18. 4. 91 Official Journal of the European Communities No C 102/7 
Opinion on the proposal for a Third Council Directive on the coordination of laws, 
regulations and administrative provisions relating to direct insurance other than life assurance 
and amending Directives 73/239/EEC and 88/357/EEC (*) 
(91/C 102/04) 
On 17 September 1990, the Council decided to consult the Economic and Social Committee, 
under Article 66 of the Treaty establishing the European Economic Community, on the 
abovementioned proposal. 
The Section for Industry, Commerce, Crafts and Services, which was responsible for preparing 
the Committee's work on the subject, adopted its Opinion on 6 February 1991. Mr R. 
Pelletier was Rapporteur. 
At its 284th plenary session (meeting of 28 February 1991) the Economic and Social Committee 
unanimously adopted the following Opinion. 
1. Preliminary comments 
1.1. The completion of the Internal Market in the 
field of insurance, one of the main objectives of which 
is to offer persons seeking insurance free access to 
insurance services offered throughout the Community, 
is being carried out in three successive stages: 
i) Freedom of establishment, achieved for non-life 
insurance since a Directive of 24 July 1973 and for 
life assurance since a Directive of 5 March 1979. 
ii) The freedom to provide services, to which con­
ditions of varying stringency are attached, depend­
ing on the need to protect the policy-holder, was 
established by a Directive of 22 June 1988 (non-life 
insurance) which entered into force on 1 July 1990, 
and by two Directives dated 8 November 1990 
(motor insurance and life assurance). 
iii) The final stage aims to allow all persons seeking 
insurance whatever the size and nature of the risk 
to be insured, to have recourse to any insurer based 
in the Community and pursuing its business by 
virtue of the freedom of establishment or the free­
dom to provide services. 
1.2. The present proposal aims to complete the 
Internal Market in non-life insurance by means of 
mutual recognition of authorizations and systems of 
prudential supervision. 
This strategy, which is in keeping with the logic of the 
Single Market, has already been used by the Com­
mission in other directives concerning financial services, 
in particular the Second Directive on the coordination 
of banking activity (89/646/EEC, OJ No L 386, 
30 December 1989). 
(!) OJ No C 244, 28. 9. 1990, p. 28. 1.3. The principle of a single authorization valid 
throughout the Community is welcomed, subject to the 
comments set out below, as promoting an insurance 
industry which will satisfy consumers' needs, and the 
requirements for security of transactions carried out 
under the freedom of establishment and the freedom to 
provide services. 
1.4. The Committee feels that the aim of the pro­
posed Directive has to be achieved if consumers and 
economic operators are to have satisfactory access to a 
real Internal Market in insurance. 
2. General comments 
2.1. The reference to the general good as justification 
for a Member State preventing a policy which conforms 
with the laws of the home Member State being signed 
is still much too vague and likely to result in different 
interpretations, thus impeding completion of the Single 
Market in insurance. 
The Committee considers that the concept of the gen­
eral good should be much more clearly defined in the 
proposal (see point 3.10 below), in connection with 
the Rome Convention of 19 June 1980 on contractual 
obligations, the content of which has guided the Com­
mission's work. 
2.2. In the absence of harmonization of insurance 
policy law, it has been agreed to retain the principle 
that the law of the policy holder's home Member State 
should apply, albeit with numerous exceptions which 
will mean that within a single Member State policies 
will be governed by competing systems of national law. 
No C 102/8 Official Journal of the European Communities 18. 4. 91 
Such a situation will produce a degree of legal uncer­
tainty which is prejudicial to consumers and, the Com­
mittee feels, difficult to reconcile with the concept of 
the Single Market. 
2.3. The dropping of the requirement for prior 
approval of policy conditions and premiums and its 
replacement with a notification system is a logical 
extension of the single authorization, and is to be 
welcomed. This system of notification will enable the 
supervisory authorities of the Member States to check 
the legality of policy conditions, without this require­
ment being a precondition for engaging in the business 
of insurance which would be contrary to the spirit of 
the Directive. 
Changes must, however, be made to take account of 
the degree of protection required by some policy holders 
and victims of accidents, and permit, for example, rapid 
intervention by the supervisory authorities in cases 
where the cover offered in the host country does not 
fulfil the protection requirements of policy holders in 
such sensitive areas as compulsory insurance, third 
party motor insurance or accidents at work in countries 
where these areas are not covered by a public social 
security scheme (see point 3.11). 
In the case of compulsory insurance, notification could 
be required before the entry into force of general and 
specific policy conditions and standard premiums as 
the supervisory authorities of the Member State 
imposing the obligation are best placed to assess wheth­
er the cover offered complies with local rules. 
Finally, where major irregularities arise, the authorities 
of the country in which the insurance service is provided 
should have the power to adopt urgent measures, after 
informing the Commission, which could go as far as 
preventing an insurance undertaking from another 
Member State from writing new insurance policies in 
the host country. 
2.4. The extention of the supervisory powers of the 
authorities of a Member State to branches established 
in other Member States poses the problem of parallel 
systems of supervision within the same market. 
Differences in supervisory practices from one Member 
State to another may cause distortions of competition, 
so supervisory practices should be reviewed with a view 
to harmonization later. 
2.5. The financial provisions contained in the present 
proposal appear consistent with the single authorization system, since a proposal has been made that the basic 
rules on technical provisions and their asset cover 
should be coordinated. 
The proposal for a Directive on the annual accounts of 
insurance undertakings, which is specifically referred 
to in the text, should therefore be adopted before the 
proposal for a Directive discussed in this Opinion. 
In addition, the list of admissible assets should be the 
same for all insurance undertakings. Member States 
should not have the power to restrict this list in national 
law. 
2.6. Securities such as participating securities are 
being used with ever-increasing frequency as sources 
of external capital to finance the solvency margin by 
enterprises with no share capital (mutual insurance 
associations) and enterprises where only associated 
members can contribute to share capital (cooperatives). 
As the directive proposes the inclusion of calls for 
supplementary contributions up to a ceiling of 50% of 
the margin, then subordinated loans should also be 
allowed up to at least 50% of the margin (see point 3.8 
below). Participating securities—which are securities 
which circulate, have an indefinite life and may be 
quoted on the stock exchange—should comply with the 
same rules. 
2.7. The present proposal takes the same approach 
to taxation as the Second Directive of 24 June 1988, 
i.e. transitional retention of the taxation system of the 
country in which the service is provided. 
This is a source of distortions of competition, given the 
variety of tax regimes in the Member States. For the 
sake of consistency with the logic of the Single Market, 
the Commission should therefore as a matter of priority 
undertake harmonization of the taxation of premiums. 
The Committee feels that disparities in taxation—with 
insurance being merely one illustration among 
others—are a serious obstacle to completion of the 
Internal Market, and that the Commission should 
initiate efforts to harmonize tax regimes as a matter of 
priority. 
2.8. The proposal contains no provisions on recipro­
city with non-Community countries. But the Committee 
notes that the Commission has stated that the text on 
reciprocity contained in the Directive on freedom to 
provide motor insurance services, adopted by the 
Council on 8 November 1990, will have general appli­
cation and will, from the date of its entry into force, 
apply to the whole non-life insurance sector. 
The Committee welcomes this provision and the Com­
mission's statement. 
18. 4. 91 Official Journal of the European Communities No C 102/9 
2.9. The Committee has been informed that mutual 
provident associations, which at their own request were 
excluded from application of the 1973 and 1988 Direc­
tives, intend to apply for their inclusion in the scope of 
these Directives. 
If a decision were taken to this effect, it should be in 
compliance with the provisions of the Treaty and the 
principle of equal competition conditions, as all the 
economic operators concerned must have the same 
rights and duties. 
3. Specific comments 
3.1. Article 3 
The Committee recommends that it be made clear that 
the monopolies in question are those referred to in 
Article 4 of the First Directive of 24 July 1973 (73/239/ 
EEC). 
3.2. Article 6 
The Committee feels that the business of insurance 
should be open not only to European companies, but 
also to cooperative or mutual enterprises which have 
adopted the form of a European company. 
The penultimate paragraph of Article 6(1) (a) should 
therefore be reworded as follows: 
'Insurance undertakings may also adopt one of the 
forms of the European company: the European com­
pany, as provided for in Council Regulation .../ 
EEC and Council Directive .../EEC, the European 
insurance mutual association or the European 
insurance cooperative, as provided for in Council 
Regulation .../EEC and Council Directive .../EEC 
3.3. Article 13 
This Article deals with the conditions under which an 
insurance undertaking's authorization may be with­
drawn. 
The Committee believes that the provisions of the pro­
posed Directive do not change in any way the employee 
protection schemes in force under national law. 
3.4. Article 14 
Article 14 introduces a system of prudential check on 
shareholdings in insurance undertakings. The authorities of the Member State conducting the 
check have a maximum of three months to oppose 
the acquisition or increase in a holding if the plan is 
considered to be incompatible with the sound and 
prudent management of the undertaking. 
The Committee feels that a check of this kind is 
unnecessary if the undertaking intending to acquire the 
holding has already been licensed in the EEC to carry 
on the business of insurance. Otherwise this provision 
would call into question the quality of the supervision 
carried out in the home country of the company making 
the acquisition. 
In other cases national authorities should be required 
to give reasons for vetoing such a proposal, and there 
should be the opportunity of challenging their decision 
in the courts. 
3.5. Article 15 
This Article concerns the setting up of technical provi­
sions. 
Article 15(2) should be amended to make it clear that 
insurance undertakings may also hold assets outside 
the Community, where necessary for the purposes of 
business conducted in non-Community countries and 
possible reinsurance investments. 
3.6. Article 17 
This Article, which deals with investment in assets, is 
imprecise and difficult to apply, particularly as regards 
the evaluation of the future yield of an asset. 
It could be reworded as follows: 
'Assets covering the technical provisions shall be 
invested, having regard to the kind of business 
transacted and the structure of the undertaking, so 
as to ensure the security and yield of the investment 
and the undertaking's liquidity. The undertaking 
shall ensure that its investments are appropriately 
diversified and spread.' 
3.7. Article 18 
This Article lists categories of assets for the cover of 
technical provisions. It does not state, however, that 
the list must be identical in all the Member States and 
that Member States do not have the right to adopt 
legislation restricting the list. 
No C 102/10 Official Journal of the European Communities 18. 4. 91 
Steps must be taken to ensure that the discretion left 
to the Member States does not result in divergences 
arising from different methods of supervision. 
3.8. Article 22 
In this Article, which deals with the solvency margin 
of insurance undertakings, subordinated loan capital is 
specifically included in the undertaking's equity, but it 
may not account for more than 25% of the margin. 
The limit should be increased to 50% in view of the 
growing importance of subordinated loan capital in the 
financing of mutual insurance undertakings. 
It should be made clear that the same rules will apply 
to securities such as participating securities. 
3.9. Article 24 
This Article deals with the important question of the 
law applicable to insurance policies. 
The draft Third Directive, which is the subject of this 
Opinion, generally eliminates the distinction made by 
the Second Directive between 'large risks' and 'mass 
risks'. 
However, Article 24(e) uses the distinction in referring 
to the choice of law, which becomes entirely free where 
'large risks', within the meaning of the Second 
Directive, are concerned. 
Such an extension of the range of laws applicable to 
policy holders must not accentuate the legal uncertainty 
with which consumers will be confronted. 
The Committee therefore feels that, in the interests of 
consistency with the Single Market, the Commission 
should seek once again to achieve a minimum harmoni­
zation or an approximation of the EEC's laws relating 
to insurance policies. 
Done at Brussels, 28 February 1991. The work carried out in this area by the European 
Insurance Committee shows that there is a real conver­
gence of the basic provisions of the various national 
laws on insurance, and that approximation is not an 
unrealistic goal. 
3.10. Article 25 
The reference to 'legal provisions protecting the general 
good' allowing a state to restrict the freedom of choice 
of the policyholder should be amplified in the light of 
objective criteria, e.g. those laid down in the case law 
established by the Court of Justice of the European 
Communities. 
This amplification should be mentioned in recital 19, 
or in a new recital 19a and appear in Article 25. 
3.11. Article 27 
This article concerns the communication of policy con­
ditions and premiums, and compulsory insurance. 
Because of the social and political importance of com­
pulsory insurance, the Member State imposing the 
obligation must in the event of serious problems be 
able to act rapidly in exercising scrutiny, as is required 
by Article 35 of the present proposal. 
In this respect, and in accordance with the terms of the 
proposal for a Directive (recital 20a), private sickness 
insurance schemes which constitute an alternative to 
social security will be treated as compulsory insurance. 
Article 27 should therefore contain an explicit reference 
to Article 35, which authorizes the Member State in 
which the insurance service is provided to adopt certain 
emergency measures. 
The Chairman 
of the Economic and Social Committee 
Francois STAEDELIN