Draft DECISION OF THE EC/SWITZERLAND JOINT COMMITTEE amending the Annexes and Protocols to the Agreement between the European Economic Community and the Swiss Confederation on direct insurance other than life assurance of 10 October 1989 and finding that the domestic legislation of the Contracting Parties is compatible with that Agreement - Draft common position of the Community

(presented by the Commission)

EXPLANATORY MEMORANDUM

Since its conclusion in October 1989, the Agreement between the European Economic Community and Switzerland in the insurance field has not been subject to any revision even though numerous legal developments have taken place and even though Article 39 provides for regular adaptation of the Agreement in line with any changes in the domestic legislation of the Contracting Parties.

It was for this reason that the Joint Committee for the Agreement set up a working party at its first meeting in January 1998 in order to review the changes in the domestic legislation of each of the Contracting Parties that had taken place since the Agreement was signed and to examine what amendments to the Agreement were needed following those changes. The working party has completed its work and its recommendations should be submitted for approval to the next meeting of the Joint Committee.

The amendments to the Agreement set out in Article 1 of the proposal for a Decision concern only the Annexes and Protocols to the Agreement and may, therefore, be adopted by the Joint Committee itself pursuant to Article 40.3 of the Agreement. They in no way affect the nature or scope of the Agreement but are designed simply to take account, in the case of the Community, of:

-the accession of Austria, Finland and Sweden to the European Union;

-the adoption of the single currency;

-the changes in the denomination of the legal forms of French insurance undertakings endorsed by the Third Non-Life Insurance Directive;

-the change in the margin components made the Third Non-Life Insurance Directive;

and, in the case of Switzerland, of:

-the change in the allocation of supervisory tasks as between the different competent authorities;

-the abolition of a priori supervision of contracts (except for sickness insurance and insurance in respect of damage attributable to natural events).

Article 2 of the proposal for a Decision takes note of the amendments to Swiss legislation and Community legislation that are compatible with the Agreement.

Draft DECISION OF THE EC/SWITZERLAND JOINT COMMITTEE amending the Annexes and Protocols to the Agreement between the European Economic Community and the Swiss Confederation on direct insurance other than life assurance of 10 October 1989 and finding that the domestic legislation of the Contracting Parties is compatible with that Agreement

THE JOINT COMMITTEE,

Having regard to Article 40.3 of the Agreement between the European Economic Community and the Swiss Confederation on direct insurance other than life assurance of 10 October 1989 (referred to hereinafter as the "Agreement"),

Whereas:

(1) Certain legislative provisions adopted by the European Community and by Switzerland require the Protocols and Annexes to the Agreement to be adapted.

(2) After examination, certain legislative provisions adopted by the European Community and by Switzerland do not require the Agreement to be adapted,

HAS DECIDED AS FOLLOWS:

Article 1

Following the legislative provisions adopted by Switzerland and by the European Community between the date on which the Agreement was signed and 30 June 2000, the Agreement is hereby amended as follows:

Point A.4 of Annex II is replaced by the following:

"4. insurance forming part of a statutory system of social security;"

The following additions are made to the list of acceptable legal forms in Part B of Annex III:

"13. in Austria -Aktiengesellschaft, -Versicherungsverein auf Gegenseitigkeit;

14. in Finland - keskinäinen vakuutusyhtiö/ömsesidigt försäkringsbolag, - vakuutusosakeyhtiö/försäkringsaktiebolag, - vakuutusyhdistys/försäkringsförening;

15. in Sweden - försäkringsaktiebolag, - ömsesidiga försäkringsbolag, - understödsföreningar."

The term "ecu"/"ECU" is hereby replaced by the term "euro"/"EUR" in all the Annexes and Protocols to the Agreement.

The exchange value is fixed at EUR 1 = CHF 1.60.

Part B.4 of Annex III is replaced by the following:

"4 in France -société anonyme, -société d'assurance mutuelle, -institution de prévoyance régie par le code de la Sécurité Sociale, -institution de prévoyance régie par le code rural, -mutuelle régie par le code de la mutualité;"

Article 1, first paragraph, first indent of Protocol No 1 is replaced by the following:

"- the paid-up share capital or, in the case of a mutual concern, the effective initial fund plus any members' accounts which meet all the following criteria:

(a) the memorandum and articles of association must stipulate that payments may be made from these accounts to members only in so far as this does not cause the solvency margin to fall below the required level or, after the dissolution of the concern, if all the concern's other debts have been settled;

(b) the memorandum and articles of association must stipulate, with respect to any such payments for reasons other than the individual termination of membership, that the competent authorities must be notified at least one month in advance and can prohibit the payment within that period;

(c) the relevant provisions of the memorandum and articles of association may be amended only after the competent authorities have declared that they have no objection to the amendment, without prejudice to the criteria stated in (a) and (b)."

Article 1, first paragraph, last indent of Protocol No 1 is replaced by the following:

"... any hidden reserves resulting from under-estimation of assets in the balance sheet, in so far as such hidden reserves are not of an exceptional nature."

Article 1, second paragraph of Protocol No 1 is deleted.

A seventh and an eighth indent are added to Article 1, first paragraph of Protocol No 1:

"-cumulative preferential share capital and subordinated loan capital may be included but, if so, only up to 50% of the margin, no more than 25% of which shall consist of subordinated loans with a fixed maturity or fixed-term cumulative preferential share capital if the following criteria are met:

(a) in the event of the bankruptcy or liquidation of the insurance undertaking, binding agreements must exist under which the subordinated loan capital or preferential share capital ranks after the claims of all other creditors and is not to be repaid until all other debts outstanding at the time have been settled. Subordinated loan capital must also fulfil the following conditions:

(b) only fully paid-up funds may be taken into account;

(c) for loans with a fixed maturity, the original maturity must be at least five years. No later than one year before the repayment date, the insurance undertaking must submit to the competent authorities for their approval a plan showing how the solvency margin will be kept at, or brought to, the required level at maturity, unless the extent to which the loan may rank as a component of the solvency margin is gradually reduced during at least the last five years before the repayment date. The competent authorities may authorise the early repayment of such loans provided that the application is made by the issuing insurance undertaking and its solvency margin does not fall below the required level;

(d) loans the maturity of which is not fixed must be repayable only subject to five years' notice unless the loans are no longer considered as a component of the solvency margin or unless the prior consent of the competent authorities is specifically required for early repayment. In the latter event the insurance undertaking must notify the competent authorities at least six months before the date of the proposed payment, specifying the actual and required solvency margins both before and after that payment. The competent authorities shall authorise repayment only if the insurance undertaking's solvency margin will not fall below the required level;

(e) the loan agreement must not include any clause providing that, in specified circumstances other than the winding-up of the insurance undertaking, the debt will become repayable before the agreed repayment dates;

(f) the loan agreement may be amended only after the competent authorities have declared that they have no objection to the amendment,

- securities with no specified maturity date and other instruments that fulfil the following conditions, including cumulative preferential shares other than those mentioned in the preceding indent, up to 50% of the margin for the total of such securities and the subordinated loan capital referred to in the preceding indent:

(a) they may not be repaid on the initiative of the bearer or without the prior consent of the competent authority;

(b) the contract of issue must enable the insurance undertaking to defer the payment of interest on the loan;

(c) the lender's claims on the insurance undertaking must rank entirely after those of all non-subordinated creditors;

(d) the documents governing the issue of the securities must provide for the loss-absorption capacity of the debt and unpaid interest, while enabling the insurance undertaking to continue its business;

(e) only fully paid-up amounts may be taken into account."

Article 2 of Protocol No 2 is replaced by the following:

"The particulars referred to in (b) and (c) of Article 1 of this Protocol may not be required with regard to the following risks:

(a) risks listed under classes 1, 3 to 7 and 9 to 18 in Part A of Annex I;

(b) risks listed under class 8 in Part A of Annex I other than those caused by natural forces."

The first two indents of point B.12 in Annex III are replaced by the following single indent:

"- incorporated companies limited by shares or by guarantee or unlimited societies registered under the Industrial and Provident Societies Act,"

Point D.1(l) in Annex II is replaced by the following:

(l) Nidwalden: Nidwaldner Sachversicherung, Stans;"

Point D.1(s) in Annex II is replaced by the following:

"(s) Zürich: Gebäudeversicherung Kanton Zürich, Zürich;"

Point A.8, last indent in Annex I is replaced by the following:

"- land subsidence and landslides."

Article 2

The following legislative provisions adopted by Switzerland between the date on which the Agreement was signed and 30 June 2000 are compatible with the Agreement:

-Articles 14(1), 38a and 8(2a) of the Insurance Supervision Law ("Loi sur la surveillance des assurances") of 23 June 1978;

-Article 7(2) of the Non-Life Insurance Law ("Loi sur l'assurance dommage") of 20 March 1992 in so far as it is applied pursuant to an agreement concluded by Switzerland with a third country or provided that it is interpreted in a manner compatible with the Agreement.

Article 3

This Decision shall enter into force on ...

Done at Berne on ....

For the Joint Committee

The Chairman