WRITTEN QUESTION E-4219/97 by Stéphane Buffetaut (I-EDN) to the Commission (21 January 1998)

Subject: Failure to transpose the Third Insurance Directives in respect of mutual societies governed by the Mutual Societies Code in France

The French Government has still not yet transposed the Third Directives 92/49 ((OJ L 228, 11.8.1992, p. 1. )) on non-life insurance and 92/96 ((OJ L 360, 9.12.1992, p. 1. )) on life assurance, which entered into force on 1 July 1994, in respect of mutual societies governed by the Mutual Societies Code. The Commission, as guardian of the Treaties, has opened proceedings against the French Government for failure to comply with Treaty obligations. A reasoned opinion was addressed to the French authorities on 5 March 1997.

Since then, no transposition measures have yet been taken, while the effects of these distortions of competition on the market are becoming ever more noticeable.

In fact the so-called '45' mutual societies still enjoy preferential tax treatment: they are not subject to the 7% tax on sickness and prudential policies; they are not required to observe the solvency rules to which other actors on the market are subject (no distinction is drawn between insurance and welfare service activities, the solvency margin does not apply).

This difference in treatment gives them a clear competitive advantage particularly in the sickness insurance market, where their market share is growing faster than that of insurers and welfare institutions (+0.7% as against +0.5% between 1990 and 1996).

What measures does the Commission propose to take to put an end to these distortions of competition which persist on the French market and which are linked to its failure to transpose Community directives? Does it intend to bring proceedings before the European Court of Justice?

Answer given by Mr Monti on behalf of the Commission (30 March 1998)

The Commission would confirm that infringement proceedings have been initiated against France under Article 169 of the EC Treaty. As part of those proceedings, it delivered a reasoned opinion stressing that inclusion of the mutual associations in the scope of Directive 92/49/EEC of 18 June 1992 relating to direct insurance other than life assurance and amending Directives 73/239/EEC and 88/357/EEC (third non-life insurance Directive) and in the scope of Directive 92/96/EEC of 10 November 1992 relating to direct life assurance and amending Directives 79/267/EEC and 90/619/EEC (third life assurance Directive) entailed application in full of the relevant provisions to these associations as of 1 July 1994. Transposal involved the provisions on establishing technical provisions, covering them with matching assets and establishing a solvency margin being applied in respect of their entire business.

Furthermore, during other exchanges of letters the Commission pointed out to the French authorities that, pending the full adaptation of national law to the third-generation Directives, they should revoke national instruments that conflicted with the Directives so that the mutual associations would cease to enjoy, by virtue of the Mutual Societies Code, more favourable treatment than other insurance undertakings.

To date, transposal of the third-generation insurance Directives remains incomplete.

Moreover, the Commission is currently investigating whether the exemption from the 7% tax on sickness insurance policies constitutes granting state aid to the '45' mutual associations.