirddirectiveonlifeassur­
anceistheculminationofthenumerouseffortsmade
bytheCommissionoverthelasttenyears.
1.1.1.Itisbasedonthesatisfactoryresultsachieved
bynationalsupervisoryregulationsanditsaimisto
createacommonframeworkfortheinsurancemarket
andtolaydownrulesoncompetitionwhichensure
thatthesectorissoundlymanagedinthefuture.
1.2.Theproposalisbasedonthefollowingprin­
ciples:
—asingleauthorizationgrantedbytheauthoritiesin
thehomeMemberState(countrywheretheinsurer
oritssubsidiaryhasitsregisteredoffice).Theauth­
orizationisvalidinallMemberStates,irrespective
ofwhethertheactivityisexercisedunderthefree­
domofestablishmentorthefreedomtoprovide
services,
—introductionofsubsequentsupervision,
—limitationofinterventionbytheauthoritiesofthe
hostMemberStatetothemonitoringofabuses
contrarytothegeneralgood,2.2.However,theCommitteefeelsthattheproposed
thirddirectiveshouldprovidegreaterprotectionfor
holdersofpersonalinsurancepolicies,whicharediffer­
entfromothertypesofoperationssuchassimple
savingsschemes.
2.2.1.Aslifeassurancepoliciesmayrunforvery
longperiodsandprovideprotectionagainstcalamities
ofasocialnature(death,invalidity,incapacity),they
mustbegivenpropertreatmentenablingthemtopro­
videeffectiveprotectionforpolicyholders.
2.2.2.ItisforthisreasonthattheCommitteealso
urgesthatspecialattentionshouldbegiventotheneed
forsuchcontractstobeclear.
—limitationofsupervisiontofinancialcontrol,and
2.3.Thesingleinsurancemarketwhichwillshortly
existwillbeverydifferentfromthepresentwalled-off
markets.—acceptanceoftheprincipleofcomposites.
1.3.Thepresentproposalisthereforeconsistentwith
thepolicyfollowedbytheCommissioninrecentyears
andextendstheharmonisation achievedinthebanking
andfinancialsector.
1.3.1.TheCommitteeapprovesthepresentpro­
posal,subjecttothefollowingreservations .2.3.1.Thesechangesarebeingforeshadowed by
trendstowardsconcentration ,theemergenceofnew
formsofco-operationbetweenbanksandinsurance
firmsandthegrowinginterestofnon-ECfirmsinthe
Europeanmarket.
2.3.2.Insuchacontextitisnotobviousthatusers'
interestswillbestbeservedmerelybyincreasingcompe­
tition,especiallyifsuchincreasedcompetitionleadsto
theweakeningoffirmswhosesolvencyisthepolicy
holder'sbestguarantee. (i)OJNoC99,16.4.1991,p.2.

NoC14/12 OfficialJournaloftheEuropeanCommunities 20.1.92
3.1.4.TheCommitteethereforethinksthatthescope
shouldbechangedbycreatingacommonareaofoper­
ationsforpersonalwelfarecoveragainstillness,inval­
idityordeath.
3.2.Article52.4.Whatismore,insuchamarketstructuraldistor­
tionsofcompetitionwhichareincompatiblewiththe
veryaimsoftheCommunitymaybeintroducedbecause
ofdifferencesinthewaythatdirectivesareinterpreted
andappliedbythesupervisoryauthorities.
2.4.1.TheCommitteefeelsthattheproblemsof
insurance,andespeciallylifeassurance,areconstantly
changing.
2.4.2.ItthereforecallsupontheCommissiontokeep
averycloseeyeonmarkettrends.
2.4.3.Theseshouldbethesubjectofareportdrawn
up,atthelatest,threeyearsaftertheimplementation
oftherelevantdirectives .
2.4.4.TheCommitteerecommends thattheCom­
missionusetheinterveningperiodto:
—encourageEuropeaninsurerstodrawupacodeof
goodconductconcerningboththepolicyholderand
competition,and
—studythepossibilityofsettingupaEuropeansuper­
visorybodydesignedeithertoreplaceexisting
nationalsupervisorybodiesortoputrighttheir
differencesininterpretingandapplyingdirectives.
2.4.5.Atanyevent,theCommitteebelievesthat,
attheveryleast,actionshouldbetakentoorganise
sufficient,consistentandharmoniousco-ordination
betweennationalsupervisoryauthorities.
2.5.TheCommitteealsoconsidersthattheprogress­
iveimplementation ofthesingleinsurancemarketwill
doubtlessinvolvesomeinconveniences foremployees
inthesector.
2.5.1.Thistooshouldbetakenintoaccountbythe
Europeanauthorities .3.2.1.InsurancefirmsmaytaketheformofaEuro­
peanCompany (SE),asallowedundertherelevant
regulationanddirective.
3.2.1.1.TheCommitteethinksthatinsurancebusi­
nessshouldbeopennotonlytofirmswhichadoptthe
newlegalformofaSE,butalsotothosewhichoptfor
theformofaEuropeanCo-operativeSocietyora
EuropeanMutualSociety,whichiscurrentlybeing
drawnupbytheCommission .
3.2.1.2.ThelastparagraphbutoneofArticle5(1)(a)
shouldthereforeread:
'Assuranceundertakingsmayalsoadoptoneofthe
formsofaEuropeancompany:aEuropeanPublic
LimitedCompany(SE),asprovidedforinCouncil
Regulation (EEC)No.../...andCouncilDirective
(EEC)No.../...,aEuropeanMutualSocietyora
EuropeanCo-operativeSociety,asprovidedforin
CouncilRegulation (EEC)No.../...andCouncil
Directive(EEC)No
3.2.2.Theproposalintroducestheprincipleofsub­
sequentsupervisionand,inArticle5(3),removesthe
possibilityoftheMemberStateslayingdown'pro­
visionsrequiringthepriorapprovalorsystematicnotifi­
cationofgeneralandspecialpolicyconditions,the
technicalbasesused...'.
3.2.2.1.Butifonewishestotakeaccountofthe
particularnatureoftherisksinsuredagainst(i.e.death,
invalidity,incapacity),oneshouldmaintaintheprin­
cipleofsystematicnotificationofdocumentstothe
homecountry'ssupervisoryauthorities.
3.2.2.2.Suchnotificationinnowaymeansthatthe
insurermustawaittheapprovalofthesupervisory
authorities,sincesupervisioniscarriedout'sub­
sequently'.Theinsurermaythereforebeginoperations!
3.2.2.3.Systematicnotificationmayallowauthori­
tiesinthehomecountrytoreactmorerapidlyifthe
policiesproposeddonotcontainallthenecessary
guarantees .3.Specificcomments
3.1.Article2
3.1.1.Theproposaldoesnotenvisageanymajor
changetothescopeoftheFirstDirective.
3.1.2.ButtheCommitteefeelsthatthescopemustbe
extendedtocoverotheroperatorsonthelifeassurance
market,forinstance,followingarequestmadeby
mutualprovidentsocieties,andthatitisvitalthatthe
sameprudentialrulesbeappliedtoall.
3.1.3.Moreover,policyholdersareoftenclassified
incategorieswhichdonotfitinwiththedistinction
betweenlifeandnon-lifebusinessassetoutintheFirst
Directiveof5March1979.3.3.Article11
3.3.1.Thisarticledescribestheconditionsunder
whichinsurancefirmsmaytransferallorpartoftheir

20.1.92 OfficialJournaloftheEuropeanCommunities NoC14/13
portfoliosofcontractstoanacceptingofficeestablished
intheCommunity .
3.3.2.InArticle11(6)itisstatedthat'Member
Statesmayprovidepolicyholderswiththeoptionof
cancellingthecontract'.
3.3.3.TheCommitteeconsidersitisessential,tothis
end,thatthepolicyholdershouldbeabletoexpress
anopinionontheplannedtransfer,andthattheMem­
berStatesshouldthereforebeobligedtoprovidethis
possibility.
3.4.Article14a
3.4.1.Theproposaloffersnewpossibilitiestocom­
positeundertakings .
3.4.2.TheExplanatoryMemorandum evenstresses
thatArticle14a'allowsthoseMemberStateswhoso
wishtoauthorisenewcompositeundertakings'.
3.4.3.So,theproposalembodiesthefavourablecon­
clusionsoftheCommission'sreportandconfirmsthat
theobligationimposedoncompositesofpracticing
separatemanagementhashadsomegoodresults.
3.4.4.However,theCommitteefeelsthattherules
onseparatemanagementshouldbeappliedstrictlyand
thatsupervisioninthisareamustbesteppedup.
3.4.5.Thetechniqueofseparatemanagementcould
bethesubjectofanewassessmentinthereportthat
theCommissionissaidtobepreparingontheinsurance
market.abletogivethesamemeaningtotheconceptsofpru­
denceandsufficientprovisions.
3.5.2.Whenchoosingtherateofinterestofpro­
visions,accountmustbetakenoftheyieldonexisting
assets[Art.15(1)(B)].
3.5.2.1.'Assetsrepresentingthetechnicalprovisions
shallbeinvestedhavingregardto...includingpossible
futurevariationsintheiryieldandvalue'(Art.17).
3.5.2.2.Whenaninsurerguaranteesahighratefor
thefuture,theCommitteebelievesthatcautionmust
beshownwhentakingaccountofshareswhoseyield
isverylowintheshortandmediumterm.
3.5.2.3.Thecommitmenttoofferahighrate(inthe
mediumorlongterm)canthereforeonlyinfactbe
envisagedif,asinArticle15(1)(B),suchcommitments
arecovered:
—eitherbytakingaccountofassetswhoseyieldis
fixedinadvance(governmentbonds,),
—orbyusingareasonableprudentialmarginwhen
referringtoassetswithuncertainyields.
3.5.3.Article15(1)(B)stipulatesthat'therateof
interestusedshallbechosenprudently,takinginto
accountthecurrencyinwhichthepolicyisdenominated
andhavingregardtotheyieldonthecorresponding
existingassets'.
3.5.3.1.TheConsultativeGroupofActuariesdeals
withthismatterinitsreport.
3.5.3.2.Eveniftheinsurertakesaccount,whenset­
tingrates,ofahigh,realisticrateitisrecommended
thatthecalculationandformationoftechnicalreserves
bebasedonaninterestratewhichissufficientlydistant
fromthe'limitofdanger'.
3.5.3.3.TheCommitteethereforeconsidersthat:
—itislogicalthatthemaximumrateofinterestused
incalculatingtechnicalprovisionsmaynotbehigher
thanthatusedincalculatingthepremium,and
—itisnodoubtdesirablethattheMemberStateof
thecommitmentshouldbeabletolaydown,for
eachcurrencyandafterconsultationoftheother
MemberStates,amaximuminterestrateforthe
investmentoffuturepremiumsinrespectoflong­
termcontracts;thiswouldreinforcethesolidityof
operations.3.5.Article15
3.5.1.Theprudentialrulescontainedintheproposal
aredefinedinArticles15,16and17.
3.5.1.1.Toovercomethepeculiaritiesofnational
rulestheyhavebeendraftedingeneralterms,which
mayleadtovariousinterpretations .
3.5.1.2.Forinstance:
—inArticle15(1):ThehomeMemberStateshall
requireeveryassuranceundertakingtoestablish
sufficienttechnicalprovisions...
—inArticle15(1)(A):Theamountofthemathematical
provisionsshallbecalculatedbyasufficientlypru­
dentactuarialvaluationofallfutureliabilities...
—inArticle16:Premiumsfornewbusinessshallbe
sufficient .
3.5.1.3.TheCommitteewonderswhetherthesuper­
visoryauthoritiesofthetwelveMemberStateswillbe3.6.Article17
3.6.1.TheCommitteeconsidersthatthewordingof
thisarticleistoodifficultforittobeappliedinpractice.

NoC14/14 OfficialJournaloftheEuropeanCommunities 20.1.92
3.9.2.Theprovisionslaiddownforthispurpose
refertominimuminformationthattheinsurancecom­
panymustprovidetothepolicyholderwhenacontract
isconcludedandthroughoutthetermofthecontract.
3.9.3.Ifsomeofthisinformation isbasicandobvi­
ous,someofit,onthecontrary,goeswellbeyond
currentlawsandpractices.
3.9.4.Itisthereforeessentialthattheseprocedures
whichcontributetomarkettransparencybeharmon­
ised.
3.9.5.TheCommitteeconsidersthattheprovisions
laiddowninArticle27shouldrefertothismore.
3.10.Article35
3.10.1.Thisarticlesetsouttheprocedureslaiddown
intheMemberStateofthebranchand/oroftheMem­
berStateofprovisionofservices.
3.10.2.TheinterpretationofArticle35(5),particu­
larlywhentheMemberStateofthecommitmentcon­
sidersthatthemeasurestakenbythehomeMember
Stateareinadequateorarelacking,maybeasourceof
conflictswhichwillrequireadequateandimmediate
co-ordinationonthepartofthesupervisoryauthorities
oftheMemberStates.3.6.2.Itthereforeproposesthefollowingwording
instead:
'Assetsrepresentingthetechnicalprovisionsmust
beinvestedhavingregardtothekindofbusiness
transactedandthestructureoftheundertaking
concerned,soastoensurethesecurityandyieldof
theinvestmentandtheliquidityoftheundertaking,
whichwillseethatitsinvestmentsareadequately
spreadanddiversified.'
3.7.Article22
3.7.1.Inthisarticle,whichconcernsthesolvency
margin,subordinatedloansareexpresslyincludedin
theitemsmakinguptheassetsofanassuranceunder­
taking,uptoalimitof25%ofthemargin.
3.7.2.TheCommitteethinksthislimitoughttobe
raisedto50%,bearinginmindthegrowingimportance
ofsubordinated loansinthefinancingofmutual
insurancesocietiesandthefactthattheguaranteesare
good.Thesamefigurehasbeenadoptedforthebanking
market.
3.7.3.Asregardsthenon-votingsecurities(suchas
participationcertificates)issuedbycooperativeand
mutualinsurancesocieties,theCommitteethinksitis
reasonabletoraisethelimitto75%ofthemargin,for
anissueofunlimitedduration,andto50%foranissue
oflimitedduration.
3.8.Article24
3.8.1.TheMemberStateofthecommitment can
onlypreventtheconclusionofacontractifitconflicts
withprovisionsprotectingthegeneralgoodintheMem­
berStateofthecommitment .
3.8.2.Thisconceptshouldbemadeclearersoasto
minimiseclashesofinterpretation betweenMember
States.
3.9.Article27
3.9.1.Contracttransparency isessentialifpolicy
holdersaretobeabletopassproperjudgment.3.11.Article38
3.11.1.Everyassuranceundertakingissupposedto
informthesupervisoryauthoritiesofitshomeMember
StateoftheamountofpremiumsreceivablebyMember
Stateandclass.Thisinformation isthenforwardedto
theauthoritiesofeachMemberStateofcommitment .
3.11.2.TheCommitteethinksitwouldbeusefulto
insertaclauserequiringfirmstodrawupatrading
accountandafinanicalaccountforeachMemberState
ofcommitment .
DoneatBrussels,30October1991.
TheChairman
oftheEconomicandSocialCommittee
FrancoisSTAEDELIN