ARCHIVESHISTORIQUES
DELACOMMISSION
COLLECTION RELIEEDES
DOCUMENTS "COM"
COM(74)1838
Vol.1974/0288

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COMMISSION OFTHEEUROKBANGOMMUNITEBS
COM(74)1838 final
Brussels.14November1974
AmendmentstotheProposalforafirstCouncil
Directiveonthecoordination oflaws,regulations
andadministrative provisionsrelatingtothetaking-up
andpursuitofthebusinessofdirectlifeassurance
(Presented "bytheCommissiontotheCouncil
pursuanttothesecondparagraphofArticle
149oftheEECTreaty)
COM74)1838final

XV/163/74-E
ANNEXI
EXPLAINATORYMEMORANDUM
OnthebasisoftheOpinionsdeliveredbytheEuropeanParliament and
theEconomicandSocialCommitteeconcerningtheproposalforafirstCoun­
cilDirectiveonthecoordination oflaws,regulations andadministrative
provisionsrelatingtothetaking-upandpursuitofthebusinessofdirect
lifeassurance,theCommissionproposesthattheamendmentscontainedinthe
documentattachedheretobemadetoitsoriginalproposal.
Article 1
Firstnararraph
TheEconomicandSocialCommitteeproposesthai;thewords"insurance
undertakings"bereplacedby"undertakings "sinceseveraloftheactivities
definedintheDirectivearecarriedonbyundertakings whichcannotbedes­
cribedasinsuranceundertakings .
TheCommissionadoptstheamendmentproposed'bytheESC,onthe
groundsofconsistency . ?
'■· ΓΟ\
'»
Subparagraph 1
BoththeEconomicandSocialCommitteeandtheEuropeanParliament ""
proposethatsubparagraph 1(b)beincorporatedinsubparagraph 1(a)in
ordertoeliminateanydoubtastowhetherannuitiesarecoveredby:Article
19(a),whichdealswiththemethodofcalculatingthesolvencymargin.
TheCommissionadoptsthisproposalinordertopreventitsintentions
frombeingmisunderstood .

-2- XV/163/74-E
Articles 1and2
BoththeEconomicandSocialCommitteeandtheEuropeanParliament
requestthatthecoordinationreferredtoinArticle2(3)beachieved
withinfouryears.Theyconsiderthatthepresentprovisionmayresultin
distortionofcompetition .
. .. , • f _•,
UnderArticle1(2)(c)themanagementofgrouppensionfundsisimme­
diatelysubjecttotheprovisionsoftheDirectivewhereitisoarriedonby
insuranceundertakings ,whereasifsuchmanagementiscarriedonbyother
•' .«»•
undertakingsitisnotsubjecttotheprovisionsoftheDirectiveuntil
furthercoordination ,inrespectofwhichnotimelimitisfi'uted'ihas"been
effected(Article2(3))»
Theprovisionisliabletodistortcompetitioninfavourofsuchother
undertakings .Inaddition,thelatterarenotsubjecttothefinancialrequi­
rementslaiddowninthisDirective,whichmeansthatthebeneficiaries of
theiractivities mayRaveonlyapoorfinancialguarantee.
TheCommission,therefore,adoptstheproposaloftheconsultative
bodiesbutconsidersitnecessarytospecifythatthetimelimitrunsfrom
thedateofnotification oftheDirective.
Article3'
Subparagraph 1
TheEui-bpeanParliamentconsidersthat,inviewofthepresentcostof
funerals,theamountgiveninthissubparagraphforbenefitsintheeventof
death-mustbeincreased.
TheCommissionagreeswiththiscommentandadoptsthe/proposal.
Article4
TheEconomieandSocialCommitteeconsidersthattheDirectiveshould
notapplytothe"Caissed'Epargnedel'EtatduGrand-Duché deLuxembourg".

-3- XV/163/74-E
.TheCommission .cannotadopttheproposaloftheESCsincelifeassu­
rancecontractsenteredinto^^^iththis"bodyaredirectlycovered "bythe
Directive.Thefactthatsuchcontractsareconcludedonlywiththe
beneficiaries ofmortgageloansgrantedby'thatinstitution doesnot
affectthesituationandthissamelinkalsoexistsinothercountries.
Moreover,thereisintheCommunityapublicinstitution engagingin
thesameoperations andtheMemberStateconcernedhasexpresslystated
andacceptedthatthisinstitutioniscoveredbytheDirective.
IftheLuxemburginstitutionreferredto,whichwillenterinto
competitionwithsimilarundertakings inothercountries,wasnotsubject
tothesamefinancialrequirements astheseotherundertakings ,there
wouldbedistortionofcompetition .
Articles8and10(3)
1)Article8,introductory sentence,Article8^3)andArticle10(3)
TheEuropeanParliamentproposessomepurelytextualamendments.
TheCommissionconsidersthattheyareunnecessary sinceitsproposed
wordingissufficiently clear.
2)Article8(l)fb)
TheEuropeanParliamentaskstheCommissionto-specifythatthe <■•••-
businessactivitiestowhichtheundertakings coveredbytheDirective
mustconfinethemselvesincludereinsurance contracts.TheEconomicand
SocialCommitteemakesasimilarrequestinrespectofreinsurance ■■
acceptances .
TheCommissiondtfesnotagreewiththeviewsofthetwoconsultative
bodies,becausetheundertakings engagingsolelyinthebusinessof
reinsurancefalloutsidethesoopeofthisdirectivebyvirtueofthe
1starticleofthisdirective.
Moreover,itisrecalled,ontheonehand,thatre-inSurance wascovered
bytheliberalization DirectiveNo64/225/CEEof25February1964,-and
ontheotherhand,itisrecalledthattheCommissionhasrepliedwith
considerableattentiontothesetwoconsultative bodies,itmentioned
re-insurance inseveralarticlesofthedirectiveandinparticularin
article19(a)and(b).
•/.

-A- XV/163/74-E
Furthermore ,itwishestomaintainasmuchconsistencyaspossible
"betweenthisDirectiveand.thefirstDirective oncoordination inthefield
ofindemnityinsuranceof24.July19731whichcontainsthesameprovision,
sothatthetwoDirectivesformacoherentwholeandnomisinterpretation is
possible.
Article12
TheEuropeanParliamentproposesthatthepresentArticle14beplaced
immediatelyafterArticle11sinceitisitslogicalcontinuation *
TheCommissionacceptsthisproposal.Accordingly ,Article14becomes
Article12,Article12becomesArticle13andArticle13becomesArticle14.
Article12(old)
ParaGraph 1
TheEuropeanParliamentproposesthatthisparagraphrefernottothe
activitieslistedintheAnnextotheDirectivebuttothoselistedin
Article1,sincethislistismorecomprehensive thantheformer.
TheCommissionadoptsthisamendment.
Artide13(old.)
Paragraph 2,secondsubparagraph
BoththeEconomicandSocialCommitteeandtheEuropeanParliament
proposethatintheFrenchversiontheword"individualisees "bereplaced
bytheword"distinguees "inordertopreventthisprovisionfrombeing
interpreted asrequiringtheitemizedbreakdownoftheassetsandsecurities
formingtheguaranteesusedtocovercommitmentscontractedvis-a-vislife
policyholders .
TheCommissioncannotacceptthisproposalsinceitsintentionispre­
ciselytoprovideforanitemizationofgurj?anteesinordertoafford
greaterprotectiontopolicyholders .Ontheotherhand,theword"geTdenti-
ficeerd"intheDutchversionoftheParliament'sreportcanbeaccepted.

-5- XV/163/74-E
Paragraph3(b),lastsentence,andparagraph3(c)
BoththeEconomicandSocialCommitteeandtheEuropeanParliament
notethatintheeventofthetransferofassetsbetweenthelifeportion
andtheindemnityportionoftheassetsofanundertaking dealinginseveral
classesofinsurance,andintheeventofexecutionorthewindingupof
suchanundertaking ,theDirectiveregulatesonlythepositionofthosecre-
diorswhoseclaimsariseoutoflifeassurancebusiness andnotthatof
creditorswhoseclaimsariseoutofindemnityinsurancebusiness,andthat
thisomissionisliabletoleadtomisinterpretations .Theyrequestthatsi­
milarprotectionbeaffordedtocreditorswhoseclaimsariseoutofindemni­
tyinsurancebusiness.
TheCommissionapprovesthisproposal.
Article17
Seetheexplanatory memorandumregardingArticle19(a),firstresult.
Article18
Subparagraph 1,1stindent
BoththeEconomicandSocialCommitteeandtheEuropeanParliamentpro­
posethatanexpressionotherthan"effectiveinitialfund"beusedsince,in
ordertofindthesolvencymarginofmutualconcernsnotonlytheeffective
initialfundobutalsoanyeffectiveincreaseinthatfundmustbetakeninto
consideration .
TheCommissionacceptsthisargumentandadoptsthewordingproposed
bytheEuropeanParliament.
Subpara^rraph 2
TheEconomicandSocialCommitteerequeststhatthewords"appearing
inthebalancesheet"bedeletedsince,incertainmembercountries,under­
takingsmanaginggrouppensionfundsmayhaveprofitreserveswhichmustbe
giveninaseparatespecialaccountandwhichprovidethesameguarantees
asprofitreserveswhichappearinthebalancesheet.

-6~ XV/163/74-E
TheCommissioncannotaccedetotlu's"requestsince.thef
are"inthebalancesheet"isacharacteristic oftheexplicititemscompri­
singthesolvencymarginwhicharereferredtoinsubparagraphs 1.and2.By
makingprovisionforpublicity .,itvri.viestopreventotherreserveswhichdo
notprovidethesamefinancialguarantees frornbeingtakenintoconsidera-;
tion. '' y
Article19
Introductory sentence
.BoththeEconomioandSocialCommitteeandtheEuropeanParliament ■
requestthatthewords"minimy.nipolvsncymargin"beusedtodifferentiate the
latterfromtheeffectivasclv?.;icyn>a\'gin.' '" ..
TheCommissionrecognizestheneedtospecifythattherequirements of
Artiole19relatetotheminimuu .solvencymargin,inordertoavoidanycon­
fusionWiththeeffectivesolvencymargin.Theword"minimum 1'isinfact
usedinArticle24(2).
Article17(l^andArticle19(a),firstresult -•■••
*Point(a),tresuit
<TheEconomicandSocialCommitteeconsidersthatthefirstresultin
thecalculationofthesolvencymarginmustbecomputedinallcountrieson.
thebasisofthemathematicrl r3servesnetofreinsurance ,igotherwords,
afterdeductionoftransfersforreinsurance .Itbasesthisproposalonthe
groundsthat,initsopinion,.Article17(l)enablesMemberStatestoautho­
rizetheestablishment ofnetorgrossmathematical reservesandthatthe
Directivelaysdowncoordinating measuresinrespectofsolvencymargins,cc.r
accordingtowhichsuchmarginswouldhavetobecalculatedfromequivalent
mathematical reservesinal-1themembercountries.
TheCommissioncannotacceptthisproposal.FirstofaLll,thearguments
putforwardbytheESCshowtl-.nt,inordertoavoidconfusion,Article17(l)
mustspecifythatthereservaeshouldincludereinsurance .-'
Indeed^whereth&t layndewnthattheamountofthe.rcservob
istobedeterminedaccordingtotherulesfixed'bythethifemeansthatthe

-7- XV/363/74-E
rulesoftheStatemustgovernthemethodofdetermining suchamount,in
particularthechoiceofinterestrate,mortalitytableandleadingpercen­
tage,butnotthedetermination ofthenatureofthereserves,inother
words,whetherornottransfersforreinsuranceareincluded.
Thiscoordinating Directivemustmakeasinglerulingonthisimpor­
tantquestion,orelsedistortionofcompetitionwilloccur.
Itispreferabletospecifythatthereservesmuatincludereinsurance.
Ifitislaiddownthatreservesmustbenetofreinsurance ,theprotection
ofinsuredpersonswillbereducedsincetheinsurercuuldonhisowninitia­
tivereducethereservestobeestablished byincreasingtheamountofassets
hetransferstoreinsurers.
WhereastheESCconsidersthatthesolvencymarginshouldbecalculated
onthebasisofnetreserves,theEuropeanParliament ontheotherhandcon­
sidersthatitshouldbecalculated onthebasisofgrossreservesandgives
thefollowingreasonsforitsrejectionoftheformermethod:
a)Communityreinsurersengagedexclusivelyinthebusinessofreinsu­
rancearenotsubjecttoanycontrol.Consequently ,ifthenetreserveswere
takenasabasisforcalculation therewouldnotbetheadditionalfinancial
guaranteeprovidedbythemargininrespectofreinsurance .
b)Thesituationissimilarifthereinsuranceiswithanundertaking
inathirdcountrywherecontrolisimpossible. ,
c)Thehighertheproportionofinsurancereinsuredthesmallerwould
bethemarginofsolvency ,requiredinrelationtotheeffectivecommitments
oftheinsurer.Itcouldbeaddedthatthiswouldenableinsurerssubject
tocontroltodetermineforthemselvesindirectlytheamountofthefinan­
cialguaranteestheywererequiredtoprovide,whichwouldbeananomalous
situation.
d)IntheUnitedKingdomabout20^ofinsurancepoliciesa,rereinsured,
whereasthisfigureisonly10fointheotherMemberStates.Calculations
basedonnetreserveswouldthereforegiverisetodistortionofcompetition
betweenMemberStates.
/.

-'8- XV/I63/74-E
TheEuropean Parliament comes down infavour ofcalculations based on
thegross reserves plus reinsurance acceptances from outside theCommunity .
Ittempers this stand byproposing areduction inthepercentage adopted for
calculating themargin .
TheCommission adopts theproposals oftheEuropean Parliament .
Point (a),second resuit
TheEconomic andSocial Committee requests that ,inorder toobviate
anymisinterpretation ,itbespecified that thecapital atrisk forwhich
theundertaking isresponsible relates todirect business and toreinsurance
acceptances .TheEuropean Parliament applies thesame arguments toboth re­
sults under point (a)andproposes areduction ofthe"permille 1'relating
tothecapital atrisk .
TheCommission accepts theParliament 'sproposal andadds further
clarification toavoid thedanger ofmisinterpretation pointed outbythe
ESC .
Point (b).first paraffraph
TheEconomic andSocial Committee proposes extending thesolution
setoutinpoint (b)inrespect oftemporary insurance foraperiod not
exceeding five years tocover temporary insurance foraperiod ofbetween
five andtenyears .Initsopinion , .such :insurance issimilar toindemnity
insurance andhasonly asmall mathematical reserve .Inthis way ,theaddi­
tional guarantees required would notexceed what istechnically essential
andanunwarranted rise inpremiums would beaverted .Moreover ,there would
beadninistrative difficulties indistinguishing between temporary insu­
rance foraperiod notexceeding five years ontheonehand andthat for
aperiod exceeding five years ontheother .TheEuropean Parliament has
expressed asimilar opinion .
: '• . A>■vol .
Since theCommission isconcerned with this borderline case ,it
1■ ' l Xco
decided toaccept thepropositions ofthese consultative bodies .

-9- XV/163/74-E
Point(b).secondparagraph
BoththeEconomicandSocialCommitteeandtheEuropeanParliament
requestthatprovisionbemadefora.morerapidreductionoftheratesof
themarginsincethesupplementary andtemporaryinsurancescoveredbythis
paragraphformonlyasmallproportionofthepolicyportfolioofalife
assurancs company.
TheCommissionacceptsthisproposai.
Point(b),thirdparagraph
.BoththeEconomicandSocialCommitteeandtheEuropeanParliament
proposethattotakeaccountoftransfersforreinsurance ,areferenceperiod
longerthanonefinancialyearshouldbechoseninordertoreducethedif­
ficultiesarisingfromfluctuations intherateofreductionforreinsurance
whichwouldbecausedbyvariktipnsinthevolumeofclaimsfromyearto
year.
TheCommissionadoptsthisproposal,whichmakesformorestablemana­
gementofinsuranceundertakings .
Point(b)tfourthparagraph(new)
BoththeEconomicand.SocialCommitteeandtheEuropeanParliament
considerthataccountshouldbetakenofthespecialpositionofLloydsof
LondonaridthatanewparagraphshouldbeaddedtoArticle19(b)tobring
itintolinewithArticle16(5)ofthecoordinatingDirectiveinthefield
ofindemnityinsurance.
TheCommissionadoptsthisproposal.
Points'(c)and(d)
BoththeEconomicandSocialCommitteeandtheEuropeanParliamentcon­
sideritnecessarytospecifythatinrespectofthemathematical reserves
referredtoin'point(c)thedefinitiongiveninpoint(a)underthefirst
resultshouldbeadopted.
Theyproposethesaiaesolutioninrespectofthe"capitalmanaged"
referredtoinpoint(d)whichis,infact,themathematicalreserves.
TheEuropeanParliamentproposesthatinpoint(c)therateof4%
(percent)ofthereservesbereplacedby3,5$(percent).

-10- XV/163/74-E
TheEuropeanParliamentproposesthatit.bespecifiedthatpoint(d)
relatestothemanagementofgrouppensionfunds,sincethefundsthemselves
areexcludedfromthescopeoftheDirective jLnaccordancewithArticles1
and2(3)»
TheCommissionadoptstheaboveproposals.
Article20
Paragraph 1 ■'.
a)BoththeEconomicandSocialCommitteeandTheEuropeanParliament
consideritnecessarytospecifythattheguaranteefundisdefinedasa
functionoftheminimum,andnotoftheeffeptive,solvencymargin.Other­
wise,anundertakingwithaparticularly highrelativeguaranteefundbecause
ithadahighereffectivesolvencymarginthanthat.requiredunderArticle
19,wouldbesubjectedtotherestoration measuresprovidedforinArticle
24(3)iandtherewouldbenojustificationforthis.
TheCommissionadoptsthisproposal.
b)TheEconomicandSooialCommitteeconsidersitunacceptablethat
50%oftheguaranteefundmustconsistonlyofitemslistedinArticleI8(l)
and(2)whiletheitemslistedinArticle18(3)areexcluded.Intheopinion
oftheESC,thebuildingupoftheseadditionnal amountsoffreeassetswill,
firstly,beattheexpenseoftheassuredpersonswhowillthushaveasmaller
shareintheprofitsoftheundertaking and,secondly,willpenalizepersons
whohavebeeninsuredforalongerperiodvis-a-vistheyoungergenerations
ofassuredpersons. ••••,
TheCommissionfeetsthatitcannotaccepttheviewsoftheESCon
thismatter.
Indeed,ifatleasthalfoftheguaranteefundiscoveredbytheitems
listedinArticle18(l)and(2),theso-called"explicititems",thisprovi­
desasubstantialguaranteeforassuredpersonsandwillfacilitateboth
thecontrolofthesolvencyofundertakings andrecoursetotherestoration
measuresprovidedforinArticle24*
/■

-11- xv/l63/74-E
Paragraph3(new)
BoththeEconomicandSocialCommitteeand.theEuropeanParliament
notethatathirdparagraphshould "beaddedtoArticle20,alongthelines
ofthesolutionadoptedinthedirectiveonthecoordination ofindemnity
insurance,whichmakesprovisionforareducedguaranteefundformutual
associations .
TheCommissionadoptsthisproposal.
Article2?
TheEconomicandSocialCommitteepointsoutthatmandatorytransfer
maywellconstituteanobstacletothefreedomsought "bytheTreatyofRome
andthatitwouldbeusefuliftheMemberStatesweretoreduceprogressively
thepercentageofsuchtransfers.WhileitconsidersitvitalthatArticle
22(3)shouldberetained,theCommitteeneverthelessrecognizesthatin
theimmediatefutureArticle22(l)and(2)maygiverisetoseriousimple­
mentingdifficulties forcertainMemberStates.Itconsiders,however,that
theproblemsraisedbyArticle22(l)and(2)mustbedefinitivelysettled
whenfreedomtoprovidelifeassuranceservicesisintroduced.
TheCommitteethereforeproposesthatArticle22(l)and(2)bereplaced
byastandstill -clause.
TheEuropeanParliament,for'itspart,doesnotadoptanattitudewhich
isasfavourableto'thesen&ndatorytransfers.Indeed,theEuropean •
Parliamentproposestomaintaininthedirectivetheaffirmation onlyof'
thoseBandatorytransfers .whichoughttobeabolished.
Havingrecalledthatthisarticlecoversonlyonecountry,itfindsthat
itisnecessarytoleavetothegovernmentofthiscountrythetimeto
abolishthislegislation andtoadapttothe-newsituationwhichisgoing
tocarrythelossofreturnsforthestate.
TheEuropeanParliamentproposesontheonehandthattheabolition
ofthisnationalarrangement becomesobligatoryonlywhenthefreedomto
ptovideservicesoflifeassurnnoetakeseffect&ndontheotherhand,
toabolishparagraph2whichstipulatesanimmediatereductionof25%
ofthesetransfers.' « :•

-12- XV/163/74-5
TheCommissionrecalls -thatitsoriginalproposalisbasedonthe
objectivesoftheDirective,AstheE,S,C*and.theEuropeanParliament
pointoutintheirreports,article22coversinparticularnandatory
transfers <withadesignatedpublicagencyofoneofthememberstates#
Asimilarsituationexistedinanothermemberstate.Thelatter,however,
putandendtothesituation,consideringittobeincompatible witha
genuinecommonmarketininsiirance.
Whereanundertaking fromaMemberStateotherthanthatdoveredby
thisArticlesetsupinthelatterStateanagencyorabranch,suchagency
isobligedtoeffectpartialreinsurance withthepublicagencycoveredby
thisArticle,whereasinanotherMemberStateitwouldnothavesuchobli­
gationandcould,forexample,effectthewholeofitsreinsurancewithan
undertakinginthecountrywhereitsheadofficewassituated.TheCommission
considersthatthissituationcreatesinequalitybetweenMemberStatesas
regardstheconditionsgoverningthetaking-upandpursuitofassurance
businessandthatitisnecessaryinthisDirectivetocoordinatetherules
governingthematter.
However,inviewoftheseriousimplementingdifficulties towhich
thisarticlecouldgiveriseinthememberstatesconcerned,theCommission
acceptsthepropositionof-'•heEuropeanParliament,concerningparagraph1,
thatistosay,thatthenandatoryyi;rancfqes.oughttobeabolishedpro­
gressivelytodisappearnotinfiveyears,butfetthemomentofputting
intoforceoftheseconddirectiveconcerningthecoordination oflaws
andwhichisdestinedtofacilitatetheeffectiveexerciseoflifeinsurance
activities.inprovidingservices.
Forthesameparagraph-paragraph1-theParliamentproposesequally
toabolishthewords"enreassurance "andtospecifythatthebeneficiary
bodiesofthesere-insurances arepublicbodies.TheCommissioni3in
agreementwiththesetwopropositions .
Thefirstparagraph,thusmodified,foreseeingtheprogressiveabolition
ofmandatorytransfers,.theCommission (deviatingfromtheattitudeof
theEuropeanParliamentonthispoint)feelsthatitisnecessarytomaintain
paragraph2whichfixesthefirststageofthisprogression andtousethe
follo'.jingmoreprecisephrasetoachievethisj"fromthecomingintoforce
ofthispresentdirectivethisreductionisaminimumof25$theactual
prescribedrate".

-13- XV/163/74-E
Article25
Paragraph 1
TheEuropeanParliamentproposesaslighttextualamendmentwhichthe
Commissioncannotacceptsinceitdoesnotrepresentarealimprovement.
Moreover,thistextisidenticalwiththefirstsubparagraph ofArticle
2l(l)oftheDirectiveonindemnityinsuranceanditisdesirabletomaintain
asmuchconsistency aspossiblebetweenthetwodirectives.
Article28
Thirdparagraph
BoththeEconomicandSocialCommitteeandtheEuropeanParliament
requestthatanadditionbemadetothisparagraphtoenablethetechnical
reservesoftheagenciesandbranchesofundertakings fromthirdcountries
toincludeclaimsagainstreinsurers ,asisthecaseforCommunity,under­
takings(Article17(3))•Moreover,similarprovisionisalreadymadeinthe
coordinatingDirectiveinthefieldofindemnityinsurance(Article24»
thirdparagraph,lastsentence).
TheCommissionadoptsthisproposal.
Article30
Paragraphs1and2
BoththeEconomicandSocialCommitteeandtheEuropeanParliament
notethattheadvantagesgrantedtoundertakings fromthirdcountriesform
anindivisible whole.TherequestthatthisArticlebeamendedsinceit
doesnotappeardesirabletograntoneorotheroftheseadvantageswithout
grantingtheothers.
TheCommissionadoptsthisproposalandamendstheArticlesothatthe
grantingoftheseadvantagesandtheapplicationthereforrelatetoallthe
advantages.
Article33
TheEconomicandSocialCommitteepointsoutthatinBelgiumthere
areundertakings called"Caissespatronalssderetraite"whichareengaged
inthemanagementofgrouppensionfundswithinthemeaningofArticlel(2)
(c)andjihichtherefore .shouldbesubjecttotheprovisionsoftheDirective.

-14- XV/163/74-E
Theseundertakings are"non-profit-makingassociations ",alegalformnot
mentionedinArticle8.TheESCconsidersthatitisnotnecessarytocom­
pelsuchundertakings tochangetheirlegalformandproposestheinsertion
ofaprovisionenablingthemtokeepit.
TheCommissionadoptsthisproposal.Forreasonsofcompetitionitis
importantthatsuchundertakings shouldcomewithinthescopeoftheDirec­
tiveanditisdesirabletomakethisclear.
Itisthereforenecessarytoinsertthenewparagraphproposedbetween
theformerparagraphs 2and3*

XV/163/74-E
ANNEXII
AmendmentstotheProposalforafirstCouncil
Directiveonthecoordination oflaws,regulations and
administrative provisionsrelatingtothetaking-upand
pursuitofthebusinessofdirectlifeassurance
Initialproposai
ARTICLE1
Firstnaragraph
ThisDirectiveconcernsthe
taking-upoftheself-employed acti­
vityofdirectinsurancecarriedon
byinsuranceundertakings established
inaMemberStateorwhichwishto'
becomeestablishedthere,andthe
pursuitthereofintheformofthe
activitjesdefinedbelow.
Subraragraph 1
Thefollowingkindsofinsurance
wheretheyareonacontractualbasis:
a)Lifeassurance,thatistosay,
thebranchofinsurancewhichcom­
prises,inparticular ,assurance
onsurvivaltoastipulatedage
only,assuranceondeathonly,as­
suranceonsurvivaltoastipula­
tedageoranearlierdeath,life
assurancewithreturnofpremiums,
marriageassurance,and-birthas­
surance;
b)Annuities:
c)Supplementary insurance....
d)Thetypeofinsuranceexistingin
IrelandandtheUnitedKingdom...Newproposai
ARTICLE1
Firstparagraph
ThisDirectiveconcernsthe,
taking-upoftheself-employed acti­
vityofdirectinsurancecarriedon
byundertakings established ina
MemberStateor■whichwishtobecome
establishedthere,andthepursuit
thereofintheformoftheactivities
definedbelow.
Subpara^raph 1
Thefollowingkindsofinsurance
wheretheyareonacontractualbasist
a)Lifeassurance,thatistosay,
thebranchofinsurancewhichcom­
prises,inparticular ,assurance
onsurvivaltoastipulatedage
only,assuranceondeathonly,as­
suranceonsurvivaltoastipula­
tedageoranearlierdeath,life
assurancewithreturnofpremiums,
marriageassurance,birthassurance s
provisionofannuities :
b)Supplementary insurance(formerly
io;
c)Thetypeofinsuranceexistingin
IrelandandtheUnitedKingdom...
(formerly1(d));
./•

-2- XV/163/74-E
Initialproposai
ARTICLE2
Subparagraph 3
Subjecttofurthercoordination ,
operations ,otherthanthose
ARTICLE3
Subparagraph 1
Institutions whichundertake'to
providebenefitsintheeventofdeath
only,wheretheamountofsuchbene­
fitsislessthan300unitsofaccount.
ChangeofnumberingofArticlesNewproposai
ARTICLE2
Subparagraph 3
Subjecttocoordination ,which
mustbeachievedwithinfour.years
followingthenotification ofthis
Directive,operationsotherthan...
(restunchanged).
ARTICLE3
Subparagraph 1
Institutions whichundertaketo
providebenefitsintheeventofdeath
only,wheretheamountofsuchbene­
fitsislessthan800unitsofaccount
es ARTICLE13
es ARTICLE14
es ARTICLE12
ARTICLE13
Paragraph 1
Anundertaking whichsetsupxn
aMemberStatemaynotcarryonsimul­
taneouslytheactivitiesreferredto
intheAnnextothefirstDirective
onthecoordination ofindemnity
insuranceandtheactivitieslisted
inArticle1ofthisDirective.ARTICLE12 becomes
ARTICLE13 ....becomes
ARTICLE14 becomes
ARTICLE12
Paragraph 1
Anundertaking whichsetsupin
aMemberStatemaynotcarryonsimul­
taneouslytheactivitiesreferredto
intheAnnextothefirstDirective on
thepoordination ofindemnityinsu­
ranceandtheactivitieslistedin
theAnnextothisDirective.

-3- XV/163/74-3
Inilial_pjrçmgsal
Pavagraph3fb).,lastsentence
Eachtransferofassetsftom
thelifeportiontotheindemnity -
portionmustlieapprovedaposteriori
"bythesupervisoryauthority.
Intheeventofexecutionbeing
leviesatthesuitofoneormore
individualcreditorstoenforceclaims
arisingoutoflifeassurance "business,
theassetsrepresenting thelifepor**
tionshallbeappliedexclusivelyin
satisfaction ofthosecreditors,and
intheeventofawinding-up,these
assetsshallbeappliedinpriorityto
allotherclaimsinsatisfaction ofall
creditors whoseclaimsariseoutof
life'assurancebusiness.Newproposai
ARTICLE14
&EasssaËLli*)i la5t.fiftaSgasa
Eachtransferofassetsfrom
thelifeportiontotheindemnity
portionviceversamustbeappro­
vedexpostfactobythesupervisory
authority.
Intheeventofexecutionbeing
leviedatthesuitofoneormoreindi­
vidualcreditors,therespectiveassets
ofthelifeportionandoftheindemnity
portionshallbeappliedexclusively in
■Satisfaction ofcreditorsenforcing
claimsarisingoutofbusinessinthe
ion,andintheeventof relevantportion,andm
tria»»–i»^mifiai»cr«:i*i*irnurr»iiiirrr <
awinding-uptherespectiveassetsof
eachoftheseportionsshallbeapplied
inpriorityinsatisfaction ofall
creditorsenforcingclaimsarising:out
ofbusinessintherelevantportion.
ARTICLE17
JPaçag^gyoh1firstsentence
EachMemberStateinwhoseterr­
itorybusinessiscarriedcnshall
requiretheundertaking toestablish
sufficienttechnicalreserves,inclu­
dingmathematical reserves.EachMemberStateinwhoseterri­
toryanundertakingcarriesonbusiness
shallrequiresuchundertakingtoesta­
blishinrespectofitsdirectlife
assurancebusiness,inclnj-ing ;liabilities
reinsuredwithotherundertakings ,suffi­
cienttechnicalreserves,including
mathematical reserves.

-4- XV/163/7.'--
Initialproposai,
.ARTICJJB_18_
-thepaidupsharecapitalor,
inthecaseofamutualconcern,
theeffectiveinitialfund.
ARTICLE19
Introductory sentence
Subjecttotheprovisionsof
Article20thesolvencymarginshall
"bedetermined asshown "belowaccord­
ingtothecasesofinsurancepracti­
sed.
Point(a).
-fi^^tresult:
4%ofthemathematical reserves
relatingtodirect "businessand
reinsurance acceptance ;Newproposai
ARTICLE 1;
Sub-p^aj^roh Jl..firstiden-t
-theamountofthepaidupcapital
ofthecompanycr,inthecaseof
amutualsociety,theeffective
amountofitsfund.
ARTICLE19
Subjecttotheprovisionsof
Article20theminimumsolvencymargin
shall "bedetermined asshown "below
accordingtotheclassofinsurance
practised.
secordrcsultt
thefigurerepresenting 31°of
thecapitalatriskforwhich
theundertakingisresponsible
multipliedbytheratioexisting
inrespectoftnelastfinancial
yearbetweentheamountofcapital
atriskforwhichtheundertaking
remainsresponsibleaftertrans­
fersandretrocessions forrein­
surancea.ndtheamountofcapi­
talatriskwithoutdeducting
reinsurance ;thisratiomayin
XJOcasebelessthan3C%.anamountequalto3.5/u(percent)
ofthemathematical reservesin
respectofdirectbusinessinclud­
ingliabilitiesreinsuredvithothe
undertakings andofreinsurance
acceptance fromthirdcountries :
seconditems
anamountequalto
ofthecapitalatriskforwhich
theundertakingisresponsiblein
respectofdire_ct..bus^nes^^andjof
jr.QJ?--2^9ptavr.^s,frontithird
countries,multipliedbytheratio
obtaininginrespectofthelast
financialyearbetween(i)the
amountofcapitalatriskforwhich
theundertaking remainsresponsible
afterdeductingliabilitiesrein-
suredwithotherundertakings and
addingretrocessions and(ii)the
•/.

-5- XV/163/74-E
New-Dro^osal
md-acceptances fromthirdcountries
areadded;thisratiomayinno
casebelessthan50
firstparagraph
.Forinsurancesincaseofdeath,ForinsuranceinClassIofthe
temporaryinsuranceandinsurance AnnextothisDirective "beinginsurance
coveringaperiodof5yearsorlessincaseofdeathtakenoutforatempo-
arecovered "bythefirst"branchoftheraryperiodnotexceedingtenyears,
annaxtothisDirective.-
rcmt
Theamountsoobtainedshall"be
dividedintotv;oportions,thefirst
portionextendingupto10million
unitsofaccount,thesecondcompris­
ingtheexcess;18/sarid16/^ofthese
portionsrespectively shall"becal­
culatedandaddedtogether.
ogra/oh
Thesumsocalculatedshall "be
multiplied "bytheratioexistingin
respectofthelastfinancialyear
"betweentheamountofolaimsremain­
ingto"be"borne"bytheundertaking
afterdeductionoftransfersand
retrocessions forreinsurance and
the£TOSSamountofclaims;this
ratiomayinnocase"belensthan
50%Peint(b).secondnarr.rranh
Theamountsoobtainedshall "be
dividedintotwoportions,thefirst
comprisinganamountnotexceeding
5millionunit3ofaccount,thesecond
comprisingtheexcess;amountsequalto
18%and16fsrespectivelycfthesepor­
tionsshall "becalculated andadded
together.
Pointi"b;.thirdDars^aph
Thesumsocalculatedshall "be
multiplied "bytheratioobtainingin
respectofthelastthreefinancial
years,betweentheamountofclaims
remainingtobebornebytheunder­
takingafterdeductingliabilities
reinsuredwithotherundertakings and
addiiigretrocessions andthegross
amountofclaims;thisratiomayin
nocasebelessthan50$.
./•

XV/163/74-E
Point(c)
Forpermanenthealthinsurance
notsubjecttocancellation existing
intheUnitedKingdomandIreland,
referredtoinClansIoftheAnnex
tothisDirective,andforcapital
redemptionoperationsinClassV,it
shall"beequaltoA°/°ofthemathemati­
calreservesrelatingtothistypeof
insuranceoroperation.
Forinsuranceconnectedwith
investment fundsreferredtoinClass
II,tontinesreferredtoinClassIV
andgrouppensionfundsreferredto
inClassVI,itshall"beequalto1$
ofthecapitalmanaged.Now ,oro,nof?ril
J>arssrj.newl
InthecaseofLloyds,the_j^alculation
P.IL"fie,solvencymarginshallhemade
onthe"basisofnetpremiums,which
shall "bemultiplied b.vaflat-rate
percentagefixedarnuallv "bytheinters
«■«?!,-frTM1«■t A?MUG.'aUriS_»>ai
nal_auditor,^Th^sfl.at:–T'c,~t,opercen-
tagemathecalculated onthe_hasjL_n
of.themostrecent^tatistj .calda1,aon
commissions paid.Thesedatatogether
withtherelevantcalculations .shall
"besenttotheauthoritiesofthe
countriesvjheeLlo**dsises+ablirhed .
PointIcj.
ForinsuranceinClassIofthe
AnnextothisDirective "beingperma­
nenthealthinsurancenotsubjectto
cancellation aspractisedintheUnited
KingdomandinIreland,andforcapital
redemptionoperations(ClassV),itshall
beequalto3.5°/°(percent)ofthemathe­
maticalreservesasspecifiedinpoint
(a)ofthisArticle(firstitem),
J&iSlXsQ.
Forinsuranceconnectedwith
investmentfluids(ClassII),tontines
(ClassIV)andthei^nagcmcntofgroup
pensionfunds(ClassVl),itshallbe
equalto1,(percent)ofthemqtho^
maticalreservesasgpecifieci._in
(fir.stitem),

-7- XV/163/74-E
initial -proposai
ARTICLE20
ParagraphJ.
Onethirdofthesolvencymar­
ginshallconstitutetheguarantee
fund.Itshallconsist,totheextent
ofatleast50$,ofitemslistedin
Article18(1)and(2).
.ARTICLE22
Paraeraph 1
MemberStatesshallgradually
reducethescopeoftheobligation
imposedonundertakings toeffect
partialreinsurance ,inrespectof
"businesscovered "byArticle1,with
oneormoreoftheagenciesdesigns
ted"bynationalrule3,soasto"bring
ahoutthecompletedisappearance of
suchobligationattheendofthe
transitional periodreferredtoin
Article33.ARTICLE20
ffMagaak»1.
Onethirdofthemini.rrumsolvency
marginM^pe /jti,cle1gshall
constitutetheguaranteefund.It
shallconsist:,,totheextentofatleast
50oftheitemslistedinArticle18(l)
and(2).
Inthecaseofmutualsocieties
andcompaniesof_aj%utualtype.Member
Statesqa^r•providefortheminirrtum
gua-r^iitecfundto"bereducedto450000
unitsofaccount.
Paragra-ph 1
MemberStatesshallgradually
reducethescopeoftheobligation
imposedonundertakings toreinsure
aproportionoftheirliabilities
inrespeotofbusinesscoveredby
Article 1with'oneormoreofthe
■publicagenciesdesignatedbynational
rules,soastobringaboutthecom­
pletedisappearance ofsuchobligation
Dir^c.ti.v.qfleal,ingwltk.tiie,JPXQvlSJLon
/.

-8-XV/163/74-3
NewDronosal
JBg3ffigB5,£
Theratiocurrentlyinforce
shallbereducedby25$forthwith.witheffectfromtheentry
intoforceofthisDirectivethepro­
portioncurrentlyrequiredtobeso
reinsuredshall"bereducedbyat
«lâasfc25/J.
ARTICLE28 ARTICLE28
TheMemberStateinquestion
shallrequirethattheassetsrepre­
sentingthetechnicalreservesshall
bolocalizedinitsterritory.Subject,asprovidedinArticle
17(3),theMemberStateinquestion
shallrequirethattheassetsrepre­
sentingthetechnicalreservesshall
belocalizedinitsterritory.
Paragraph 1
Anyundertaking which,having
obtainedanauthorization fromone
MemberState,obtainsanauthorizat­
ionfromoneormoreotherMember
Statestoestablishother-agencies
orbranchesthereinmayapplyfor
oneormoreofthefollowingadvan­
tagestlEEna&jQ .
Anyundertaking which,having
obtainedanauthorization fromone
MemberState,obtainsanauthorization
fromoneormoreotherMemberStates
toestablishotheragenciesorbranches
thereinmayapplyforall^ofthefollow­
ingadvantages t
(therestunchanged)

-9- XV/163/74-E
Initial .proposai iTewproposai
Shouldatleasttwoofthe
MemberStatesinquestionapprove
theapplicationinwholeorinpart
theoompetentauthority.......Shouldatleasttwoofthe
MemberStatesinquestionapprove
theapplication bytheundertaking ,
thecompetentauthority.......
(restunohanged).
Third.s^.ib--Tjqraaraphs(new)
Thoseundertakings inBelgium
whicharecalled"Caissespatronales
dsrctraite"andrhichinaccordance
withtheirobjectsaslaiddownin
theirstatutesareengagedinthe
managementofgrouppensionfund3
withinthemeaningofArticle1(2)(C)
maynursuesuchactivitiesunderthe
xrtimrgi J»I >.>i>n<n- wn«i»
formofassociations sansbutlucra-
tif(non-profit-makingassociations)
andshallnotberequiredtoadopt
oneofthelegalformsspecifiedin
Article8jfl)(a)ofthisDirective.
Decomes thefourthsub-paraeraph

Annex IV
Draft letter fortheEuropean Parliament
Sir ,
TheEuropean Parlaiment delivered itsOpinion on17October 1974
concerning twoCommission proposals forDirectives onthecoordination oflaws ,
regulations andadministrative provisions relating tothetaking-up andpursuit
ofthe "business ofdireot life assurance (OJHoC35t28March 1974 )andthe
abolition ofrestrictions onfreedom ofestablishment inthe business ofdirect
life assurance (OJNoC27,15March 1974)*
TheEuropean Parliament ,while approving thebroad lines oftheno
twoproposals for "Directives ,proposed that certain Articles beamended .The
Commission has examined most carefully theOpinion oftheEuropean Parliament and
hasdecided toadopt most ofitssuggestions ,including themost important ones ,
intheproposed amendments toitsoriginal proposal which itissending tothe
Council ofMinisters inaccordance with the second paragraph ofArticle 149 of
theEECTreaty .These suggestions concern :
Article 3(l)Jtheraising fsorn 300u.a.to800u,a«oftheupper limit in
respect ofthebenefits provided bycertain institutions notcovered bythe
Directive ,
Article 13(3 )(b)and (c)Sprovision ofsimilar protection forindemnity
policyholders asforlife policyholders ,
Article 19,introductory sentence ,andArticle 2Q(l ):addition oftheword
"minimum "before thewords "solvency margin ",
Article 19(a),first andsecond items ,andArticle 19(c )and (d):
thesolvency margin tobecalculated onthebasis ofmathematical reserves in
respect of(i)direct business including liabilities reinsured with other
undertakings and (ii)reinsurance acceptances from third countries ,
reduction ofthepercentages relating tothesolvency margin .

-2- AnncxIV
Article19(b),firstparagraphtextensiontocontractsforperiodsnotexceed!
tenyears*secondparagraph:reductionofthefirstportionto5000000vf
Article19("b)»thirdparagraph:referenceperiodofthreefinancialyearsfor
olaims,
Article19(h):additionofanewfourthparagraphconcerningLloydsofLondon,
Article20(2):additionofathirdsubparagraphprovidingfortheguarantee
fundsofmutualsocietiesto"bereduoed,
Article22(l):referencetotheputtingIntoeffeotofasecondDirectiveon
lifeassurance
Article28,thirdparagraph:referencebywayofprovisotoArticle17(3x
TheCommissionhasalsoadoptedtheimprovements offormc*
layoutproposedinrespectofArticle1(l),Article12(l),Article14(changeof
numbering),Articlel8(l),Article19(d),Article22(2)andArticle30.
HieCommissionhasdecidednottoaccepttheOpinionofth^
EuropeanParliament onasmallnumberofpoints.TheCommissionconsidersthai
thefirstparagraphofArticle1,thefirstsentenceandparagraph3ofArticle
Article10(3)andArticle25,inrespectofallofwhichtheParliamentpropos'
draftingohanges,shouldnotbealteredsince,firsttheprovisionsinquestion
aredearenoughand,secondly,itisdesirable,ifmisinterpretations areto1:
avoidedtokeepthisDirectivealignedasfaraspossibleontheFirstDirects
oncoordination inthefieldofindemnityinsuranceof24July1973#
TheCommissionisretainingtheoriginaltextofthefirst
sub-paragraph ofArticle13(2)forthepurposeofprotectingpolicyholders.
TheCommissionisalsoretaining,albeitinslightlyamendo
forms,paragraph2ofArticle22becauseitseemstotheCommissionalogical
implementation oftheprinciplelaiddowninthepreoedingparagraph.
Yoursfaithfully