No C 319/10 Official Journal of the European Communities 30. 11. 87 
Opinion on the proposal for a Council Directive on the coordination of laws, regulations 
and administrative provisions relating to the compulsary winding-up of direct insurance 
undertakings (!) 
(87/C 319/04) 
On 5 February 1987 the Council decided to consult the Economic and Social Committee, 
under Article 198 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 2 September 1987 in the light 
of the report by Mr Cortois. 
At its 248th plenary session (meeting of 23 September 1987) the Economic and Social 
Committee adopted the following Opinion unanimously: 
Introduction 
This draft Directive supplements the first coordination 
Directives concerning the taking-up and pursuit of the 
business of non-life insurance (73/239/EEC) and life 
assurance (79/267/EEC) which lay down inter alia the 
need for authorization. 
With a view to the completion of an internal market 
in insurance, the proposed Directive provides for the 
coordination of the national rules which apply when 
the authorization of an insurance undertaking is with­
drawn in the Member State in which the head office is 
situated or when the conditions for this are fulfilled. In 
both these cases the proposal provides for compulsory 
winding-up under the supervision of the competent 
authorities in that Member State. 
According to whether the undertaking is insolvent or 
not, two different procedures apply: special compulsory 
winding-up and normal compulsory winding-up. 
In both cases the draft Directive lays down the twofold 
principle of the unity and universality of the procedure, 
i.e. firstly, the whole winding-up is carried out under 
the supervision of the authorities in the Member State 
where the head office is situated and, secondly, it affects 
all establishments in the Community. 
Accordingly, the principal aim of the Directive is to 
provide special protection for policyholders when 
authorization is withdrawn (normal compulsory wind­
ing-up) or when the undertaking is in a state of proven 
or probable insolvency (special compulsory winding-
up). 
To this end the proposed Directive provides for the 
constitution of separate non-life and life asset funds 
(!) OJNoC71, 19.3. 1987, p. 5. reserved as a matter of priority for these creditors and, 
secondarily, on social grounds, for claims in respect of 
wages and salaries. 
A register has to be kept in each establishment of the 
assets making up these funds, under the supervision of 
the supervisory authorities in the country concerned. 
The total value of the assets must at all times be not 
less than the value of the technical reserves. In view of 
the obvious links between this Directive and that on 
the annual accounts of insurance undertakings, the 
Commission should ensure that they are consistent with 
each other on this point. 
Finally, it should be stressed that the aim of the proposal 
is the application of certain principles and procedures 
in all the Member States rather than the complete 
harmonization of winding-up legislation. 
General comments 
1. The Committee endorses the Commission's aim 
in adopting a specific Directive on the compulsory 
winding-up of insurance undertakings, viz. to protect 
policyholders in such a situation and hence to help 
create the confidence needed for an internal market in 
insurance. Specific protection is in fact warranted by 
the particular nature of the insurance business in that 
the undertaking uses policyholders' premiums to form 
reserves and assets corresponding to these reserves, 
which are used to meet subsequent, fluctuating liab­
ilities. 
1.1. At the same time the Committee suggests that 
it would be in the interests of policyholders to have a 
stronger preventive policy, including improved cooper­
ation between the supervisory authorities, in accord­
ance with the basic Directives on the taking-up and 
pursuit of the business of insurance. 
30. 11. 87 Official Journal of the European Communities No C 319/11 
As part of this, restructuring measures, such as the 
transfer of portfolios and internal reorganization, 
would have to be taken in good time wherever possible 
so that compulsory winding-up could be avoided. 
The Committee regards winding-up as a last resort to 
prevent policyholders from incurring further losses. 
Hence a preventive policy is of crucial importance in 
creating the necessary confidence for an internal market 
in insurance. 
2. The Committee would draw attention to the fact 
that the application of the principle of the unity and 
universality of the winding-up procedure, as provided 
for in the proposed Directive, will necessitate changes 
— in some cases substantial — in national legislation 
due to the lack of a general European convention on 
bankruptcy law; precisely the same situation obtained 
in the case of the Directive on the winding-up of credit 
institutions (doc. COM(85) 788 final), on which the 
Committee has already issued an Opinion. 
2.1. The Committee would also point out that the 
term 'compulsory winding-up' as used in the proposed 
Directive is not synonymous with bankruptcy as found 
in the laws of most Member States. 
Whereas bankruptcy presupposes a decision by the 
courts, the compulsory winding-up provided for in the 
draft Directive can also be ordered by an administrative 
body, namely the supervisory authority. 
3. The Committee broadly endorses the winding-up 
procedures laid down in the draft Directive, comprising: 
— in the case of normal compulsory winding-up essen­
tially: 
a) the customary termination of existing contracts, 
b) satisfaction of incurred claims by a trustee, and 
c) where possible the transfer of the portfolio; 
— in the case of special compulsory winding-up: 
a) the termination of existing non-life insurance 
contracts and claim of policyholders on separate 
'non-life' assets unless the portfolio has been 
transferred, b) the transfer of the life-assurance portfolio, poss­
ibly with a proportional reduction of all obli­
gations — failing such a transfer the policyhol­
ders can claim on the separate 'life-assurance' 
assets amounting to the total value of the math­
ematical reserves and all other benefits attaching 
to their contract. 
— For both types of insurance the draft Direc­
tive lays down the order of precedence in 
which the creditors are eligible to participate 
in the distribution of the asset funds. 
— The Committee approves the proposed order 
of precedence which gives priority to the 
insurance claims of policyholders and to life-
assurance claims [Art. 19 (1) (b) and (2) (b)]. 
4. The unity of the procedure means inter alia that, 
in the event of compulsory winding-up, policyholders 
throughout the Community are reimbursed from the 
combined separate assets of all branches in the Com­
munity. 
In this connection the Committee would point to the 
need concurrently to coordinate the rules for the calcu­
lation of the technical reserves in the Member States, 
as these determine the assets which have to be registered 
for every branch. 
Specific comments 
1. Article 1 - Scope 
The Committee notes that it is still not clear how the 
draft Directive will apply to Lloyd's, although the latter 
falls within its field of application. 
The Committee urges that this point be cleared up as 
quickly as possible. 
2. Article 2 - Registers 
The Committee notes the Commission's explanations 
regarding the nature of the registers to be kept by 
insurance undertakings. 
It urges that when the relevant rules are put into prac­
tice, effective account be taken of the need for flexibility 
as regards the form and regularity of the registers, 
including the possible use of computers as one way of 
minimizing administrative costs. 
No C 319/12 Official Journal of the European Communities 30. 11. 87 
3. Article 5 (2) - Appointment of a liquidator 4. Article 12 (3) - Special compulsory winding-up 
For the sake of clarity the Committee suggests that the 
2nd sentence read as follows: 
'If the supervisory authority finds that the said bodies 
do not carry out the winding-up satisfactorily, or 
that there is good reason to believe that they may 
not do so, it may, on its own initiative or at the 
request ...' The Committee considers that it is in the interests of 
policyholders in those Member States where branch 
offices are established that these Member States should 
always be entitled to call for the appointment of an 
assistant liquidator if the total sum insured exceeds a 
certain amount. 
Done at Brussels, 23 September 1987. 
The Chairman 
of the Economic and Social Committee 
Alfons MARGOT