WRITTEN QUESTION E-0232/97 by Alexandros Alavanos (GUE/NGL) to the Commission (7 February 1997)

Subject: Insurance Companies' Reserve Fund in Greece

Over the last two years the cancellation of the licences of insurance companies has caused serious problems for the reserve fund of the private automobile insurance sector: a deficit of Drs 25 billion has appeared in the Insurance Companies' Subsidiary Fund.

Given the widespread concern that other insurance companies may withdraw from the market, thereby increasing the deficit in the reserve fund, will the Commission say whether it considers legitimate and legally valid, from the point of view of the interests of policy holders, the view that insurance premiums should be raised again in order to cover deficits in the reserve fund?

Answer given by Mr Monti on behalf of the Commission (11 April 1997)

The third-generation insurance Directives (92/49/EEC on insurance other than life assurance ((OJ L 228, 11.8.1992. )) and 92/96/EEC on life assurance ((OJ L 360, 9.12.1992. ))) introduced a single authorization and prudential and financial control system that is applicable by the Member State in which the insurance company is established. Under the arrangements laid down in the Directives, the competent authorities of the home Member State are responsible for monitoring the financial health of insurance companies, including their state of solvency and the establishment of adequate technical provisions. The Directives also set out the minimum standards for technical provisions. The Member State which granted the authorization may lay down stricter rules for the insurance companies for which it is responsible.

Motor-vehicle insurance is covered by Article 9 of the third Directive on insurance other than life assurance (class 10: motor-vehicle liability).

In addition, Articles 4 and 5 of that Directive stipulate that the taking-up and pursuit of the business of insurance are subject to the granting of a single official authorization by the authorities of the Member State where the undertaking has its head office. Article 7 states that 'The scheme of operations [required by the authorities of the home Member State as a condition for granting authorization] shall include particulars or proof concerning:

(f) estimates of premiums ... and claims;

(h) estimates of the financial resources intended to cover underwriting liabilities and the solvency margin.'

Accordingly, estimates of premiums, which are among the financial resources intended to cover a company's underwriting liabilities and solvency margin, are subject to financial control by the home Member State, this being a condition for granting authorization to an undertaking wishing to set up in a branch of insurance (in the case in point, motor-vehicle insurance). It is emphasized here that the controls in question do not concern the rates which the undertaking intends to apply, but analyse its business forecasts in order to determine whether it would constitute a viable insurance company.

Such controls are carried out on a permanent basis and, if the company ceases to fulfil the conditions for taking up the business of insurance, including those on solvency and the establishment of technical provisions and assets covering those provisions under the rules of the home Member State, the authorization granted by the authorities of that Member State may be withdrawn.

It transpires that Greek undertakings which have established their head office in Greece are subject to financial supervision by the Greek authorities alone. In other words, the compatibility of the policy pursued by them on premiums with a view to creating adequate technical provisions to meet their contractual obligations must be assessed in the light of Greek legislation and is the responsibility of the supervisory authority within the Greek Ministry of Trade.