AMENDED PROPOSAL FOR A COUNCIL DIRECTIVE ON THE COORDINATION OF LAWS, REGULATIONS AND ADMINISTRATIVE PROVISIONS RELATING TO THE COMPULSORY WINDING UP OF DIRECT INSURANCE UNDERTAKINGS
Date: 1989-09-12
Institutions: European Commission
Subjects: approximation of laws, balance sheet, cessation of trading, insurance, insurance company, liquidation, single market

COMMISSION OF THE EUROPEAN COMMUNITIES 

C0MC89) 394 final  SYN-80 

Brussels, 12 September 1989 

Amended  Proposal  for a 

COUNCIL  DIRECTIVE 

on the coordination of  laws, regulations and administrative  provisions 

relating to the compulsory winding up of direct  insurance undertakings 

(presented by the Commission  pursuant  to paragraph 3 of Article 149 

of the EEC Treaty) 

A 

(V^/ 

EXPLANATORY MEMQRANEPM 

1.  On 23 January 1987 the Commission presented to the Council a proposal 
for  a  Directive  on  the  coordination  of  laws,  regulations  and 
administrative  provisions  relating  to  the  compulsory  winding  up  of 
direct  insurance  undertakings.1  That  Directive,  referred  to  in  the 
White Paper as a measure necessary for the completion of the internal 
roarket, aims  to  supplement  the Council's  First  Directives  on direct 
non-life insurance2 and direct life assurance respectively.3 

It lays down rules and procedures governing the œmpulsory  winding up 
of  direct  insurance  undertakings,  which,  safeguard  the  rights  of 
policyholders and the insured so as to prevent discrimination  on the 
grounds of nationality, and consequently facilitate the creation of an 
internal market in insurance. 

2.  The Economic and Social Committee delivered its opinion on 23 September 
1987.4  The  European  Parliament  has  completed  its  first  reading, 
delivering  its  opinion on  14 March  1989  on  the basis  of  the  report 
prepared by its Legal Affairs Committee.5  Acting on the basis of the 
third paragraph of Article 149 of the Treaty, and taking account of the 
two opinions, the Commission hereby presents an amended version of its 
proposal for a Directive. 

3.  All the amendments recommended by Parliament have been incorporated, in 
spirit if not to the letter. Some of the observations formulated by the 
Economie and Social Committee have been taken into account. Moreover, a 
number  of additional amendments, intended  to improve and  clarify the 
scope of certain provisions, are proposed. 

1  O0M(86) 768 final/2, OJ No C 71, 19.3.1987. 
2  First Council Directive 73/239/EBC of 24 July 1973 on the coordination 
of  laws,  regulations  and  administrative  provisions  relating  to  the 
taking-up and pursuit of the business of direct  insurance  other than 
life assurance; OJ No L 228, 16.8.1973, p. 3. 

3  First Council Directive 79/267/EBC of 5 March 1979 on the coordination 
of  laws,  regulations  and  administrative  provisions  relating  to  the 
taking-up  and  pursuit  of  the  business  of  direct  life  assurance; 
OJ NO L 63, 13.3.1979, p. 1. 
4  OT No C 319, 30.11.1987, p. 10. 
5  PE 124.469/fin. - Rapporteur P. PRICE. 

- 2 -

4.  The amendments made to the first recital and to Article 1(1) make clear 
what Community provisions are in force and take account of the progress 
made  in  creating  the  internal  market  by  adding  a  reference  to  the 
Second Council Directive 88/357/EEC on the freedom to provide services 
in  the field  of direct non-life  insurance,6 adopted  on  22 June  1986, 
which also amends the First Non-Life Coordination Directive. 

5.  As  regards  normal compulsory  winding up  (NCW),  Article  5(2) has been 
amended on the lines proposed by the Economic and Social  Committee,  in 
order  to make more clear the purpose of this provision and  thereby to 
avoid any difficulties of interpretation. 

6.  Article  4(1)  has  also  been  amended  in  accordance  with  Parliament's 
opinion with the aim of increasing  the extent  to which  the winding-up 
procedure  is  publicized  and,  consequently,  of  strengthening  the 
protection  of  insurance  creditors.  Indeed,  it  would  seem  that 
publication  of  the  withdrawal  of  authorization  and  of  the  measures 
taken  under  the  procedure  solely  in  the  Official  Journal  of  the 
European Communities  is not enough to guarantee appropriate  notice  to 
insurance creditors, who do not always have easy access to the Official 
Journal. 

7.  The  new  paragraph  1  added  to  Article  6  lays  down  that  where  the 
competent authorities of the country in which the insurer has its head, 
office  decide  to  deprive  the  bodies  of  that  undertaking  which  are 
responsible  for  carrying  out  the  winding  up  and  for  appointing  an 
administrator  of  their powers, as provided  for by  Article  5(2), they 
must  state  the  grounds  for  such  a  decision.  This  is  because  it 
introduces  a major modification  to  the  ordinary NCW  procedure,  which 
results from an abnormal situation liable to place the very aim of NCVT 
at risk. It therefore appears desirable that the undertaking and, where 
appropriate,  the  courts witk which  any  appeal  against  a  decision  is 
lodged pursuant to Article 6(2) of the amended  proposal should  receive 
an accurate and clear Indication of the reasons behind that decision. 

6 

Second Council Directive of 22 June  1988 on the coordination of laws, 
regulations and administrative provisions relating to direct insurance 
other than life assurance and laying down provisions to facilitate the 
effective  exercise  of  freedom  to  provide  services  and  amending 
Directive  73/239/EBC; OJ No L 172. 4.7.1988, p. 1. 

- 3 

8.  Article 8(1) incorporates the amendment proposed by Parliament. Its aim 
is  to  enhance  the  universality  of  the  effects  of  the  winding-up 
procedure.  The  proposed  wording  requires  the  Member  States  to  take 
whatever steps are necessary to ensure that the winding-up procedure is 
completed as quickly as possible in the interests of all concerned,  in 
particular  of  insurance  creditors  (policyholders,  insured  persons, 
victims). 

9.  As  regards  Title  III  of  the proposal  for  a  Directive,  which  governs 
special compulsory winding up  (SCW), Article 10(2) has been amended  in 
accordance with Parliament's opinion in the same way as Article 8(1). 
The aim is the same, i.e. to enhance the universal effects of any SCW 
ordered  and  carried  out  in  the  Member  State  in  which  the  insolvent 
insurance undertaking has its head office. 

10. The new paragraph 2 of Article 11 is intended to lay down the necessary 
conditions governing publication of the essential  documents relating to 
the  special  compulsory  winding  up  of  an  insurance  undertaking.  This 
requirement, which is inspired by that laid down for normal compulsory 
winding  up  (Article  5(1)),  is  justified  by  considerations  concerning 
the protection  of  the creditors  of  the insurance undertaking  and  the 
proper  implementation  of  the  procedure,  particularly  where  an 
undertaking is wound up because of insolvency. 

Finally,  the  amendment  to  Article  13(1) brings  this  proposal  for  a 
Directive into line with the new provisions relating to the transfer of 
portfolios  laid  down  by  the  Second  Directive  88/357/EBC  on  the 
provisions of non-life insurance services. 

In  introducing  these amendments  to  the proposal  for  a  Directive,  the 
Commission  has  met  Pari lament's  wishes  in  full  and  has  largely  met 
those  of  the  Economie and  Social  Committee.  As  for  the  observations 
made concerning application of the proposal to Iioyd's,  the Commission 
considers that the scope of this proposal for a Directive must be  the 
same as that of the two First Directives, which do extend to Lloyd's. 

As  for  the  observations  concerning  the  possibility  of  using 
computerized systems for keeping the register referred to in Article 2, 
the text initially proposed by the Commission  is sufficiently flexible 
to allow for that possibility without its being specif loan y mentioned. 
The same applies to the comment made on the role to be  played by  the 
supervisory  authorities  of  Member  States  in  which  branches  of  an 
insurance  undertaking  undergoing  special  compulsory  winding  up  are 
established  (Article 12). 

Amended Proposal  for a 

COUNCIL DIRECTIVE 

on the coordination of  laws, regulations and administrative provisions 

relating to the compulsory winding up of direct  Insurance undertakings 

Initial proposal 

Amended proposal 

THE COUNCIL OF THE EUROPEAN COMMUNITIES, 

Having regard  to the  Treaty  establishing  the 
European Economic Community, 

and  in  particular  Articles  57(2)  and  66 
thereof, 

Having  regard  to  the  proposal  from  the 
Commission, 

Having regard  to the  opinion of  the European 
Parliament, 

having regard  to the  opinion of  the Economic 
and Social Committee, 

Whereas  coordination  of  the  conditions 
governing  the  taking  up  and  pursuit  of  the 
business of direct  insurance has been largely 
implemented,  as  regard  insurance  other  than 
life asssurance,  by the First Council Direc 
tive  73/239/EEC  of  24  July  1973  on  the 
coordination  of  laws, 
regulations  and 
administrative  provisions  relating  to  the 
taking-up  and  pursuit  of  the  business  (1of 
direct insurance other than life assurance / 
and,  as regards life assurance,  by the First 
Council Directive  79/267/EEC of  5 March  1979 
on the coordination of  laws,  regulations and 
administrative  provisions  relating  to  the 
taking-up  and  pursuit  of  the  business  of 
direct life assurance  ; 

regard 

Treat/ 
Having 
estahl i shlng  the  European  Economic 
Community, and in particular Articles 
57(2) and 66 thereof, 

the 

to 

Having regard to the proposal from the 
Commission, 

In  cooperation  with  the  European 
Parliament, 

Having  regard  to  the  opinion  of  the 
Economic and Social Committee 

Whereas coordination of the conditions 
governing the taking-up and pursuit of 
the business  of direct insurance has 
been  largely  implemented,  as  regards 
insurance  other  than  life assurance, 
by  the  First  Council  Directive 
73/239/EBC  of  24  July  1973  on  the 
coordination of laws, regulations and 
administrative provisions relating to 
the  taking-up  and  pursuit  of  the 
business  of  direct  insurance  other 
than  life  assurance,1 
^  2  pvqt. 
amfsnflflfl by Directive 88/gg7/EBg_, and 
as regards life assurance,, by the First 
Council Directive 79/267/EEC of 5 March 197 
on the coordination of laws, regulations 
and administrative provisions relating to 
the taking-up and pursuit of the business 
of direct life assurance ; 

1 OJ L 228, 16.8.1973, p. Ï 
2 OJ L 63, 13.3.1979, p. 1 

1 OJ No L 228, 16.8.1973. p. 3. 
2  OJ No L 172, 4.7.1988, p. 1. 
3  OJ No L 63. 13.3.1979, p. 1. 

- 2 -

Unchanged 

Whereas those Directives do not harmonize the 
rules  on  the*  role  of  the  supervisory 
authorities  or  those  governing  the  treatment 
of  insurance  contracts  in  the  event  of  the 
winding up  of the  undertaking or  the distri 
bution  of  the  assets  representing  technical 
reserves in that eventuality; 

Whereas,  however,  it is in the interests not 
only  of  creditors,  in  particular  insurance 
creditors, 
but  also  of  the  supervisory 
authorities, that common solutions be found to 
the problems raised; 

Whereas harmonized provisions should therefore 
be adopted  in so far as is necessary  to take 
account of the specific  features of insurance 
undertakings; 
for  the  rest, 
compulsory winding  up remains  subject  to the 
law  of  the  Member  State  in  which  the  head 
office is situated; 

whereas, 

Whereas  it  is  not  advisable  to  extend  the 
scope  of  this  Directive  to  insurance 
undertakings that are not subject to the First 
Coordination Directives; 

Whereas  direct  insurance  undertakings,  by 
reason of  their activities,  are  required  to 
establish  reserves  in  order  to  meet  their 
future liabilities;  whereas the existence of 
assets representing such reserves, as required 
by  the  First  Coordination  Directives  and 
verified by the supervisory authorities, is an 
evident safeguard  of the  rights of  insurance 
creditors; 

Whereas  the  keeping  of  registers  of  such 
assets  at  the  head  office  and  in  each 
Community agency  or branch  in respect  of all 
the  life  and  non-life  direct  insurance  and 
reinsurance  business  managed  by  such  head 
office,  agency or branch on the basis both of 
establishment  and  the  provision  of  services 
makes  it  possible 
to  identify  such 
assets, to verify that they are sufficient, to 
monitor  compliance 
measures 
prohibiting the free disposal of assets and to 
create,  in  the  event  of  special  compulsory 
winding  up,  a  separate  single  life  and/or 
non-life asset  fund  reserved  as  a matter  of 
priority for insurance creditors whose claims 
relate  to  the  direct  life  and/or  non-life 
as 
insurance  or  reinsurance  business, 
appropriate,  managed  by  the  head  office, 
agency or branch concerned; 

with 

any 

necessary  to  distinguish  Unchanged 

Whereas  it  is 
between cases  in which an undertaking  is in a 
situation  of  proven  or  probable  insolvency 
(special compulsory  winding up) and  those  in 
which  compulsory  winding  up  proceedings  are 
initiated  because  the  undertaking,  for  any 
other  reason,  is  no  longer  authorized  in 
accordance  with  the  First  Directives  (normal 
compulsory winding up);  whereas in the latter 
case,  by its very nature, the question of the 
distribution of assets does not arise and only 
rules on  jurisdiction or  the effects of such 
winding  up  on  insurance  contracts  are 
necessary; 

Whereas  it  is essential  that  the supervisory 
authorities  be  closely  associated  with  the 
implementation and supervision of the special 

compulsory  winding  up  procedure,  even where 
the  opening  of  the  procedure  and  the 
appointment of the liquidator fall within the 
jurisdicton of a court; 

Whereas special compulsory winding up must not 
have the effect of depriving  life or non-life 
policyholders  of  cover  immediately  and 
unilaterally;  whereas however it is necessary 
to  guarantee  that  winding  up  operations  are 
not unduly  prolonged  to  the detriment  of the 
general body of creditors;  whereas provision 
must  be  made  for  possible  transfers  of 
portfolios in this connection; whereas partial 
transfers  may  be  authorized  under  certain 
conditions; 

Whereas  the  value  of  indemnity  insurance 
claims  or  claims  resulting  fro<n reinsurance 
acceptances  may  not  be  known  either because 
the  loss  has  not  yet  been  determined  or 
because  losses  have  been  incurred  but  have 
not yet been reported; whereas to prevent such 
a  situation  from  impeding  the  progress  and 
completion of a special compulsory winding up 
within  a  reasonable  period,  the supervisory 
authorities  should  be  allowed  discretion  to 
authorize the lodging of a sum ,  set aside to 
satisfy  such  claims, 
with  a  trustee 
responsible  for  satisfying  the  said  claims, 
under  their  supervision  and  within  a 

- 4 -

prescribed period;  whereas the lodging with a 
trustee of reserves in respect of losses which  Unchanged 
have  been  incurred  but  have  not  yet  been 
reported  should  be possible  under  the normal 
compulsory winding up procedure also; 

Whereas claims,  other  than insurance,claims, 
arising  after  the  opening  of  the  winding  up 
represent  a  special  category  that  must  be 
satisfied prior to any distribution;  whereas, 
on social grounds,  claims in respect of wages 
and  salaries,  in  so  far  as  they  cannot  be 
satisifed  from  the  funds  resulting  from  the 
assets not entered in the register,  should be 
accorded  an  entitlement  to the separate funds 
that takes  precedence over  claims  in respect 
of portions of premiums: 
Whereas  the  agencies  and  branches  in  the 
Community  of  undertakings  whose  head offices 
are situated outside the Community are subject 
to the First Coordination Directives;  whereas 
their  overall  solvency  is  subject  to 
verification  only  in  certain  conditions  laid 
down  in  the  First  Coordination  Directives; 
whereas in these circumstances it is advisable 
the 
to 
cooperation 
supervisory 
when 
reorganization  measures  are  taken  before 
ordering  the  opening  of a  special compulsory 
winding up,  which takes effect throughout the 
Community;  whereas,  on  the other hand,  the 
normal compulsory  winding up of an  agency or 
branch in the Community of such an undertaking 
need not entail the normal compulsory winding 
up of the other Community agencies or branches 
of that undertaking; 

authorities 

intensify 

concerned 

between 

HAS ADOPTED THIS DIRECTIVE : 

- 5 -

TITLE I 

SEVERAL PFOVIS-tQK? 

Article t 

1.  This  Directive  shall  apply  to  insurance 
undertakings  which  come  within  the scope 
of the First Council Directive 73/239/EEC, 
hereinafter  referred  to  as  the  First 
Non-life  Coordination  Directive,  or  the 
First 
Directive  79/267/EEC, 
hereinafter referred  to as the First Life 
Coordination Directive. 

Council 

2.  Non-Life  business  (direct  insurance  or 
reinsurance)  means  transactions  included 
within  the  classes  listed  in Annex  A  to 
the First Non-Life Coordination Directive, 
and the corresponding reinsurance transac 
tions. 

Life  business  (direct  assurance  or 
reinsurance)  means  assurance transactions 
included within the classes listed  in the 
Annex  to  the  First  Life  Coordination 
Directive 
corresponding 
the 
reinsurance transactions. 

and 

Article 2 

1.  Every  undertaking  shall,  in each Member 
State  in which  it  has  its head office or 
an agency or branch, keep registers of the 
assets  representing,  in accordance  with 
national  rules,  the  technical  reserves 
corresponding  to  the  direct  insurance 
transactions  and  reinsurance  acceptances 
managed  by  such  head  office,  agency  or 
branch,  irrespective  of  the  country  in 
which  the  policyholder  is  normally 
resident or in which the risk is situated. 

2.  Where  an  undertaking  transacts  both 
non-life  business  (direct  insurance  or 
reinsurance)  and  life  business  (direct 
assurance or reinsurance),  it shall keep 
separate registers in respect of each type 
of business at the head office,  agency or 
branch at which both types of business are 
transacted. 

1. This  Directive  shall  apply  to 
insurance  undertakings  which  come 
within  the  scope  of  Directive 
73/239/EBC, hereinafter referred to 
as the First Non-Life Coordination 
Directive, as amended by the Second 
Council 
8 8 / 5 5 7 / ^^ 
hereinafter  referred  to  aq  thp 
Second  Nr.p-T.if*>  Directive  or 
Directive  79/267/EEC,  hereinafter 
referred  to  as  the  First  Life 
Coordination Directive. 

Dilutive 

2. unchanged 

Unchanged 

Unchanged 

Unchanged 

- 6 -

Unchanged 

The  total  value  of  the  assets  entered, 
valued  in accordance with national rules, 
shall  at  all  times  be  not  less  that  the 
value  of  the  technical  reserves. 
The 
latter  shall  be  calculated  without 
deduction  of  amounts  reinsured,  but  the 
assets  entered  shall  include  claims 
against  reinsurers where the Member State 
concerned  allows technical reserves to be 
covered by such claims. 

Where an asset entered  in the register  is  Unchanged 
subject  to  a  charge  in  favour  of  a 
creditor or another person,  so that part 
of the value of the asset is not available 
for  the  purpose  of  covering commitments, 
that  fact  shall  be  recorded  in  the 
register  and  the  amount  not  available 
shall not  be  included  in the  total value 
referred to in paragraph 3. 

Where an asset entered  in the register  is  Unchanged 
realized or where  it becomes subject to a 
charge as provided for in paragraph 4, the 
undertaking  shall,  where  necessary  in 
order  to  remain  in  compliance  with  the 
provisions of paragraph 3,  make good the 
resulting reduction of the total value of 
assets  entered  by  entering new  assets in 
the register. 

Article 3 

The registers shall be documents internal 
to the undertaking, subject to supervision 
by  the  supervisory  authorities  of  the 
Member States in which the undertaking has 
its head office or an agency or branch. 

Unchanged 

Unchanged 

Where  the  supervisory  authority restricts 
or  prohibits  the  free disposal  of assets 
pursuant to Articles 29,  22 or 27 of  the 
First  Non-Life  Coordination  Directive  or 
Articles 24,  26 or  31 of the First Life 
Coordination Directive,  this decision may 
be invoked  as against  third parties.  The 
authority  shall  at  the same  time require 
the  lodging  of  the  non-life  or  life 
register,  as  appropriate,  of  the  head 
office, agency or branch concerned. 

- 7 -

3.  Where?, pursuant  to the preceding paragraph 
a  register  is  lodged  with  the supervisory 
authority of the Member State in which the 
head office  is situated  or of  the Member 
State  responsible  for  verifying  overall 
solvency  within  the meaning of Article 26 
of  the  First  Non-Life  Coordination 
Directive or Article 30 of the First Life 
Coordination Directive, the registers kept 
in  the  Member  States  in  which  the 
undertaking  has  an  establishment  shall 
likewise  be  lodged  with  the  appropriate 
authorities of those States. 

During  such  time  as  the  register  is 
lodged, 
any  modification  shall  be 
conditional  on  the  consent  of  the 
supervisory  authorities  and  shall  be 
entered 
in  the  register  on  their 
responsibility. 

Where the prohibition on the free disposal 
of assets is lifted, the register shall be 
returned to the undertaking. 

Article * 

1.  Where  the  authorization  provided  for  in 
Articles  6(2)(a)  and  23  of  the  First 
Non-Life  Coordination  Directive  and  in 
Articles 6(2)(a) and 27 of the First Life 
Coordination  Directive  is  withdrawn  or 
where  the  conditions  for  withdrawal  of 
authorization are fulfilled, the insurance 
undertaking  shall  be  automatically  wound 
up.  Such compulsory winding up shall take 
one of the following two forms: 

Unchanged 

unchanged 

Unchanged 

(a) normal  compulsory  winding  up  as  long 
as  special  compulsory  winding  up  has 
not been ordered; 

(b) special compulsory  winding  up,  which 
shall  be  ordered  where  it  appears 
probable  that  the  assets  of  the 
undertaking  are  no  longer  sufficient 
to cover its existing liabilities,  or 
where the  undertaking  is  found  to be 
insolvent or to have ceased to pay its 
debts. 

Unchanged 

unchanged 

2.  Once authorization has been withdrawn, the 
undertaking  may  no  longer  be  wound  up 
voluntarily. 

Unchanged 

- 8 

Unchanged 

TITLE II 

NORMAL COMPULSORY WINDING UP 

Article 5 

Normal  compulsory  winding  up  shall  be 
carried  out  under  the supervision  of the 
supervisory  authority of the Member State 
in which  the head  office is situated,  in 
cooperation  with  the  supervisory  autho 
rities  of  the  other  Member  States 
concerned. 

Normal  compulsory  winding  up  shall  be 
carried  out  by  the  bodies  of  the 
undertaking. 
However,  where  the  said 
bodies  do  not  carry  out  the  winding  up 
satisfactorily,  or  where  there  is good 
reason to believe that they may not do so, 
the  supervisory  authority  of  the  Member 
State in which the head office is situated 
may,  on  its  own  initiative  or  at  the 
request of the supervisory authorities of 
the  countries  in  which  agencies  or 
branches are situated,  in accordance with 
the law of the Member State,  of the head 
office,  deprive the bodies of the under 
taking of their powers, wholly or in part, 
or  propose  such  deprival  to  the  court. 
The  said  supervisory  authority  shall  at 
the same time,  in accordance with the law 
of  the  Member  State, 
appoint  an 
administrator  or propose  such appointment 
to the court. 

on 

that 

authorities 

2.  Normal compulsory winding up shall 
be carried out by the bodies of the 
undertaking.  However.  where fiie 
supervisory authority Qf the Member 
State in which  thf? head  office is 
situated 
its  own 
finds. 
t hg 
yrlf.1ji.t1vp.  rvr  at  thft  raprerh  of 
supervisory 
the. 
of 
Mftifofir  States  In  which  agencies  or 
branches  are  situated, 
the 
s^  WYHre  a ra  TWh  ra.T*rying  m it 
the, winding  np  satisfactorily, or 
vhgre  thgra  is  gQQà  rCflSOD  tO 
teHgyft that thgy may Tint do so. it 
may, in accordance with the law of 
the  Member  State  of  the  head 
office, deprive  the bodies of the 
undertaking of their powers, wholly 
or  in  part,  or  propose  such 
deprival  to  the  court.  The  said 
supervisory authority sha.11 at the 
same  time, in accordance with the 
law of the Member State of the head 
office, appoint an administrator or 
propose  such, appointment  to  the 
Court. 

The  instrument  of  appointment  shall 
specify the powers of the administrator. 

of 

the 

withdrawal 

Publication 
of 
authorization and,  where appropriate,  of 
the  appointment  of  the  administrator, 
shall be  effected  by  the bodies  carrying 
out  normal  compulsory  winding  up  by 
placing  an  announcement  summarizing  the 
decision concerned  in the Official Journal 
of the European Communities. 

The administrator  shall submit a progress 
report  on the winding up to the authority 
that  appointed  him  at  least  every  six 
the  authority 
months  and 
considers it desirable.  The report shall 
be  communicated 
to  the  supervisory 
authority of the Member State in which the 
head office is situated. 

whenever 

Unchanged 

and, 

shall 

administrator, 

4.  Publication  of  the  withdrawal  of 
authorization 
where 
appropriate, of the appointment of 
the 
be 
effected by the bodies carrying out 
normal  compulsory  winding  up  by 
placing an announcement summarizing 
the  decision  concerned  in  the 
Official  Journal  of  the  European 
Communities  and  in  two rationally 
fl1 ^tr1 hitft1  newspapers  in  tbe. 
MPmhAr  states  in  which  there  are 
oredltorfi-

Unchanged 

Article  6 

- 9 -

1. The grounds shall >?e stated for any 
decision  tafren pursuant to Article, 
5f2^)  depriving  au  undertaking's 
bodies of their powers. 
ex 1. Unchanged 

3. ex 2. Unchanged 

4.  ex 3. Unchanged 

Article 7 

Unchanged 

Unchanged 

The Member States shall adopt the measures 
necessary  to  enable  the  undertaking  to 
appeal  to  the court  against  any decision 
taken  pursuant  to Article  5(2) depriving 
its  bodies  of  their  powers wholly  or in 
part  and appointing an administrator. 

The  lodging  of  an  appeal  by  the 
undertaking  shall  not  have  suspensory 
effect.  The court hearing the appeal may, 
however,  decide  otherwise  by  way,  of 
exception. 

Where  the  appeal  is  held  to  be  well 
founded, 
acts  carried  out  by  the 
administrator prior to that decision shall 
remain valid, unless the court hearing the 
appeal considers that they may be declared 
void without prejudicing the interests of 
third  parties  who  have  acted  in  good 
faith. 

Article 7 

Normal  compulsory  winding  up  shall  not 
entail  the  automatic  termination  of 
insurance  contracts,  but  shall  preclude 
their automatic renewal.  The policyholder 
may,  however, terminate the contract when 
the annual premium falls due,  subject to 
giving notice thereof. 

The  supervisory  authority  of  the  Member 
State in which the head office is situated 
shall  ensure  that 
the  winding  up 
procedure  is conducted  satisfactorily and 
shall,  in  particular,  exercise,  where 
necessary,  the  power  provided  for  in 
Article  5(2)  to  appoint  or  request  the 
appointment of an administrator. 

3. 

The  supervisory  authorities shall  ensure 
that the insurance undertaking: 

Unchanged 

a) seeks possible transfers of portfolios; 

b) exercises existing rights  to terminate 
contracts. 

The  supervisory  authorities may  impose a 
time  limit  by which  the bodies acting in 
the  winding  up  must  exploit  the  said 
possibilities. 

A.  The  Member  States  may  adopt  special 
measures  to  facilitate  winding  up  in 
respect of long-term contracts. 

Unchanged 

10 -

Article 8 

Article 6 

The normal compulsory winding up of 
an undertaking shall take effect In 
all  Member  States.  Tt  ghai i 
preclude  the  opening  of any  other 
winding-up procedure In respect of 
â&  agency  or  branch  of  the 
nnflflXtffifrlng  situated  In  another 
Member state. 

M e m b er  S t a t es  s h a ll  a d o pt  t he 
nfioefyjary  provisions  .to ensure  ttot 
tttf>  nrvrmal  n r m p il « n ry  wiTrtJTTg-np  is 
effective 1n the.tr territory-

2.  Unchanged 

Unchanged 

Article 9 

Th<>  normal  compulsory  winding  up  of an 
undertaking  shall  take  effect  in all the 
Momber  States. 

Where  one of  the  conditions  laid, down' in 
subparagraph  (b)  of  Article  4(1)  is 
satisfied  in  the  course  of  a  normal 
compulsory  winding  up  procedure,  the 
supervisory  authority  of the Member  State 
in which  the head  office  is situated  shall 
transform  or  shall  request  the courts of 
that  State  Jo  transform  the procedure  into 
a  special  compulsory  winding  up under the 
conditions  laid  down  in Title III. 

Article 9 

Subject  to Article  8 ( 2 ), the provisions of 
this  Title  shall  apply  pending  the final 
settlement  of  all  insurance  obligations, 
which  shall,  inter  alia, be procured  by : 

- the 

termination 

or 

surrender  of 

contracts, or their  natural  maturity; 

- satisfaction  of  incurred  and  reported 
claims ; 

- the  lodging  with  a  trustee  of  reserves 
in  respect  of  claims 
which  have  been 
incurred  but have not yet been  reported; 

- the transfer of the portfolio. 

Save  as  otherwise  provided  in  special 
provisions contained  in this Title, normal 
compulsory winding up shall be carried out 
in accordance  with  the  law of  the Member 
State  in  which  the  head  office  is 
situated. 

Unchanged 

- 11 -

TITLE HI 

SPECIAL COMPULSORY WINDING UP 

Article 10 

Opening of the special compulsory winding 
up of  an undertaking  whose head office is 
situated  within  the  Community  shall  be 
ordered 
either  by  the  supervisory 
authority of the Member State in which the 
head office is situated,  or by the courts 
of  that  State  after  consulting  the 
supervisory authority or at its request. 

A special compulsory winding up shall take 
effect in all Member States. 

Article 11 

1.  Where a special compulsory  winding  up is 
opened,  the authorities  competent  under 
the law of the Member State in which the 
head  office is situated  shall appoint one 
or more liquidators forthwith. 

2.  A special  compulsory  winding up shall be 
carried  out by the liquidators  under the 
supervision of the authorities referred to 
in paragraph  1,  in cooperation  with the 
supervisory  authorities  of  the  other 
Member States concerned. 

3.  The  liquidators  shall  report  to  the 
authorities referred to in paragraph  1 on 
the  position  at the time of opening the 
winding  up  and on  the progress  of the 
winding up at least  every six months and 
whenever  those  authorities  consider  it 
desirable.  The report shall be communi 
cated to the supervisory authority of the 
Member State  in which  the head  office is 
situated. 

TITLE III 

SPECIAL OQMFULSORY WXNDPr, TTP 

Article 10 

1. Unchanged 

in 

accordance 

2.  A  special  compulsory  winding up, 
with 

ordered 
paragraph 1 ,  shall 
take effect in all nember States. 
Tt  shall  preclude  the opening of 
any  nt:her wiring  up procedure in 
respect of an agency or branch of 
the uTYlertaftlng situated in another 
Member State. 

Member  S t a t es  s h a ll  adopt 
necessary  prmri.gi.oiLq  -co  ensure  -max 
the  «persial  rampnlsnry  wy 
is  e f f e c t i ve  in.  their  terri  tory, 

the 

A r t i c le  11 

1.  Unchanged. 

2.  Publication 

of 

of 

l&fi 

âDd 

nomination 

of  &3e 

decision 
ordering  special  oranpulsory xjirH-iTig 
up. 
of 
essential 
Hq^rf*-*™*» 
documents  r e l a t i ng  to  the  procedure 
shfl.11  he  effected  by  the  bodies 
carrying  o\»t  winding  *ip fry placing 
*H 
the 
said 
or 
documents  jji  the  Official 
rTonrml 
of_jft&  European  Communities  and in 
nationally  -  rt1frtr1ftitecL 
tKQ 
newspapers  in  the  Member  States  in 
which  there  are  creditors, 

aBPniir>nejneiit 
decision. 

summarizing 
nomination 

3. ex 2. Unchanged. 

4.  ex 3. Unchanged. 

12 -

Article 12 

One or  more assistant  liquidators  may  be 
appointed  in  each  Member  State  in which 
the undertaking has an establishment,  or, 
where  appropriate,  in  any  other  Member 
State. 

The  assistant 
liquidators  shall  be 
appointed  by  the  liquidator,  or  by  the 
authorities  referred  to  in Article  11(1) 
in accordance  with  the  law of the Member 
State  in  which  the  head  office  is 
situated. 

The  supervisory  authority  of  any  Member 
State  in  which  the  undertaking  has  an 
establishment may  propose the appointment 
of  an  assistant  liquidator  and  submit 
observations on his powers. 

The  assistant  liquidators  shall  be 
invested  with  specific  powers  and  shall 
act  on  behalf  of  the  liquidator  only  in 
respect of the Member State for which they 
have been appointed. 

Article 12 

Unchanged. 

Unchanged. 

Unchanged. 

Unchanged. 

Article 13 

Article 19 

In  the  case  of  a  special  compulsory 
winding  up,  the  liquidators  shall  not 
transfer  a  portfolio  to  one  or  more 
insurance  undertakings  without  the prior 
authorization of the supervisory authority 
of  the  Member  State  in  which  the  head 
office  is  situated  or  of  the  courts  of 
that 
the 
supervisory  authority  and  in  accordance 
with  the  conditions  laid down  in Article 
21  of  the  First  Non-Life  Coordination 
Directive, or Article 25 of the First Life 
Coordination Directive, as-^appropfTa14. 

consulting 

after 

State 

The  transfer  of  the  entire  portfolio 
relating  either to direct  life assurance 
and  life  reinsurance  business,  or  to 
direct  non-life  insurance  and  non-life 
reinsurance business,  shall be permitted 
even  where  the  other  portfolio  is  not 
transferred. 

and 

non-life 

The transfer of only part of the portfolio 
relating  to  life  assurance  and  life 
reinsurance  business  or  to  non-life 
insurance 
reinsurance 
business  may  be  permitted  on  condition 
that  such  transfer  does  not  impede  the 
satisfactory  conduct  of  the  winding  up 
procedure  or  prejudice  the  interests  of 
the  insurance  and  reinsurance  creditors 
referred to in Article 18(1) (b) (c),  and 
in  the  cases  provided  for  in  Article 
i  J' /1 \ 

1. In the case of a special ccrapulsory 
winding  up,  the  liquidators  shall 
not transfer a portfolio to one or 
more insurance undertakings without 
the  prior  authorization  of  the 
supervisory authority of the Member 
State in which, the head  office is 
situated  or  of  the courts of that 
State 
the 
supervisory 
and  in 
acoordanoe with the conditions laid 
down  in  Article  11  of  the  Second 
flPTr-Iilfff Directive,  or  Article  25 
of  the  First  Life  Coordination 
Directive, as appropriate. 

consulting 

authority 

after 

2. Unchanged. 

3. Unchanged. 

46 

A rt  H:  !.?.•  1 '.. 

13 

Special  compulsory  winding  up  shall 
automatically  terminate  existing  non-life 
insurance 
contracts  30  days  after 
publication of  the order  for such winding 
up,  where  such  contracts  have  not  been 
transferred during  that period. 

Article 14 

1. Unchanged. 

2. Unchanged. 

3. Unchanged. 

Unchanged. 

Unchanged. 

Unchanged. 

The liquidators,  may, with the consent of 
the  supervisory  authority  of  the  Member 
State  in which the head office is situated 
or  of  the  courts  of  that  State  after 
consulting  the  supervisory  authority, 
extend  the  period  provided  for  in 
paragraph  1  and  suspend  policyholders' 
genuine 
termination 
rights 
negotiations concerning the transfer of an 
entire portfolio are in progress. 

if 

of 

Member States  may  introduce  or  retain an 
official  system  for  transferring  the 
portfolio  of  an  undertaking  whose  head 
office  is situated  in their  territory or 
of an  agency or  branch  situated  therein, 
entailing automatic extension of the time 
limit provided  for in paragraph  1 and the 
suspension  of  policyholders*  rights  of 
termination. 

Article 15 

Special  compulsory  winding  up  shall 
entail  the  automatic  termination 
existing life assurance contracts. 

not 
of 

The  liquidators may,  with the permission 
of the supervisory authority of the Member 
State in which the head office is situated 
or  of  the  courts  of  that  State  after 
consulting  the  supervisory  authority, 
reduce  the  obligations  of  the  insurer 
arising  from  life  assurance  contracts, 
particularly  with  a  view  to  effecting  a 
transfer of portfolio. 

Failing  a  transfer  under  the  conditions 
laid down  in Article  13,  the liquidators 
may,  after obtaining permission under the 
conditions  laid  down  in  the  preceding 
paragraph,  terminate the contracts in the 
interests  of  he  general  body  of  life 
assurance creditors.  Such termination may 
be imposed by the supervisory authority of 
the Member State in which the head office 
is situated or by the courts of that State 
after 
supervisory 
authority. 

consulting 

the 

In such cases,  the amount of their claims! 
shall correspond to the total value of the; 
mathematical  reserves  and  other benefits 
attaching  to  their  contract,  without: 
deduction of administrative or termination; 

- 14 -

Article 16 

1 .  Contracts  by  virtue  of  which  the 
undertaking  being  wound  up  accepts 
reinsurance  risks  shall  not  be  renewed 
after  the opening of a special compulsory 
winding up has been ordered. 

Article 16. 

Unchanged. 

The  liquidators  shall  seek  appropriate 
reinsurance  cover  throughout  the  special 
compulsory winding up procedure. 

Special  compulsory  winding-up  shall  not 
preclude  the  offsetting  of  reinsurance 
claims and liabilities. 

Unchanged. 

Unchanged. 

Article 17 

Unchanged. 

Unchanged. 

Unchanged. 

Article 17 

1.  The composition  of  the assets  entered in 
accordance with Article 2 at the time when 
special compulsory winding up is opened in 
all  the  registers  kept  in  respect  of 
direct life assurance and life reinsurance 
business and  in all the registers kept in 
respect  of direct  non-life  insurance  and 
non-life  reinsurance  business  shall  not 
thereafter be changed. 

2.  No alteration other than the correction of 
purely  technical  errors shall  be made  in 
the registers. 

3.  Notwithstanding 

2, 

paragraph 

the 
liquidators shall  add to  the  said  assets 
the  yield  therefrom  and  the  value  of 
premiums received  in respect of the class 
of business  concerned up  to the time any 
transfer of  portfolio  is  effected  in the 
case  of  direct  life  assurance  and  life 
reinsurance  transactions  and  during  the 
period provided for in Article 1A or up to 
the  time  any  transfer  of  portfolio  is 
effected  in the  case  of  direct  non-life 
insurance and non-life reinsurance. 

- le -

Failing  transfer  of  the  portfolio,  the 
assets  entered  in all  the registers kept 
in respect  of non-life  and  life business 
shall  be  realized,  and  the  proceeds 
therefrom  shall  constitute  the  non-life 
and  life  asset  funds  which . shall',  be 
distributed  to  creditors  for  the  claims 
specified  in Article 18 in accordance with 
Article  19(1)  and  Article  19  (2) 
respectively. 

Where the proceeds of realizing the assets 
are less than the amount at which they are 
valued  in the registers,  the liquidators 
shall  justify  that  circumstance  to« the 
supervisory authority  of the Member State 
in which the head office is situated or to 
the  courts  of  that  State,  which  shall 
inform 
authority 
accordingly. 

supervisory 

the 

Unchanged. 

unchanged. 

Article 18 

Article 18 

The claims eligible to participate in the 
distribution of the asset funds defined in 
Article 17(4) shall be the following: 

unchanged. 

to 

claims 

referred 

(a)  Claims,  other than insurance claims, 
arising  after  the  opening  of  the 
special  compulsory  winding  up  and 
relating to the winding-up operations 
in  so  far  as  they  relate  to  costs 
actually  incurred for the benefit of 
the 
in 
subparagraphs  (b) or  (c) ;  where a 
strict allocation  is impossible,  an 
equitable  portion  thereof  shall  be 
payable. 
Where  redundancies  occur  after  such 
winding  up  is  opened,  such  claims 
shall not include that portion of any 
redundancy  payments due,  calculated 
by  reference  to  the  period  of 
employment prior to the opening. 
(b)  Indemnity  and  lump-sum  insurance 
claims,  and claims in respect of the 
repayment  of  unused  portions  of 
premiums  paid  arising  from  direct 
life assurance or  non-life insurance 
business managed  by the head office, 
or  an  agency  or  branch  situated 
within the Community. 

(c)  Claims  in  respect  of  reinsurance 
acceptances  arising  from  life  or 
non-life reinsurance business managed 
by the head  office,  or  an  agency or 
branch situated  within the Community 
insofar as they are not extinguished 
by  offsetting  pursuant  to  Article 
16(3). 

- 16 -

(d)  Claims  in  respect  of  wages  and 
salaries arising before or after the 
opening,  to the extent that,  in the 
latter case, they are not included in 
the  claims  referred  to subparagraph 
(a),  if  the  funds  resulting  from 
assets  not  entered  in  the  registers 
are insufficient to satisfy them. 

The  claims  referred  to  in  subparagraphs 
(a)  to  (d)  of  paragraph  1  shall  be 
satisfied  out  of  the  life  and  non-life 
asset  funds  according  to  the  class  of 
business to which they,  in fact,  relate 
or,  where strict allocation is impossible 
in proportion  to  the  size  of  the asset 
funds available for distribution. 

Article 19 

1.  The  non-life  asset  fund  constituted  in 
accordance  with  the conditions  laid  down 
in  Article  17(4)  shall  be  distributed 
among the creditors by the liquidators in 
satisfaction  of  claims  relating  to 
non-life business in the following order: 

(a)  claims  arising  after  the  opening  of 
the special compulsory winding up and 
referred  to in Article 18(1) (a) and 
(2) ; 

(b)  indemnity  insurance  claims in favour 
of  policyholders  and  entitled  third 
parties  or,  as  the  case  may  be, 
guarantee funds; 

(c)  claims  resulting  from  reinsurance 
acceptances,  subject  to  the  limits 
laid down in Article 18(1)(c); 

(d)  claims  in  respect  of  wages  and 
salaries, subject to the limits laid 
down in Article 18(1)(d); 

(e)  claims  in  respect  of 
portions of premiums paid. 

unused 

2.  The  life  asset  fund  constituted  in 
accordance  with  the  conditions  laid  down 
in Article  17(4) shall  be  distributed  by 
the  liquidators in satisfaction of claims 
relating to life business in the following 
order: 

(a)  claims  arising  after  the  opening  of 
the special compulsory winding up and 
referred  to  in Article  18(1)(a) and 
(2)  : 

unchanged. 

Article 19 

Unchanged. 

Unchanged. 

17 -

Unchanged. 

(b)  claims  in  respect  of  lump-sum 
surrender 
annuities, 
benefits, 
values,  mathematical  reserves  or 
other 
favour  of 
policyholders and beneficiaries; 

benefits 

in 

(c)  claims  resulting  from  reinsurance 
acceptances,  subject  to  the  limits 
laid down in Article 18(1)(c); 

(d) -claims  in  respect  of  wages  and 
salaries not included  in subparagraph 
(a) subject  to the  limits  laid down 
in Article 18(1)(d); 

(e)  claims  in respect of unused portions 

of premiums paid. 

from 

resulting 

Where  the  value  of  insurance  claims or 
claims 
reinsurance 
acceptances is not known,  or where losses 
have been  incurred  but  not yet reported, 
the  liquidators shall set aside a sum to 
satisfy such claims.  Where after payment 
of  the  other  claims  listed  in  Article 
18(1),  the value of such claims is still 
not known  or losses  have  still not been 
reported,  the  liquidators may,  with the 
consent  of  the  supervisory  authority  of 
the Member State  in which the head office 
is situated or of the courts of that State 
after 
supervisory 
authority,  lodge that  sum with a trustee 
appointed  for  the  purpose  who  shall  be 
responsible for satisfying the said claims 
under  the  supervision  of  the  said 
authorities, on condition that such claims 
are made within a period which they shall 
prescribe. 

consulting 

the 

4. 

The  creditors  referred  to  in  paragraphs 
(1)  and  (2)  may  participate  in  the 
distribution of the assets not entered  in 
the  registers  defined  in  Article  2  as 
unsecured  creditors  in  respect  of  any 
unsatisfied portion of their claim. 

Any residue of either  of the asset funds, 
and  any  amount  lodged  with  the  trustee 
pursuant  to paragraph  (3) and not claimed 
within  the  prescribed  period,  shall  be 
added  to  the  assets  not  entered  in the 
registers. 

Article 20 

This  Title  shall  apply  either  to  the 
satisfaction  of  claims  other  than  those 
referred to in Article  18(1),  nor to the 
realization and distribution of assets not 
entered  in  the  registers  referred  to  in 

Unchanged, 

Unchanged. 

Article  2p 

Unchanged. 

- 18 -

Save  as  otherwise  provided  in  special 
provisions contained  in this Title,  the 
special  compulsory 
up  of 
undertakings  to  which  this  Directive 
applies  shall  be  carried  out  in 
accordance with the provisions of- the law 
of  the  Member  State  in  which  the head 
office is situated. 

winding 

Unchanged, 

TITLE IV 

19 -

NON-COMMUNITY UNDERTAKINGS 

T H EE IV 

Article 21 

IQT-CTMMUNITY UNDERTAKINGS 

1.  Subject  to  the  provisions  that  follow, 
this Directive shall apply to agencies or 
branches established  in the' territory of 
a Member State of undertakings whose head 
office is situated outside the Community. 

2.  For  the  purpose  of  applying  the 
provisions of Title II of this Directive 
to  the  establishments  referred  to  in 
paragraph 1 "supervisory authority of the 
Member State  in which the head office  is 
situated"  means  the  authority ' that 
granted  the authorization referred  to in 
Article  23  of  the  First  Non-Life; 
Coordination  Directive and Article 27 ofj 
the  First  Life  Coordination  Directive, 
and  "Member  State  in  which  the  head 
office 
means  the 
corresponding Member State. 

is  situated" 

3.  The special  compulsory winding  up  of  an 
agency or branch of an undertaking whose 
head  office  is  situated  outside  the 
Community  shall  be  opened either  by the 
supervisory authority of the Member State 
which  withdrew  the  authorization  or  by 
the  courts  of  that  State  after  the 
supervisory  authority  has  given  its 
opinion  or  at  that  authority*s request. 
Where  Article  26  of  the  First  Non-Life 
Coordination  Directive  or Article  38 of 
the First Life Coordination Directive has 
been  applied  the  special  compulsory 
winding up shall be opened either by the 
supervisory authority of the Member State 
which  is responsible  for supervising the 
solvency margin or by the courts of that 
State after the supervisory authority has 
given its opinion or at  that authority's 
request. 

4.  For  the  purpose  of  applying  the 
provisions  of  Title  III,  "supervisory 
authority  of  the  Member  State  in which 
the  head  office  is  situated" means  the 
supervisory  authority referred  to  in the 
previous  paragraph  and  "Member  State  in 
which the head office  is situated" means 
the corresponding Member State. 

5.  Without prejudice to the second paragraph 
of  Article  27  of  the  First  Non-Life 
Coordination  Directive  and  the  second 
subparagraph  of  Article  31(2)  of  the 
First  Life  Coordination Directive,  the 

Article 31 

Unchanged. 

Unchanged. 

Unchanged. 

Unchanged. 

Unchanged. 

- 20 

supervisory  authority  of  a  Member  State 
in  whose  territory  a  non-Community 
undertaking has an agency or branch shall 
inform the supervisory authorities of the 
other  Member  States  in  whose  territory 
the  undertaking  has  an  establishment of 
the  reorganization  measures  it  proposes 
to take under Articles 20  and 27 of the 
First Non-Life Coordination Directive and 
Articles  24  and  31  of  the  First  Life 
Coordination  Directive  with  a  view  to 
cooperating  in  the  implementation  of 
those measures. 

It  shall  consult  the  same  authorities 
before withdrawing authorization. 

The  opening  of  compulsory winding  up or 
the  withdrawal  of  authorization  in 
respect  of  the  head  office  shall 
necessarily  entail  withdrawal  of  the 
authorization granted by Member States to 
the 
agencies  or  branches  of  the 
undertaking in question. 

7. 

Without  prejudice  to  the  application  of 
paragraph  6, 
the  normal  compulsory 
winding  up  of  an  agency  or  branch 
established  in the territory  of a Member 
State  shall  not  entail  the  normal 
compulsory  winding  up  of  agencies  and 
branches established  in the territory of 
the other Member States. 

unchanged. 

Unchanged. 

-  21 -

TITLE V 

TITLE V 

FINAL  PROVISIONS 

FINAL  PROVISIONS 

Article 22 

Article  22 

Member  States  shall bring  into force the 
measures necessary  to comply  with  this 
Directive not  later than  ... 
They shall  forthwith  inform  the  Commission 
thereof. 

Unchanged. 

The provisions adopted  pursuant  to 
the first paragraph  shall nraka^cx^cas^. 
reference to this Directive. 

Article 23 

Article  23 

This Directive  is addressed  to the Member 
States. 

Unchanged. 

Done at Brussels  # 

-i 

For the Council 

V. 

•"S*. 

ISSN 0254-1475 

COM (89) 394 final 

DOCUMENTS 

EN 

06  18 

Catalogue number : CB-CO-89-399-EN-C 

ISBN 92-77-52849-4 

Office for Official Publications of the European Communities 
L-2985 Luxembourg 

2é