PROPOSAL FOR A THIRD COUNCIL DIRECTIVE ON THE COORDINATION OF LAWS, REGULATIONS AND ADMINISTRATIVE PROVISIONS RELATING TO DIRECT LIFE ASSURANCE AND AMENDING DIRECTIVES 79/267/EEC AND 90/619/EEC
Date: 1991-03-22
Institutions: European Commission
Subjects: administrative procedure, approximation of laws, financial solvency, freedom to provide services, life assurance, right of establishment

COMMISSION OF THE EUROPEAN  COMMUNITIES 

C0M(91) 57 final - SYN 329 

Brussels,22 March 1991 

Proposal  for a 

THIRD COUNCIL  DIRECTIVE 

on the coordination of  laws, regulations and administrative 

provisions  relating to direct  life assurance  and  amending 

Directives 79/267/EEC and 90/619/EEC 

(presented by the Commission) 

-  2  -

EXPLANATORY  MEMORANDUM 

I • 

INTRODUCTION  - GENERAL  CONSIDERATIONS 

A) 

The  completion  of  the  Internal  market  in  insurance  is  one  of  the 

Commission's  priority  objectives  given  the  increasing  importance  of 

this  industry,  which,  especially  on  the  life  insurance  side,  is 

expanding  rapidly,  and  the  work  already  undertaken  in  other  fields 

with  a view  to creating  a single  financial  market. 

In  the  direct  non-life  insurance  sector,  the  Second  Directive, 

Directive  88/357/EEC,  has  already  made  a  significant  contribution 

towards  the  formation  of  the  internal  market.  That  Directive  lays 

down  rules  to  facilitate  freedom  to  provide  services  in  direct 

non-life  insurance  in  the  form  of  two  separate  sets  of  arrangements. 

The  first,  intended  for  large  risks  and  based  on  the  approach  -  as 

mapped  out  in  the  White  Paper  - of  home  country  control,  provides  for 

application  of  the  law of  the  country  of  establishment  of  the  insurer 

covering  the  risk.  The  second  set  of  arrangements  concerns  "mass 

risks"  and  is  based  on  application  of  the  supervisory  rules  of  the 

country  in which  the  risk  insured  is  located  (host  country  control). 

When  the  Second  Directive  was  adopted,  the  Commission  formally 

undertook  to present  at  the earliest  opportunity  proposals  which  would 

permit  the  application of  the  principle  of  home  country  control  to all 

direct  non-iife  insurance  business  and  its  subjection  to  a  single  set 

of  legal  arrangements.  A  proposal  for  a  Third  Non-Life  Insurance 

Directive  was  accordingly  approved  by  the  Commission  on  18 July  1990 
and  transmitted  to  the  Council.1 

-  3 -

As  regards  life  insurance,  the second  stage  has  just  been  reached  with 

the  adoption,  on  8 November 
last,  of  the  Second  Directive, 
Directive  90/619/EEC,1  which  governs  freedom  to  provide  services  in 

life  insurance,  likewise on  the basis of  two sets of  arrangements:  the 

first,  resting  on  the  principle  of  application  of  the  rules  of,  and 

supervision  by,  the  home  country,  being  concerned  with  insurance 

buyers who  take  the  initiative  in seeking  "services" cover-, the  second 

providing  for  application  of  the  rules  of,  and  supervision  by,  the 

country  in  which  the  service  is  provided  when  it  is  the  undertaking 

that  takes  the  initiative  in entering  into a contractual  relationship. 

For  the  achievement  of  this,  the  third  stage  in  life  insurance,  which 

will  result  in the  full  completion  of  the  internal  market,  the  general 

strategy  adopted  is,  as  in  non-life  insurance,  that  provided  for  in 

the White  Paper: 

(a) 

coordination  of  the  essential  rules  on  the  prudential  and 

financial  supervision  of  direct  life  insurance  business; 

(b) 

mutual  recognition,  on  the  basis  of  such  harmonization  at 

Community  level, of  the authorizations granted  to  insurance 

undertakings  and  of  the  prudential  supervision  systems  of 

the different  Member  States; 

(c) 

the  grant  of  a  single  authorization  valid  throughout  the 

Community  and  supervision  of  an  undertaking's  entire 

business  by  its home Member  State  (home country  control). 

This  strategy  has already  been used  to complete  the  internal  market  in 

other  areas  of  financial  services.  Such  is  the  case  with  UCITS 

(Directive  85/611/EEC,  OJ  No  L 375,  31.12.1985),  banking  (Second 

Directive 89/646/EEC,  OJ  No  L 

386,  30.12.1989)  and  investment 

services  (OJ  No  C 43,  22.2.1989),  where  considerations  of  the 

-  4 -

protection  of  the  savers,  investors  and  consumers  are  as  much  to  the 

fore  as  they  are  in  insurance.  It  is therefore  considered  Justified, 

while  not  denying  the  distinctness  of  insurance,  to  apply  to  all 

financial  institutions a regime based on  the same  principles. 

Once  this objective  has  been  attained,  the  free movement  of  insurance 

products  will  be  possible  within  the  Community  and  it  will  afford 

every  person  seeking  insurance  the  opportunity  of  turning  to  any 

Community  insurer  in order  to find  the cover  best  suited  to his needs, 

while  providing  him with  adequate  protection. 

The  introduction  of  this  regime  into  the  direct  life  insurance  sector 

involves  substantial  amendment  of  the  rules  currently  in  force  under 

the  First  and  Second  Directives.  Those  Directives  make  no  provision 

for  either  a  single  authorization  system  or  genuine  home  country 

control.  Nor  has  any  coordination  been  carried  out  yet  as  regards  the 

essential  harmonization  of  prudential  supervision  rules  concerning 

insurance  companies'  technical,  and  in  particular  mathematical, 

provisions  and  investments. 

The  present  proposal  for  a Third  Directive  addresses  these  issues  and 

amends  the  first  two  Directives  so  as  to  produce  a  cohesive  system 

applicable  to  all  life  insurance  business,  whether  transacted  under 

conditions  of  establishment  or  under  conditions  of  provision  of 

services. 

The  structure  of  this  proposal  for  a  Directive  is  the  same  as  that 

already  adopted  by  the  Second  Banking  Directive,  the  proposal  for  a 

Directive on  investment  services  and  the proposal  for  a Third  Non-Life 

Directive.  It consists, therefore, of  five  titles: 

-  5  -

TITLE  I: 

Definitions  and  scope 

(Art icles  1 and  2) 

TITLE  II: 

The  taking-up  of  the  business  of  life  insurance 

(Articles  3 - 7) 

TITLE  III: 

Harmonization  of  conditions governing  pursuit  of  business 

(Articles  8 -  27) 

TITLE  IV: 

Provisions  relating  to  freedom  of  establishment  and  freedom 

to provide  services 

(Articles  28 -  39) 

TITLE  V: 

Final  provisions 

(Articles  40 -  46) 

B) 

Harmonization  of  the  rules  concerning  the  technical  provisions  of 

undertakings  carrying  on  the  business of  direct  life  insurance 

The  introduction  of  a  system  of  a  single  authorization  and  home 

country  control  calls  for  harmonization  of  Member  States'  rules  on  the 

definition  and  calculation  of  technical  provisions  and  on  the  currency 

matching,  diversification,  spread  and  localization  of  the  assets 

representing  them. 

As  regards  the  definition  and  calculation  of  technical  provisions, 

this  proposal  for  a Directive  establishes  coordination on  the  basis of 

actuarial  principles  that  have  to  be  respected  by  every  insurance 

undertaking. 

-  6  -

As  regards  the  assets  representing  the  technical  provisions,  the 

proposal 

lays  down  coordinated 

rules  on  their 

admissibility, 

diversification  and  valuation  and  on  currency  matching  requirements. 

The  requirement  that  assets  be  located  in  the  Member  State  in  which 

business  is  carried  on  is  deleted  to  take  account  of  the  measures 

adopted  in  the  field  of  the  liberalization  of  capital  movements.  For 

the  same  reason,  any  requirement  that  a  minimum  proportion  of  assets 

be  invested  in specific  categories  can  no  longer  be  maintained. 

-  law applicable  to contracts  and  policy  conditions 

This  proposal  for  a  Directive  does  not  undertake  any  harmonization  of 

the  substantive  law  applicable  to  contracts  and  policy  conditions. 

The  work  on  non-life  insurance  carried  out  within  the  Council  in 

recent  years  has  shown  that  it  is  not  essential  to  achieve  such 

harmonization  at  this  stage.  The  system  proposed  in this  Directive  is 

based  on  the  rules  laid  down  in the  Second  Directive  on  choice  of  law 

applicable  to  insurance  contracts.  This  system  makes  it  possible  to 

ensure  satisfactorily  the  requisite  consumer  protection  because,  in 

principle,  the  Member  State  of  the  commitment  can,  if  it  so  wishes, 

apply  its  own  law  to  an  insurance  contract  covering  a  policy-holder 

resident  in  its  territory. 

At  the  same  time,  the  Commission  considers  that,  in  order  that  they 

might  find  the  cover  best  suited  to  their  specific  needs,  it  is of  the 

utmost  importance  that  persons  seeking  insurance  should  have  access  to 

every  insurance  product  lawfully marketed  in the Community  provided  it 

does  not  conflict  with  legal  provisions  protecting  the general  good  in 

force  in the Member  State  of  the  commitment. 

-  7  -

"Material  control" over  insurance  policies and  premium  rates 

As  part  of  this  drive  to  achieve  greater  freedom  of  movement  of  insurance 

products  in  the  Community  while  maintaining  an  adequate  level  of  consumer 

protection,  the  methods  of  vetting  contracts  and  premium  rates  should  be 

adapted  to  the  requirements  of  a genuine  single  market. 

As  indicated  above,  the  proposal  for  a  Directive  provides  for  coordination 

of  the  prudential  principles  applicable  to  technical  provisions  and 

investments.  As  far  as  policy  conditions  are  concerned,  in  the  absence  of 

harmonization  of  contract  law,  the  proposal  permits  Member  States  to 

request  the  application,  in the  vast  majority of  cases, of  their  own  law to 

commitments  concerning  their  residents,  in  so  far  as  such  application  is 

Justified  by  considerations  of  the  general  good,  and  subject  ultimately  to 

review  by  the Court  of  Justice. 

The  Commission  considers  that  it  has  thus  complied  with  the  Court's 

Judgments  of  4 December  1986. 

The Commission  proposes,  therefore,  henceforth  to extend  to all  commitments 

the  arrangements  for  vetting  contracts  and  premium  rates  already  accepted 

by  the  Member  States 

in  respect  of  contracts  concluded  on  the 

policy-holder's  initiative,  i.e.  the  abolition  of  all  systems  of  prior 

approval 

of  such  documents  and  their  replacement 

by  systems  of 

non-systematic,  subsequent  notification. 

That  is  not  to  say  that  Member  States  must  abolish  all  checks  on  life 

insurance  products  and  that  they  will  be  deprived  of  every  means  of 

monitoring  and  ensuring  observance  of  the  law.  However,  with  a  view  to 

protecting  policy-holders  in  the  single  market  it  is  necessary  to  adapt 

existing  methods  of  supervision,  which  were  designed  for  purely  national 

situations,  to  take  account  of  requirements  arising  from  the welding  of  the 

twelve  national  markets  into  a  large  economic  and  financial  area  without 

-  8  -

internal  frontiers.  From  this  standpoint  checks  should  be  organized  in 

such  a  way  that  the  needs  of  protection  are  reconciled  with  those  of 

competition  between  products, be  it on  premiums  or  on  the  product  itself. 

There  are  four  cornerstones  to  the  proposed  system  for  vetting  the  content 

of  contracts  and  policy  conditions,  a  system  geared  to  the  single  market 

with  its proper  functioning  in mind: 

(i) 

The  power  of  each  Member  State  to  require  observance  of  the  rules 

of  law applicable  in  its  territory.  The  supervisory  authorities  of 

the  State  in which  the  insurance  undertaking  conducts  business  will 

be  able,  in  collaboration  with  the  supervisory  authorities  of  the 

home  Member  State,  or  even  directly  in  urgent  cases,  to  impose 

penalties on  an offending  insurer,  the ultimate  penalty  being  a ban 

on  the  conclusion  of  any  new  life  insurance  contracts  in  its 

territory  (Article  3 5 ).  An  insurance  company  contemplating  doing 

business 

in  the  Member  State  concerned  will 

therefore  be 

well-advised  to observe  the  contract  law  in force  there. 

(ii) 

Secondly,  when  a  branch  is  being  set  up,  the  authorities  of  the 

Member  State  in which  the  branch  will  be  situated  may  spell  out  the 

legal  environment  in  which  it  will  be  called  upon  to  operate, 

indicating  the  conditions  under  which,  in  the  interest  of  the 

general  good,  its activities must  be  carried  on  (Article  28(4)). 

-  9  -

(ill) 

Thirdly,  the  present  proposal  provides  for  greater  transparency  of 

insurance  products,  stipulating  that  in  all  Member  States  a 

policy-holder  must  be  informed,  before  finalising  the  contract  or, 

if  necessary,  during  the  term  of  the  contract,  of  the  elements 

essential  to  a  proper  understanding  of  the  commitment  he  is 

entering  into  (Article 2 7 ). 

(iv) 

Lastly,  the  option  given  to  policy-holders  to  cancel  the  contract 

within  a  period  of  between  14  and  30  days  from  its  commencement. 

This  provision  has  already  been  incorporated  in  Community  law  by 

the  Second  Life  Directive  90/619/EEC. 

premium  rates 

Prior  vetting  of  premium  rates  is  likewise  incompatible  with  the  logic  of 

the single  market. 

Once  the  essential  elements  of  the  calculation  of  technical  provisions  and 

of  the  investment  rules  have  been  coordinated,  the  supervisory  authority  of 

the  home  Member  State  will  be  responsible  for  the  overall  solvency  of  the 

undertaking.  The  principal  task  of  the  home  Member  State  supervisory 

authority  is,  therefore,  to  make  sure  that  the  insurance  undertaking  has 

established  sufficient  technical  provisions  to  meet  all  its  liabilities, 

invested  the  assets  representing  those  provisions  in  accordance  with  the 

rules  in force, and  correctly  constituted  its solvency  margin. 

But  beyond  this  prudential  basis, which  ensures  the  safety  of  the  products 

on  offer,  it  is  in  the  consumer's  interest  that  he  should  be  able  to 

benefit  from  the  broadest  possible  premium  competition,  given  that  the 

Treaty's  general  competition  rules  apply,  of  course,  to  insurance  and 

ensure  that  such  competition  is fair. 

-  10 -

abolition  of  the  prohibition  of  the  simultaneous  pursuit  of  business 

by  way  of  right  of  establishment  and  by  way  of  freedom  to  provide 

services 

The  Second 

Directive 

authorized, 

in  the 

interests  of 

protecting 

policy-holders, Member  States  to prohibit  the  simultaneous  pursuit  in  their 

territory  of  insurance  business  by  way  of  establishment  and  by  way  of 

freedom  of  services  as  far  as  the  covering  of  commitments  entered  into  on 

the  insurer's  initiative  is  concerned.  This  option  was  Justified  by  the 

situation  which  prevailed,  when  the  Second  Directive  was  adopted,  with 

regard  to  the  harmonization  of  the  essential  rules  on  technical  provisions 

and  the  law governing  insurance  contracts  and  policy  conditions. 

This  proposal  for  a  Directive  brings  about  the  coordination  considered 

necessary  to  afford  policy-holders  the  requisite  degree  of  protection.  At 

the  same  time, and  as with  other  financial  services,  it  introduces  into  the 

insurance  sector  the  system  of  a  single  authorization  and  prudential 

supervision  of  all  business  by  the  home  Member  State.  The  option  is 

therefore  abolished  by  this  proposal  for  a  Directive. 

composite  undertakings 

In  1979  it  was  decided  that  the  principle  should  be  laid  down  of  the 

segregation  of  the  activities of  life and  non-life  insurance  by  prohibiting 

the  authorization  of  undertakings  carrying  on  both  types  of  activity 

simultaneously.  This  position  was  adopted  at  the  time  as  being  likely  to 

afford  lives  assured  the  best  possible  protection  against  sums  accumulated 

on  their  behalf  being  used  to cover  a deficit  on  the  non-life  side. 

-  11  -

This  principle  was  not,  however,  unqualified:  those  Member  States 

which  so  wished  could  permit  existing  composite  offices  to  continue 

operating  provided  they  adopted  separate  management  and  did  not  set  up 

any  life  insurance  branches;  the  situation  was,  moreover,  to  be 

reviewed  in  the  light  of  a  report,  to  be  drawn  up  by  the  Commission, 

taking  stock  of  ten  years'  experience  of  the  functioning  of 

composites. 

The  report  having  shown  that  policy-holders  are  no  less well  protected 

when  they  contract  with  a  composite  undertaking  than  when  they 

contract  with  a  specialized  one,  the  present  Directive,  while 

retaining  the  requirement  of  separate  management,  proposes  to  remove 

the  restrictions  on  composite  undertakings  and  affords  those  Member 

States which  so wish  the opportunity  of  authorizing  new  composites. 

-  exercise  of  implementing  powers 

This  proposal  for  a  Directive  is  silent  about  the  procedure  to  be 

followed  for  the exercise  of  the  implementing  powers  it confers  on  the 

Commission.  The  question  is  dealt  with  in  a  separate  proposal  for  a 

Directive,  which  will  apply  to  all  Directives  concerning  life  and 

non-life  insurance  providing  for  such  powers  (OJ  No C  230,  15.9.1990). 

C) 

Two  factors  help  explain  the  urgency  of  action  at  Community  level 

along  the  lines  of  that  proposed  in  this  proposal  for  a  Third 

Direct ive. 

-  12  -

The  first  is a major  political  factor,  the  Single  European  Act.  When 

this  was  signed,  Member  States  expressed  their  firm  political  will  to 

take,  before  1  January  1993,  the  decisions  needed  to  create  a  genuine 

internal  market. 

The  second  factor  concerns  the  development  of  financial  services  and 

their  increasing  importance.  Within  the  Community,  this  development 

has  already  led  to  adoption  of  the  provisions  needed  to  complete  the 

internal  market  in the  field  of  credit  institutions  and  UCITS. 

Such  financial  institutions  will  thus  be  able  to  propose  throughout 

the  Community  products  benefiting  from  a  "European  passport",  thereby 

creating  a  distortion  of  competition  to  the  detriment  of  those 

insurers,  and  in  particular  life  insurers,  with  whom,  in  the  case  of 

certain  products,  they  compete  directly. 

The  insurance  industry  is  currently  at  a  disadvantage  compared  with 

other  financial  services  when  it comes  to  facing  the  challenge  of  the 

single  market.  Insurance  undertakings  are  to  a  large  extent  still 

obliged  to  operate  In  twelve  isolated  markets  subject  to  different 

rules  and  procedures  as  regards  the  taking-up  and  pursuit  of  business, 

whether  it  be  by  way  of  establishment  or  by  way  of  freedom  of 

services.  This  involves  a variable  degree  of  intervention  in  relation 

to  insurance  products  and  the  freedom  of  insurers  and  those  seeking 

insurance  to  enter  into  insurance  contracts.  This  state  of  affairs 

can  no  longer  be  tolerated  if  the  Community's  commitments  as  regards 

attaining  the objectives  of  the  EEC Treaty  are  to be  met. 

II.  COMMENTARY  ON  THE  ARTICLES 

-  13  -

TITLE I 

Definitions  and  scope 

Article  1 -  Definitions 

This  Article  contains  definitions  of  certain  terms  used  in  the  proposal  for 

a  Directive,  the  aim  being  to clarify  their  meaning  and  hence  contribute  to 

a  better  understanding  of  the  Directive. 

Art icle  2 -  Scope 

This  Article  defines  the  scope  of  the  proposal  for  a  Directive.  The  scope 

coincides  with  that  of  the  First  Directive  79/267/EEC.  Article  1(2) of  the 

First  Directive  is  amended  so  as  to  permit  any  insurer  duly  authorized  by 

the  home  Member  State  to  pursue  activities  falling  within  the  scope  of  the 

Directives  anywhere  in  the  Community. 

The  operations  and  activities  referred  to  in  Article  2  of  the  First 

Directive  are  excluded  from  the  scope  of  the  proposal,  as  are  the 

organizations  and  mutual  associations  referred  to  in  Articles  3  and  4  of 

that  Directive. 

-  14  -

TITLE  il 

The  taking-up  of  the  business  of  life  insurance 

AUTHORIZATION  CONDITIONS 

Articles  3 and  4 - The  single  authorization 

These  Articles  introduce  the  fundamental  concept  of  the  single  insurance 

licence  by  amending  Articles 6  and  7  of  the  First  Life  Directive 

79/267/EEC.  Article  6  as  amended  now  states  that  the  authorization  to  take 

up  the  business  of  direct  life  insurance  is  to  be  granted  by  the  competent 

authorities  of  the  home  Member  State.  This  system  still  has  as  its 

premises  that  an  official  authorization  is  a  pre-condition  for  the 

taking-up  and  pursuit  of  direct  life  insurance  business.  Article  7  has 

been  amended  to  state  that  the  authorization  is  to  be  valid  throughout  the 

Community.  This 

extended 

territorial 

scope 

will 

apply 

both 

to 

establishment  and  to pursuit  of  the  activities  covered  by  this proposal  for 

a Directive  by way  of  provision  of  services  (paragraph  1 ).  The  role  of  the 

competent  authorities of  the  home Member  State  (defined  in Article  1 as  the 

Member  State  in which  the  head  office  of  the  insurance  undertaking  covering 

the  commitment  is  situated)  is  consistent  with  the  principle  of  home 

country  supervisory  control  of  the  financial  position  of  the  undertaking, 

including  its  insurance  activities undertaken  by  way  of  branches  or  by  free 

provision  of  services  (see  Article  8 ).  The  task  of  supervising  the 

undertaking's  entire  business  falls  to  the  insurer's  home  authorities, 

which  are  those  that  granted  the  authorization. 

The  authorization  will  continue  to  be  given  for  a  particular  class  of 

insurance  as  listed  in  the  Annex  to  the  First  Directive.  The  option  for 

Member  States  to  also  grant  authorization  for  a  group  of  classes  has  been 

maintained  in this  proposal  (paragraph 2 ). 

-  15  -

Any  undertaking  seeking  to  extend  its  business  to  other  classes  will  be 

required  to  request  a  new  authorization  in  accordance  with  the  procedure 

laid  down  in Article  6 of  the  First  Directive  (point b ). 

Article  5 - Conditions  for  receipt  of  authorization 

The  home  Member  State  must  require  any  insurance  undertaking  seeking 

authorization  to  fulfil  the  conditions  laid  down  in Article  8 of  the  First 

Directive.  That  is  to  say,  to  adopt  a  specific  legal  form,  to which  this 

proposal  adds  the  legal  form of  the European  Company,  to  limit  its  business 

activities  to  the  business  of  insurance,  submit  a  scheme  of  operations  and 

possess  a minimum  guarantee  fund. 

An  additional  mandatory  condition,  which  was  facultative  in  the  First 

Directive,  has.  been  added  to  the  requirements,  concerning  adequate 

technical  qualifications  and  soundness  of  the managers  and  directors  of  any 

undertaking  seeking  authorization. 

These  conditions  are  considered  necessary  to  safeguard  the  general  quality 

of  business  of  an  insurance  company,  as  well  as  the  day-to-day  management 

of  the company  (paragraph 1 ). 

An  important  step  forward  concerning  authorization  conditions  is  the 

proposal  to  abolish  the  possibility  for  Member  States  to  require  the  prior 

approval  or  systematic  notification  of  general  and  special  policy 

conditions,  scales  of  premiums, or  forms  and  other  printed  documents  which 

the  undertaking  uses  in  its  dealings  with  policy-holders  (paragraph 3 ). 

Member  States  may  require  only  non-systematic  notification  of  such 

information  in exercising  their  supervisory  tasks,  but  this may  not  amount 

to  a  prior  condition  for  an  undertaking  to  be  able  to  carry  on  its 

act ivitles. 

-  16 -

Article 6 - Adaptation of  the scheme of operations 

This  provision  replaces  Article 9 of  the  First  Directive  and  sets  out  the 

requirements  for  the scheme of  operations.  In accordance  with  the  amended 

Article  8  of  the  First  Directive,  insurance  undertakings  seeking 

authorization do not  have to state  in their  scheme of operations either  the 

premium  rates  or  the  contract  documents  which  they  propose  to  apply  for 

each category of business they engage  in. 

Article 7 - Supervision of shareholders of  insurance undertakings 

The  ownership  and  control  of  an  insurance  undertaking  by  non-insurance 

interests  is an  issue of  concern  for  the Community  supervisors, especially 

in  a  period  when  highly  complex  group  structures  are  a  widespread 

phenomenon.  Thus  the  risks  of  cross-financing  and  conflicts  of  interest 

are particularly evident  in an environment of  vast changes  in the structure 

of  financial  systems.  For  these  reasons  the  current  proposal  stipulates 

that  the competent  authorities, before granting an authorization, should be 

informed  of  the  identity  of  shareholders  and  members  holding  a  qualified 

participation  in  the  proposed  insurance  undertaking  as  well  as  of  the 

amount  of  such  participations.  This  applies  to  direct  or  indirect 

shareholders  or  members  and  irrespective  of  whether  they  are  physical  or 

legal  persons.  This  procedure  enables  the competent  authority  to  appraise 

the suitability  of  the shareholders and members  and  if necessary  to  reject 

any particular  group structures as  improper  at  the moment of  the setting-up 

of  the  institution.  Closely  linked  with  this  provision  is Article  14 of 

the present  proposal  which  provides  for  an  information procedure  regarding 

the prospective acquisition of  an  insurance undertaking which  is already  in 

operat ion. 

-  17 -

TITLE  III 

Harmonization of  conditions governing  pursuit  of  business 

Chapter 1 

Article  8 - Supervision  of  the business of  insurance 

The  introduction  of  a system  of  a single  official  authorization  granted  by 

the competent  authorities of  the home Member  State  and  valid  throughout  the 

Community  calls  for  devolution  of  the  power  of  supervision,  and  of  the 

means  to  that  end,  on  the  competent  authorities  which  granted  the 

authorization  so  as  to  guarantee  full  compliance  with  the  conditions 

governing  the pursuit  of  business  by  the  insurance  undertaking,  whether  it 

be by way of  establishment  or  by way of  freedom  of  services. 

Article  8  of  this  proposal  for  a  Directive  contains  a  new  provision  which 

replaces  Article  15  of  the  First  Directive  79/267/EEC.  It  specifies  that 

the  financial  supervision  of  an  insurance  undertaking,  including  that  of 

the  activities  it  carries  on  either  through  branches  or  by  way  of  freedom 

of  services,  is  to  be  the  responsibility  of  the  competent  authorities  of 

the  home  Member  State,  that  is  to  say,  the  authorities  which  granted  the 

authorization  to  the  undertaking.  In  addition,  this  provision  specifies 

what  the  financial  supervision  of  the undertaking  consists  of:  it  includes 

verification  of  (a)  the  undertaking's  solvency,  (b)  the  establishment  of 

sufficient  technical  provisions  for  the  undertaking's  entire  business  and 

(c)  the  matching  of  assets  in  accordance  with  the  provisions  existing  in 

that  respect  in  the  home  Member  State,  which  are  coordinated  in  this 

proposal  for  a Directive. 

Lastly,  the existence of  sound  administrative  and  accounting  procedures and 

adequate  internal  control  mechanisms  is  a  guarantee  of  an  orderly  and 

healthy  pursuit  of  insurance  business.  This  proposal  for  a  Directive 

therefore  requires  the  home  Member  State  to  ensure  that  this  need  is 

sat isf ied. 

-  18 -

Without  making  any  inroads  into  this  exclusive  competence,  the  Article  also 

provides  that  the  supervisory  authorities  of  the  Member  State  of  the 

commitment  may  inform  the  competent  authorities of  the  home  Member  State  if 

they  think,  for  whatever  reason,  that  the  activities  of  an  undertaking 

carrying  on  business  in  their  territory  might  affect  its  financial 

soundness.  Naturally,  in  such  circumstances,  the  home  Member  State 

authorities  have  sole  power  to  determine  the  state  of  the  undertaking's 

f inances. 

Article  9 - On-the-spot  monitoring  of  branches 

This  proposal  for  a  Directive  provides  for  the  possibility  for  the 

authorities  of  the  insurance  undertaking's  home  Member  State  to  carry  out, 

after  having  first  informed  the  authorities  of  the  Member  State  of  the 

branch,  on-the-spot  monitoring  of  the  branches  of  the  undertakings  they 

have  authorized,  with  a  view  to  obtaining  the  information  necessary  to 

ensure  the  financial  supervision  of  the  undertakings  whose  entire  business 

they  supervise. 

This  provision  also meets  a need  for  consistency  in the  approach  adopted  by 

the  Community  for  the  completion  of  the  internal  market  in  financial 

services.  The  Second  Banking  Directive  contains  a  similar  provision 

(Article  15).  The  same  applies  to  the  proposal  for  a  Directive  on 

investment  services  in the  securities  field  (Article 19). 

Article  10 -  Sanctions 

This  Article  introduces  into  the  First  Directive  a  new  Article  23a  which 

provides  that  Member  States  must  impose  suitable  penalties  on  insurance 

undertakings  or  those  who  effectively  control  the  business  of  insurance 

undertakings  found  to be  in breach  of  the  rules on  supervision. 

-  19  -

Article  11  - Transfers  of  portfolios 

The  Second  Directive  90/619/EEC  on  direct  life  insurance  contains  a  set  of 

complex  and  detailed  provisions  on  the  transfer  of  portfolios  tailored  to 

the  legal  regimes  introduced  in respect  of  the  taking-up  and  pursuit  of  the 

business  of  direct  life  insurance,  both  by  way  of  establishment  and  by  way 

of  freedom  of  services.  The  introduction  of  a new,  single  legal  regime  for 

all  direct  life  insurance  business,  irrespective  of  the  way  in which  it  is 

pursued,  means  that  the  provisions  on  portfolio  transfer  have  to  be 

adjusted. 

Articles  12  and  13  -  Withdrawal  of  authorization  and  financial  recovery 

measures 

Article  12  adapts  to  the  system  of  a  single  official  authorization  and 

supervision  of  all  insurance  business  by  the  authorities  of  the  insurer's 

home 

Member  State 

the 

provisions 

of 

Article  24 

of 

the 

First 

Directive  79/267/EEC  concerning  the  powers  of  the  competent  authorities  to 

adopt  measures  to ensure  the  solvency  of  an  insurance  undertaking. 

This  same  aim  of  adaptation  to  the  single  official  authorization  system  is 

pursued  by  Article  13,  which  amends  Article  26  of  the  First  Directive,  on 

the  conditions  under  which  the  authorization  granted  to  the  insurance 

undertaking  may  be  withdrawn. 

Article  14 -  Supervision  of  malor  shareholders  or  members 

This  Article  introduces  into  the  life  insurance  sector  specific  provisions 

the  purpose  of  which  is  to  ensure  that  the  prudent  and  sound  management  of 

an  insurance  undertaking  is  not  called  into  question  by  the  existence  of 

major  holdings. 

-  20 -

To  that  end,  Article  14  lays  down  an  obligation  to  furnish  information  in 

two  sets  of  circumstances.  First  of  all,  shareholders  or  members  who 

propose  to  acquire,  directly  or  indirectly,  a  qualifying  holding  in  an 

insurance  undertaking  must  first  inform  the  competent  authorities  of  the 

size  of  the  intended  holding.  The  same  applies  where  natural  or  legal 

persons  wish  to  increase  their  qualifying  holding  so  that  it  exceeds 

certain  thresholds  or  the  insurance  undertaking  becomes  their  subsidiary 

(Article  14(1)).  This  obligation  to  furnish  information  is  also  provided 

for  in  the  event  of  a  reduction  in  or  disposal  of  a  qualifying  holding 

causing  it to  fall  below  the  thresholds  laid down  (Article  14(2)). 

Moreover,  in  order  to  ensure  the  effectiveness  of  supervision,  insurance 

undertakings  must,  on  becoming  aware  of  them,  inform  the  competent 

authorities  of  any  acquisitions  or  disposals  of  holdings  in  their  capital 

that  cause  holdings  to exceed  or  fall  below  the  thresholds  laid  down.  They 

must  also  inform  the  competent  authorities  each  year  of  the  names  of 

shareholders  and  members  possessing  qualifying  holdings  and  the  sizes  of 

such  holdings  as  shown  by  the  information  received  at  annual  general 

meetings  or  as  a  result  of  compliance  with  the  specific  rules  to  which 

companies  listed on  stock  exchanges  are  subject  (Article  14(3)). 

If  the  competent  authorities  consider  that  the  influence  exercised  by 

shareholders  or  members  works  to  the  detriment  of  the  prudent  and  sound 

management  of  the  insurance  undertaking,  the  Member  States  may  take  a 

series  of  measures  to  put  an  end  to  that  state  of  affairs  (Article  14(4)). 

Those  measures  will  also  be  taken  where  the  obligation  to  furnish 

information  in  advance  is  not  complied  with  or  where  the  competent 

authorities  have  opposed  the  acquisition  of  the  shareholding. 

-  21 

Articles 14a  and  14b - Composites 

In accordance with  the findings of  the report  drawn up by  the Commission  on 

the  basis  of  Article  39(2) of  the  First  Directive,  these  Articles  provide 

for  the abolition of  restrictions on  the right of  composite  undertakings  to 

establish  branches  or  on  their  freedom  to provide  life  insurance  services. 

Article  14a  also  allows  those Member  States which  so wish  to  authorize  new 

composite  undertakings. 

At  all  events,  composite  undertakings, whether  existing  or  new, must  have 

separate  management,  the  results  of  their  life  and  non-life  activities 

being  shown  separately,  and  must  comply  with  the prudential  rules  relating 

to both  act ivit ies. 

Chapter  11 

Article  15 -  Home  country  control  of  technical  provisions  and  coordination 

of  the actuarial  principles  applied  when  calculating  technical  provisions 

Paragraph  1  of  this  Article  introduces  the  principle  of  home  country 

control  for  the definition  and  calculation of  technical  provisions. 

In  comparison  with  non-life  insurance,  Council  Directive 

on  the 

annual  accounts  and  consolidated  accounts  of  insurance  undertakings  lays 

down  few  rules  on  the  determination  of  technical  provisions  in  life 

insurance.  This  Article  therefore  harmonizes  national  laws  to  the  extent 

necessary  to  permit  mutual  recognition  and  home  country  control  in  this 

field. 

Many  different  actuarial  methods  and  bases  are  used  at  present  in  the 

Member  States  of  the  Community  to  calculate  technical  provisions  in  life 

insurance,  and  a  wide  variety  of  products  are  available.  However, 

-  22 -

comparative  studies,  in  particular  that  by  the  Consultative  Group  of 

Actuaries  of  Countries  of  the  European  Communities,  have  shown  that  the 

results  of  calculations  are  often  very  similar  where  similar  products  are 

concerned  and  that  the  methods  are  all  based  on  the  same  actuarial 

principles,  including  that  of  prudence  in  the  face  of  uncertainty.  The 

conclusion  reached  by  the Consultative  Group's  study  is that  harmonization 

on  the  basis  of  these  actuarial  principles  would  be  sufficient  to  ensure 

the  effective  protection  of  lives  assured  in  the  context  of  a  single 

licence  system.  The  Consultative  Group  considers,  moreover,  that  any 

attempt  to standardize  throughout  the  Community  the methods  and  bases  used 

for  calculating  technical  provisions  would  be  inappropriate,  unnecessary 

and  counterproductive. 

Apart  from  these  considerations  of  prudence  and  the  protection  of  lives 

assured,  the  Consultative  Group  also  concluded  that  there  is  no  risk  of 

competition  being  distorted  significantly  by  the  use  in  the  Member  States 

of  different  methods  and  bases  for  calculating  technical  provisions, 

provided  that  sound  actuarial  principles  continue  to  be  applied.  This 

Article  therefore  lays down  these sound  and  prudent  principles on  the basis 

of  suggestions made  by  the Consultative Group. 

Even  after  this  harmonization  has  been  carried  out,  there  will  remain  a 

large  number  of  actuarial  methods  and  bases  capable  of  satisfying  these 

principles.  Paragraph  2  of  this  Article  therefore  provides  that  the 

methods  and bases used  by each  undertaking  must  be published.  Even  if this 

information 

is  too  technical 

to  be  readily  understood  by  most 

policy-holders,  the  mere  fact  that  it  is  freely  available  is  an  added 

inducement  to the undertaking  to exercise  prudence.  It might,  for  example, 

be analysed  and  compared  by  trade associations, consumer  protection  bodies, 

the press or  insurance  intermediaries. 

Paragraph  3  introduces  the  principle  of  home  country  control  for  the 

investment  of  the  assets  representing  the  technical  provisions.  These 

assets  are  required  to  be  invested  in accordance  with  the  rules  laid  down 

in Articles  17 - 21 of  this proposal  for  a Directive. 

-  23  -

Those  rules  cover: 

(i)  a general  principle  for  the  investment  of  the  assets  representing  the 

technical  provisions, 

(ii) the  admissibility  of  investments, 

(iii)the diversification of  investments, 

(iv) currency  matching  requirements. 

Furthermore,  paragraph  3  of  this  Article  extends  the  requirement  of 

localization of  assets  in the country  where  the business  is carried  on  to a 

localization  within  the  European  Community.  This  extension  is  to  be  seen 

both  in  the  context  of  freedom  of  capital  movements  within  the  European 

Community,  which  is fully  applicable  to  institutional  investors, and  in the 

context  of  the negative  effects of  national  localization  on  the  performance 

and  regional  spread  of  insurance  companies'  investments. 

Article  16 - Premiums  for  new  business 

The  establishment  and  the  supervision  of  technical  provisions  are  the  best 

guarantee  of  the  strength  of  insurance  undertakings  and  of  the  security  of 

policy-holders.  It  is  therefore  important  that  the  supervisory  authority 

should  be  able  to  ascertain  that  the  undertaking  has  sufficient  resources 

to  finance  these  provisions,  notably  for  new  business,  and  to meet  all  its 

liabilities,  including  the solvency  margin. 

In  this  context,  premiums  receivable  for  new  business  are  obviously  of 

considerable  importance.  In  assessing  an  undertaking's  capacity  to  meet 

its  liabilities,  it  is nevertheless  important  to consider  the  undertaking's 

overall  financial  position. 

-  24  -

This  Article  therefore  stresses  the  importance  of  the  adequacy  of  premium 

rates  for  new  business,  taking  account  of  every  aspect  of  the  undertaking's 

financial  situation. 

Article  17 -  Investment  of  technical  provisions 

This  Article  establishes  a  general  principle  for  the  investment  of 

technical  provisions,  which  is  to  be  found  in  the  current  legislation  of 

most  Member  States. 

Articles  18(2)  and  19(3) of  this  proposal  for  a  Directive  provide  that,  in 

particular  circumstances  and  at  the  insurance  undertaking's  request,  the 

home  Member  State  may  allow  exceptions  to  the  rules  on  the  admissibility 

and  spread  of  investments.  These  exceptions  may,  however,  only  be  allowed 

when  the  home  Member  State  is  satisfied  that  the  general  requirement  of 

Article  17  is fulfiI led. 

Article  18 - Admissible  investments 

This  Article  contains  a  list  of  assets  in which  the  home  Member  State  may 

allow  insurance  undertakings  to  invest  their  technical  provisions.  With  a 

view  to  retaining  the  parallelism  between  the  arrangements  for  supervising 

life  and  non-life  activities,  the  list  is  similar  to  that  in  the  proposal 

for  a  third  non-life  insurance  coordination  Directive. 

The  list  of  admissible  assets  is  to  be  regarded  as  a  maximum  list.  This 

means  that  the  home  Member  State  is  free  to  prohibit  certain  categories  of 

investments  included  on  the  list,  but  only  for  insurance  undertakings 

having  their  head  office  in  its  territory.  In  order  to  provide  the  list 

with  a sufficient  degree  of  flexibility,  paragraph  2 of  this Article  allows 

Member  States  to  permit  other  categories  of  investments  on  a  case-by-case 

basis  and  subject  to Article  17 of  this  proposal  for  a  Directive. 

-  25  -

Article  19 -  Diversification of  investments 

This  Article  lays  down  a  set  of  rules  on  the  diversification  of 

investments.  Again,  the  diversification  rules  laid  down  in paragraph  1 are 

to  be  regarded  as  a  prudential  minimum.  Home  Member  States  are  thus  free 

to  impose  lower  maximum  percentages  for  certain  or  all  categories  of 

investments,  but  only  for  insurance  undertakings  whose  head  office  is  in 

their  territory.  The  diversification  criteria  are  likewise  similar  to 

those  of  the  proposal  for  a  third  non-life  insurance  coordination 

Direct ive. 

For  some  categories  of  investments,  especially  government  bonds,  there  are 

no  maximum  percentages.  For  other  categories,  however,  especially  debt 

securities  and  other  bonds  issued  by  undertakings,  secured  loans  to  natural 

persons,  transferable  shares  and  other  transferable  variable  yield 

participations,  units  in  UCITs,  etc.,  paragraph  1  establishes  a  set  of 

maximum  percentages  both  for  the  category  of  investments  and  for  units  of 

any one  undertaking,  any one  piece  of  real  property„  etc. 

Paragraph 

2  provides  that  no  Member  State  may 

require 

insurance 

undertakings  to  invest  in  particular  categories  of  investments,  which  is 

still  common  supervisory  practice  in  some  Member  States,  especially  as 

regards  government  or  local  authority  bonds. 

The  purpose  of  the  final  paragraph  is  to  make  the  diversification  rules 

sufficiently  flexible  by  allowing  the  home  Member  State  to  permit  higher 

percentages 

on 

a  case-by-case 

basis  and 

subject 

to  Article  17. 

-  26  -

Article  20 - Valuation  of  investments 

This  Article  states  that,  under  certain  conditions, Member  States  may  allow 

hidden  reserves  resulting  from  the  undervaluation  of  assets  as  cover  for 

technical 

provisions.  The 

purpose 

of 

this  Article 

is  to 

allow 

Member  States  which  currently  require  purchase  price  valuation  of  assets  to 

put  their  undertakings  on  an  equal  competitive  footing  with  undertakings  of 

those  Member  States  which  allow  or  require  the  valuation  of  investments  on 

the  basis  of  current  values. 

Article  21  - Currency  matching 

In  contrast  to  the  position  in  direct  non-life  insurance,  the  Second 
Directive  90/619/EEC1  on  direct  life  insurance  did  not  carry  out  any 

coordination  of  national  currency  matching  rules. 

This  Article  is  intended  to  introduce  such  rules,  with  appropriate 

relaxations,  into  life  insurance.  The  rules  are  similar  to  those  which 

will  apply  in  the  non-life  insurance  sector,  allowing  for  the  peculiarities 

of  life  insurance,  for  example  the  existence  of  contracts  linked  to  a 

particular  unit  of  account. 

Article  22 -  Subordinated  loan  capital 

This  Article  updates  the  list  of  assets  recognized  for  the  purpose  of 

covering  the  solvency  margin  by  including  subordinated  loan  capital.  The 

conditions  under  which  subordinated  loan  capital  may  be  recognized  as 

own  funds  are  identical  to  those  laid  down  in  Council  Directive  89/299/EEC 

(OJ  No  L  124, 5.5.1989,  p.  16) on  the own  funds  of  credit  institutions. 

OJ  No  L  330, 29.11.1990,  p. 50, 

-  27  -

Article  23 

This  Article  amends  Article  21  of  the  First  Directive  in order  to  bring  it 

into  line with  the  principle  of  home  country  control. 

Chapter  3 

Article  24 -  Legal  provisions  protecting  the general  good 

The  aim  of  this Article  is to specify  that  any  person  seeking  insurance  can 

conclude  any  contract  allowed  by  the  law  of  a  Member  State,  provided  that 

the contract  does  not  conflict  with  legal  provisions  protecting  the  general 

good  in  the  Member  State  of  the  commitment.  In  accordance  with  the 

established  case  law  of  the  Court  of  Justice,  such  provisions  concerning 

the  general  good  can  only  be  enforced,  in  the  absence  of  more  detailed 

harmonisation  of  the  provisions  of  Member  States,,  if  they  satisfy  the 

following  conditions:  the  provisions  for  the  general  good  must  be  applied 

in  a  non-discriminatory  manner  to  all  undertakings  operating  on  the 

territory  of  the  Member  State,  they  must  be  objectively  necessary  for  the 

protection  of  that  general  good,  they  must  also  be  proportionate  in 

relation  to  the  desired  objective  and  the existing  provisions  in the  Member 

State of  origin  of  the  product  must  be  insufficient  to protect  that  general 

good.  The  public  authorities  must  also  interpret  this  concept  of  general 

good  in  the  light  of  these  criteria.  It  is  clearly  for  the  Court  to 

determine  in  the  last  resort  whether  the  authorities'  interpretation  is  in 

keeping  with  Community  law. 

Article  25 - Abolition  of  the prior  approval  of  premium  scales  and  policies 

Consumer  protection  also  includes  the  right  to  the  widest  possible  choice 

of  innovative  insurance  products  at  the most  reasonable  prices.  This  right 

-  28  -

is given  practical  effect  in  regard  to supervision  by  the  abolition  of  any 

prior  approval  of  premium  scales  and  policies  and  by  the  replacement  of 

such  approval  by  a  system  better  suited  to  the  requirements  of  mutual 

recognition  to  the  needs of  the  internal  market. 

The  prior  authorization  system  is tantamount  to  issuing  a  "quality  label", 

and  it  is  inconsistent  with  the  logic of  the single market  to confer  on  the 

supervisory  authority  of  a  Member  State  the  right  to  give  its  endorsement 

to,  or  withhold  its  endorsement  from,  products  developed  and  already 

distributed  in other  Member  States. 

This  holds  true all  the more  in relation  to the  approval  of  premium  scales: 

with  the  principle  of  the  single  licence,  the  supervisory  authority  of  the 

home  Member  State  vouches  for  the  overall  solvency  of  the  undertaking  and 

it  is for  that  authority  to ensure  that  the undertaking's  financial  policy 

does  not  jeopardize  that  solvency.  This  approach  does  not  deny  the 

supervisory  authority  of  the  State  of  the  commitment  the  right  to  protect 

its  consumers:  that  authority  can  still  prove  ex  post  facto  and 

non-systematically  that  such  and  such  a clause of  a contract  freely  entered 

into  is not  in keeping  with  a  legal  provision  protecting  the  general  good. 

This  "shifting  of  the  burden  of  p r o of  will  have  the  effect  of  making 

insured  persons more  aware of  their  responsibilities vis-à-vis  the  products 

offered  to  them,  and  hence  of  increasing  the  real  level  of  their 

protection. 

Article  26 - Cooling-off  period 

The Second  Life  Insurance  Directive  90/619/EEC  afforded  a policy-holder  who 

entered  into  a  commitment  under  the  services  arrangements  the  possibility 

of  cancelling  the  contract  within  a  period  of  between  14  and  30  days  from 

the  time when  he was  informed  that  the contract  had  been  concluded. 

-  29  -

As  part  of  the  process  of  completing  the  internal  market,  this  option  must 

be  extended  to  every  policy-holder  regardless  of  the  way  in  which  the 

contract  is  concluded,  i.e.  whether  on  an  establishment  or  on  a  services 

basis,  in order  to afford  policy-holders  adequate  protection. 

Article  27 -  Transparency 

Life  insurance  differs  from  non-life  insurance  in  the  length  of  the 

commitments  entered  into,  extending  as  they  do  in many  cases  over  several 

decades.  In addition,  some  products  resemble  rival  financial  products  sold 

by economic  operators  other  than  insurance  undertakings. 

The  upshot  of  this  is  that,  if  he  is  to  profit  fully  from  increased 

competition  between  a  growing  number  of  contracts,  the  consumer  must  be 

provided  with  clear  and  accurate 

information  about  the  essential 

characteristics of  products offered  to him,  both  during  the  pre-contractual 

phase  in  order  to  guide  him  in  his  choice,  and  during  the  term  of  the 

contract  in the event  of  any  change or  amendment. 

The  list  set  out  in Annex  2  is a minimum  list  which  Member  States  may  add 

to  in  respect  of  commitments  concerning  their  residents,  although  it  must 

be  understood  that  the  aim  of  the  obligation  to  provide  information  is  to 

protect  the  consumer  through  a better  understanding  by  the policy-holder  of 

the  essential  elements  of  his  particular  contract,  and  not  to  limit  the 

choice of  products  available. 

TITLE  IV 

Provisions  relating  to  freedom  of  establishment  and 

freedom  to provide  services 

Articles  28 and  29 -  Freedom  of  establishment 

Article  28  contains  a  set  of  detailed  provisions  amending  Article  10  of 

the  First  Directive  and  organizing  cooperation  between  the  competent 

-  30  -

authorities  of  the  Member  States,  based  on  home  country  control,  in  the 

context  of  freedom  of  establishment. 

In  this  context  it  is  stipulated  that  an  insurance  undertaking  wishing  to 

establish  a  branch  in  another  Member  State  must  notify  the  authorities  of 

its home  country,  providing  at  the same  time  the  required  information  (e.g. 

scheme  of  operations,  amount  of  the  guarantee  fund,  state  of  the  solvency 

margin, names  and  addresses of  managers)  (Article  10(1) - (3)). 

After  examining  the  notification,  the  competent  authority  may,  if  it  has 

reason  to  doubt  the  viability  of  the  project  or  the  adequacy  of  the 

structures  of  the  insurance  undertaking,  refuse  to  send  the  information  to 

the  prospective  host  authorities.  In any  such  case  it  should  give  reasons 

for  its  refusal  to  the  institution  within  three  months  of  receipt  of  the 

notification  (Article  10(3)). 

Article  29  repeals  Article  11  of  the  First  Directive,  thereby  abolishing 

the  detailed  requirements  the  scheme  of  operations  should  fulfil  for 

setting  up  a  branch  in  another  Member  State.  These  requirements  are  now 

limited  to,  notably,  the  types  of  business  the  branch  intends  to  carry  on 

and  information on  the  structural  organization  of  the  branch. 

Articles  30 -  32 -  Freedom  to provide  services 

These Articles  set  out  the  procedure  to be  followed  and  cooperation  between 

the  home  and  host  country  authorities  with  regard  to  freedom  to  provide 

services.  The  relevant  provisions  of  the  Second  Directive  are  amended  and 

extended  to  cover  not  only  activities  carried  on  by  way  of  freedom  to 

-  31  -

provide  services  on  the  initiative  of  the  policy-holder,  but  all  types  of 

commitment  falling  within  the  scope  of  this  proposal  for  a  Directive,  and 

thus  to  set  up  a  single  regime  for  the  whole  business  of  life  insurance; 

those Articles of  the Second  Directive which  have  become  superfluous  are  to 

be deleted  (Article 3 3 ). 

Thus  any  insurer  wishing  to  pursue  life  business  by  way  of  cross-border 

services must  indicate  to the home  authorities  the Member  State  in which  it 

is  intended  to provide  services and  the business  that  will  be  pursued  there 

(Article  11  of  the  Second  Directive,  as  amended).  The  host  country 

authorities  will  be  provided  with  information  regarding  the  undertaking's 

solvency  margin,  the  classes  of  business  the  undertaking  is  allowed  to 

transact  and  the nature of  the commitments  it proposes  to cover  (Article  14 

of  the Second  Directive  as  amended). 

Article  33  -  Technical  adjustments,  abolition  of  the  prohibition  of  the 

simultaneous  pursuit  of  business  by  way  of  establishment  and  by  way  of 

freedom  of  services 

This  Article  deletes  those  provisions  of  the  Second  Directive  90/619/EEC 

which  have  been  nullified  by  the  introduction  of  a  uniform  system  of 

supervision  applicable  to  all  direct  life  insurance  business  and  by  the 

extension  of  the  scope  to  include  all  the  activities  referred  to  in  the 

First  Directive  79/267/EEC. 

Article  10  of  the  Second  Directive,  which  concerns  the  scope  of  the 

provisions on  freedom  to provide  services,  is thus  deleted. 

The  same  goes  for  Article  16  of  the  Second  Directive,  which  entitles 

Member  States  to prohibit  the simultaneous  pursuit  of  insurance  business by 

way  of  establishment  and  by  way  of  services,  and  for  Article  22,  which 

-  32 -

concerns  the  information  to  be  supplied  to  policy-holders,  inasmuch  as 

Article  27  of  this  proposal  for  a  Directive  lays  down  more  detailed  rules 

on  the  subject. 

Article  24 of  the  Second  Directive, which  provides  for  home  country  control 

of  the  technical  provisions  in  the  case  of  commitments  entered  into  on  a 

services  basis  on  the  initiative  of  the  policy-holder  and  for  host  country 

control  in all  other  cases,  is  likewise  deleted. 

Lastly,  Article  14  of  the  Second  Directive,  which  lays  down  the  prior 

authorization  arrangements  governing  the  pursuit  of  business  on  an  active 

provision  of  services  basis,  must  also  be  repealed  on  identical  grounds. 

Henceforth  the  only  legal  regime  applicable  to  the  taking-up  of  business 

under  conditions  of  freedom  to  provide  services  is  that  provided  for  in 

Articles  30 -  32 of  this  proposal. 

Article  34 - Approval  of  contract  documents  used  by  the  insurer 

This Article  contains  provisions  concerning  the means Member  States may  use 

to  verify  whether  the  policies  and  contract  documents  an  insurer  proposes 

to  use  in  the  course  of  his  business  comply  with  their  legal  provisions 

protecting  the  general  good.  The  Article  takes  up  the  principle  laid  down 

in Articles  5 and  25 of  this proposal  for  a Directive.  The Member  State of 

the  commitment  cannot,  therefore,  require  prior  approval  of  such  documents 

as  that  would  hinder  considerably  the  free  movement  of  products  and  the 

development  of  innovative  products.  Moreover,  the  provisions  on  the 

compulsory  provision  of  information  by  insurers  laid  down  in  Article 27, 

and  the  option  of  cancelling  the  contract,  afford  policy-holders  adequate 

protection.  For 

the  purpose  of  monitoring 

compliance 

with 

those 

provisions,  the Member  States may  require  only  non-systematic  communication 

-  33  -

of  policies  and  contract  documents.  These  arrangements  are  better  suited 

to  the  requirements  of  a  single  market  and  ensure  an  effective  level  of 

protection  of  policy-holders. 

Article  35 -  Sanctions 

Article  20  of  the  Second  Directive  90/619/EEC  introduced  rules  on  the 

adoption  of  measures  and  sanctions  against  insurance  undertakings  which 

infringe  the  provisions  applicable  to  them  when  carrying  on  business  by  way 

of  freedom  to provide  services. 

The  rules  are  based  on  the  principles  of  devolution  of  the general  power  to 

adopt  measures  and  sanctions  to  the  home  Member  State  and  on  collaboration 

between  the  different  Member  States  concerned.  The  host  Member  State 

retains,  however,  the  possibility  of  taking  measures  directly  against  an 

undertaking  operating  in  its  territory  in  order  to  prevent  or  correct 

irregularities  committed  by  that  undertaking  in  its  territory.  The  same 

applies  where  the  measures  taken  by  the  home  Member  State  are  insufficient 

or  non-existent. 

Within  the  framework  of  a  single  authorization  system  steps  must  also  be 

taken  to ensure  compliance  with  the  rules  applicable  to  insurance  business, 

whether  it  be  carried  on  by  way  of  establishment  or  by  way  of  freedom  of 

services.  It  is  therefore  necessary  to  extend  the  arrangements  provided 

for  in Article  20 of  the  Second  Directive  90/619/EEC  to cover  all  business. 

These  arrangements  are  the  same  as  those  applicable  to  other  financial 

services  (Article  21, Second  Banking  Directive  89/646/EEC). 

Article  36 -  Advertising 

Publicity  for  insurance  products  is  an  essential  means  of  enabling 

insurance  activities  to  be  carried  on  effectively  within  the  Community. 

-  34  -

This  Article  allows  any  duly  authorised  insurance  undertaking  full  access 

to  all  the  normal  means  of  mass-advertising  of  its  services  and  products 

within  the  Community.  The  Article  recalls  the  position  that  Member  States 

may  require  that  their  national  rules  on  the  form  and  content  of 

advertising  be  respected.  These  may  be  requirements  resulting  from 

Community  legislation on  advertising,  in particular  Directive 84/450/EEC  on 

misleading  advertising,  and  Chapter  IV  of  Directive  890/552/EEC  on  cross-

border  television,  or  they  may  be  national  requirements  adopted  by  Member 

States  for  reasons  of  the  general  good.  Once  again,  this  notion  of  the 

general  good  must  be  interpreted  in accordance  with  the  requirements  of  the 

case  law of  the Court  of  Justice  as  explained  in  the  commentary  on  Article 

24  and  as  expressed,  for  instance,  in  Case  352/85,  Bond  van  Adverteerders 

and  in Case  362/88, GB-INNO-BM. 

Article  37  -  Equality  of  treatment  In  the  event  of  the  winding-up  of  an 

insurance  undertaking 

This  provision  confirms  the  principle  of  equality  of  treatment  of  all 

insurance  creditors  in  the  event  of  the  winding-up  of  an  insurance 

undertaking  and,  where  this  case  arises,  in  the  event  of  the  intervention 

of  a guarantee  system  without  any  distinction  being  made  on  grounds  of  the 

nationality  of  insured  persons  or  beneficiaries or  on  grounds of  the way  in 

which  insurance  contracts  are underwritten.  The  principle  has already  been 

incorporated  in  other  insurance  Directives,  notably  the  Second  Directives 

88/357/EEC  and  90/619/EEC. 

Article  38 - Statistical  Information 

This  Article  provides  that  every  undertaking  will  have  to  furnish  the 

supervisory  authority  of  its  home  Member  State  with  information  on  its 

turnover 

in  each  Member  State,  whether 

it  be  achieved  through  an 

establishment  or  under  conditions  of  freedom  to provide  services. 

-  35 -

The  supervisory  authorities  of  the  Member  States  in  whose  territory  the 

insurer  in question  operates  may  ask  the  supervisory  authority  of  the  home 

Member  State  to  supply  them  with  such  information,  which  is  essential  if 

they  are  to  gauge  properly  the  relative  size  of  the  various  markets.  A 

similar  provision  is  contained  in  the  proposal  for  a  Third  Non-Life 

Insurance Directive  (Article 3 9 ). 

ArtIcle  39 - Taxât ion 

This Article  extends  to the establishment  regime  the system  provided  for  in 

the Second  Directives  in respect  of  freedom  to provide  services. 

This  proposal  for  a  Directive  thus  states  that,  subject  to  future 

harmonization,  the principle  to be applied  in respect  of  indirect  taxes  and 

parafiscal  charges  is that  of  the  territoriality of  the  tax,  that  is to say 

the  application  of  the  system  of  taxation  of  the  Member  State  of  the 

commitment  and  for  the  benefit  of  that  State. 

Moreover, each  State will  apply  to undertakings operating  in  its  territory, 

whether  by  way  of  establishment  or  by  way  of  freedom  to  provide  services, 

its own  national  provisions  concerning  measures  to ensure  the collection  of 

such  taxes. 

TITLE  V 

FINAL  PROVISIONS 

Article  40 -  Implementing  powers of  the  Commission 

This  provision  indicates  the  Articles  of  the  First  Directive  and  of  this 

proposal  for  a Directive which  may  be adapted  when  the moment  is right. 

-  36  -

The  procedures  for  adapting  those  Articles  are  set  out  in  the  Council 

Directive  setting up  a Committee  on  Insurance. 

Article 41 

This Article contains  a provision which  states  that  this Directive does not 

affect  existing  rights  acquired  by  authorized  branches  and  in the  field  of 

freedom of  services. 

Article  42 -  Transfers  of  portfolios of  Community  branches  of  undertakings 

sublect  to  the  law of  a third  country 

Title  III  of  the  First  Directive  79/267/EEC  lays  down  rules  applicable  to 

branches  set  up  in  the  Community  by  third-country  undertakings.  This 

Article  introduces  into  that  Title  III,  with  a  view  to  providing 

policy-holders  with  the  same  safeguards  in  all  cases,  rules  on  how  the 

transfer  of  such  branches' portfolios of  contracts must  be  effected. 

Article  43 - Right  of  appeal 

This  Article  provides  for  a  right  to  apply  to  the  courts  in  respect  of 

decisions  taken  by  competent  authorities  in  the  field  covered  by  this 

proposal  for  a Directive. 

Articles 44 - 46 -  Implementation of  the  Directive 

These Articles  contain  the  final  provisions. 

The date of  entry  into  force should  not  be  later  than  31  December  1992. 

-  37  -

Proposal  for  a 

THIRD COUNCIL  DIRECTIVE 

on  the  coordination  of  laws, regulations  and  administrative 

provisions  relating  to direct  life assurance  and 

amending  Directives 79/267/EEC  and  90/619/EEC 

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, 

In cooperation  with  the  European  Parliament, 

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

1. 

Whereas  it  is necessary  to complete  the  internal  market  in direct  life 

assurance,  from  the point  of  view  both  of  freedom  of  establishment  and 

freedom  to  provide  services,  so  as  to  make  it  easier  for  assurance 

undertakings  whose  head  office  is  in  the  Community  to  cover 

commitments  in the  Community; 

2. 

Whereas  the  Second  Council  Directive  90/619/EEC  of  8 November  1990  on 

the  coordination  of  laws,  regulations  and  administrative  provisions 

relating  to  direct 

life  assurance,  laying  down  provisions  to 

facilitate  the  effective  exercise  of  freedom  to  provide  services  and 
amending  Directive 79/267/EEC1,  hereinafter 

"Second 

called 

the 

Directive",  has  contributed  substantially  to  the  formation  of  the 

internal  market  in  direct  life  assurance  by  already  granting  policy 

holders  who,  by  virtue  of  the  fact  that  they  take  the  initiative  in 

-  38 -

entering  into a  commitment  in another  country,  do  not  require  special 

protection  in  the Member  State of  the commitment,  complete  freedom  to 

avail  themselves of  the widest  possible  life assurance  market; 

3. 

Whereas  the  Second  Directive  therefore  represents  an  important  stage 

in  the  merging  of  national  markets  into  a  single,  integrated  market; 

whereas  it must  be  supplemented  by  other  Community  instruments  with  a 

view  to  enabling  all  policy-holders,  whether  or  not  they  themselves 

take  the  initiative,  to  have  recourse  to  any  assurer  having  his  head 

office  in  the  Community  and  carrying  on  business  there,  whether  he 

conducts  business  by  way  of  freedom  of  establishment  or  by  way  of 

freedom  to  provide  services,  while  guaranteeing  them  adequate 

protect ion*, 

4. 

Whereas  the  approach  adopted  consists  in  bringing  about  such 

harmonization  as  is  essential,  necessary  and  sufficient  to  achieve 

mutual  recognition  of  authorizations  and  prudential  control  systems, 

thereby  making  it  possible  to  grant  a  single  authorization  valid 

throughout  the  Community  and  apply  the  principle  of  home  country 

control ; 

5. 

Whereas,  as  a  result,  the  taking-up  and  pursuit  of  the  business  of 

life  assurance  is  henceforth  to  be  subject  to  the  grant  of  a  single 

official  authorization  issued  by  the  authorities  of  the  Member  State 

in which  the  assurance  undertaking  has  its  head  office;  whereas  such 

authorization  enables  the  undertaking  to  carry  on  business  everywhere 

in the Community,  whether  under  conditions of  freedom  of  establishment 

or  under  conditions  of  freedom  to  provide  services;  whereas  the  host 

Member  State  may  no  longer  require  assurance  undertakings  which  have 

already  been  authorized  in  the  home  Member  State  and  which  wish  to 

carry  on  assurance  business  there  to  seek  a  fresh  authorization; 

whereas  the  First  and  Second  Directives  should  therefore  be  amended 

along  those  Iines; 

-  39 -

6. 

Whereas  responsibility  for  monitoring  the  financial  health  of  the 

assurance  undertaking, 

including 

its  state  of  solvency,  the 

establishment  of  sufficient  technical  provisions  and  the  covering  of 

those  provisions  by  matching  assets,  henceforth  lies  with  the 

competent  authority of  its home Member  State; 

7. 

Whereas  the  home  Member  State  may  lay  down  stricter  rules  than  those 

provided  for  in  Articles 7,  14,  15,  18,  19(1)  and  (3)  and  20  in 

respect  of  assurance  undertakings  authorized  by  its  own  competent 

authorities; 

8. 

Whereas  this  Directive  fits  into  the  pattern  of  Community  legislation 
already  set  by  the  First  Council  Directive  79/267/EEC2,  as  last 

amended  by  the  Second  Directive  90/619/EEC,  and  by  Council  Directive 

.../.../EEC  [on  the  annual  accounts  and  consolidated  accounts  of 
insurance  undertakings]3; 

9. 

Whereas  the  competent  authorities  must  therefore  have  at  their 

disposal  such  means  of  supervision  as  are  necessary  to  ensure  the 

orderly  pursuit  of  business  by  the  assurance  undertaking  throughout 

the  Community,  whether  it  be  carried  on  by  way  of  freedom  of 

establishment  or  by  way  of  freedom  to  provide  services;  whereas,  in 

particular,  they  must  be  able  to  introduce  appropriate  safeguards  or 

impose  sanctions  aimed  at  preventing  irregularities  and  infringements 

of  the provisions on  insurance  supervision; 

10.  Whereas  it  is  necessary  to  adjust  the  provisions  on  transfers  of 

portfolios  to  bring  them  into  line  with  the  single  authorization 

system  introduced  by  this Directive; 

2 

3 

OJ  No L 63, 13.3.1979, p. 1. 

OJ  No 

-  40 -

11.  Whereas  it  is  clear  from  the  report  drawn  up  on  the  basis  of 

Article  39(2)  of  the  First  Directive  that  there  are  no  grounds  for 

maintaining  the  current  restrictions  on  composite  undertakings  or  for 

opposing  the  formation  of  new  composite  undertakings  provided  they 

manage  separately,  and  show  separately  the  results of,  the activity of 

life  assurance  and  that  of  non-life  insurance  and  comply  with  the 

prudential  rules  relating  to both  activities; 

12.  Whereas  it  is  necessary  from  the  point  of  view  of  the  protection  of 

lives  assured  that  every  assurance  undertaking  should  establish 

sufficient  technical  provisions;  whereas  the  calculation  of  such 

provisions  is based  for  the most  part  on  actuarial  principles-, whereas 

those  principles  should  be  coordinated  in order  to  facilitate  mutual 

recognition  of  the  prudential  rules  applicable  in  the  various 

Member  States-, 

13.  Whereas  the  rules  concerning  the valuation of  the assets used  to cover 

the  technical  provisions  and  their  diversification,  the  rules  on 

localization  and  currency  matching  rules  must  be  coordinated  in order 

to facilitate mutual  recognition of Member  States' provisions; whereas 

such  coordination  must  take  account  of  the  measures  adopted  in  the 

field  of  the  liberalization  of  capital  movements 
in  Council 
Directive 88/361/EEC4  and  the work  undertaken  by  the  Community  with  a 

view  to achieving  economic  and monetary  union; 

14.  Whereas,  however,  the  home  Member  State  may  not  require  assurance 

undertakings  to  invest  the  assets  covering  their  technical  provisions 

in  particular  categories  of  assets,  such  a  requirement  being 

incompatible  with  the  free  movement  of  capital  measures  provided  for 

in Directive 88/361 /EEC-, 

-  41  -

15.  Whereas  the  list  of  items of  which  the  solvency  margin  required  by  the 

First  Directive may  be made  up must  be  supplemented  to  take  account  of 

new  financial  instruments  and  of  the  facilities  granted  to  other 

financial  institutions  for  the constitution of  their  own  funds; 

16.  Whereas  it  is  at  present  neither  necessary  nor  appropriate  to 

harmonize  the  law  covering  the  contract;  whereas  in  the  absence  of 

such  harmonization  the  opportunity  afforded  to  the  Member  States  of 

imposing  the  application  of  their  law  to  assurance  contracts  covering 

commitments  in  their  territory  is  likely  to  provide  a  sufficient 

safeguard  for  policy-holders; 

17.  Whereas  within  the  framework  of  an  internal  market  it  is  in  the 

policy-holder's  interest  that  he  should  have  access  to  the  widest 

possible  range  of  life  assurance  products  available  in  the  Community 

so  that  he  can  choose  that  which  is best  suited  to  his  need;  whereas 

therefore  the  Member  State  in  which  the  commitment  is  entered  into 

must  allow  all  life  assurance  products  offered  for  sale  in  the 

Community  to  be  marketed  in  its  territory  as  long  as  they  do  not 

conflict  with  the  legal  provisions  protecting  the  general  good  in 

force  in  that  Member  State,  insofar  as  that  good  is  not  already 

protected  by  the  rules  in  the  Member  State  of  origin,  that  these 

provisions  are  applied  in  a  non-discriminatory  manner  to  all 

undertakings  carrying  on  business  in  that  Member  State  and  that  they 

are objectively  necessary  and  proportionate  to  the  desired  objective; 

18.  Whereas  Member  States must  ensure  that  the  life assurance  products  and 

contract  documents  used  for  covering,  whether  by  way  of  establishment 

or  by  way  of  freedom  to provide  services,  commitments  entered  into  in 

their  territory  comply  with  such  specific  legal  provisions  protecting 

the general  good  as are  applicable; whereas  the  systems of  supervision 

to  be  employed  must  be  in  keeping  with  the  requirements  of  an 

integrated  market;  whereas  their  employment  may  not,  however, 

-  42 -

constitute  a prior  condition  for  carrying  on  life  assurance  business; 

whereas  from  this  standpoint  systems  of  prior  approval  of  policy 

conditions  are  unjustified;  whereas  it  is  necessary  as  a  result  to 

provide  for  other  systems which  are  better  suited  to  the  requirements 

of  a  single  market  and  which  enable  every  Member  State  to  guarantee 

policy-holders adequate  protection; 

19.  Whereas  in  a  single  insurance  market  the  consumer  will  have  a  wider 

and  more  varied  choice  of  contracts; whereas  If he  is to profit  fully 

from  this  diversity  and  from  increased  competition,  he  must  be 

provided  with  whatever  information  is  necessary  to  enable  him  to 

choose  the contract  best  suited  to his needs-, whereas  this  information 

requirement  is all  the  more  important  as  the  duration  of  commitments 

can  be  very  long-,  whereas  the  minimum  provisions  must  therefore  be 

coordinated  in  order  that  the  consumer  receive  clear  and  accurate 

information  about  the  essential  characteristics  of  the  products 

proposed  to him  as well  as  the address of  the body  or  bodies, to which 

any  complaints  of  policy-holders,  lives  assured  or  beneficiaries  of 

the contract  may  be  addressed; 

19a. Whereas  publicity  for  insurance  products  is  an  essential  means  of 

enabling  insurance  business  to  be  carried  on  effectively  within  the 

Community;  whereas  it  is  necessary  to  leave  open  to  insurance 

companies  the  use  of  all  normal  means  of  advertising  in  the  Member 

State of  the branch or of  provision of  services; whereas Member  States 

may  nevertheless  require  compliance  with  their  national  rules  on  the 

form  and  content  of  advertising,  whether  required  by  Community 

legislation on  advertising or  adopted  for  reasons of  the general  good; 

-  43  -

20.  Whereas  within  the  framework  of  a  single  market  no  Member  State  may 

continue  to  prohibit  the  simultaneous  carrying-on  of  life  assurance 

business  in  its  territory  by  way  of  freedom  of  establishment  and  of 

freedom  to provide  services; whereas  the option  given  to Member  States 

in  this  connection  by  the  Second  Directive  should  therefore  be 

abo I i shed -, 

21.  Whereas  provision  should  be  made  for  a  system  of  penalties  to  be 

imposed  when,  in  the  Member  State  in which  the  commitment  is  entered 

into,  the  assurance  undertaking  does  not  comply  with  the  provisions 

protecting  the general  good  that  are  applicable  to  it; 

21a. Whereas  work  is  in  progress  on  the  subject  of  winding-up  insurance 

undertakings  (Amended  Commission  proposal  COM(89) 

394  final  of 

18  September  1989);  whereas  it  is essential  at  this  stage  to  provide, 

in  the  event  of  the  winding-up  of  an  insurance  undertaking,  that  the 

systems  of  protection  in  place  in  Member  States  must  guarantee 

equality  of  treatment  for  all  insurance  creditors,  irrespective  of 

nationality  and  of  the method  of  entering  into  the  commitment; 

22.  Whereas  some  Member  States  do  not  subject  life  assurance  transactions 

to any  form  of  indirect  taxation, while others  apply  special  taxes  and 

other  forms  of  contribution;  whereas  the  structure  and  rate  of  these 

taxes  and  contributions vary  considerably  between  the Member  States  in 

which  they  are  applied;  whereas  it  is  desirable  to  avoid  a  situation 

in  which  existing  differences  lead  to  distortions  of  competition  in 

insurance  services  between  Member  States;  whereas,  pending  subsequent 

harmonization,  the application of  the  tax  system  and  of  other  forms of 

contribution  provided  for  by  the  Member  State  in which  the  commitment 

is entered  into  is  likely  to  remedy  such  mischief;  whereas  it  is  for 

the  Member  States  to  establish  the  method  of  ensuring  that  such  taxes 

and  contributions are  collected; 

- 44 -

23.  Whereas, technical adjustments to the detailed rules laid down  in this 

Directive may be necessary from time to time to take account of fresh 

developments  in the  insurance  industry; whereas  the Commission will 

make  such  adjustments  as  and  when  necessary,  after  consulting  the 

Committee  on  Insurance  set  up  by 

,  in  the  exercise  of  the 

implementing powers conferred on  it by the Treaty, 

24.  Whereas  it  is necessary  to  lay down specific provisions  to ensure a 

smooth  transition  from  the  legal  regime  existing  at  the  time  of 

application of  this Directive  to the regime  introduced by  it, taking 

care not  to place an additional  workload on Member States' competent 

authorities, 

HAS ADOPTED  THIS  DIRECTIVE 

-  45  -

TITLE I 

Definitions and  scope 

Article 1 

For  the purposes  of  this  Directive: 

(a)  "First  Directive" means  Directive  79/267/EEC; 

(b)  "Second  Directive" means  Directive  90/619/EEC; 

(c)  "assurance  undertaking"  means  an  undertaking  which  has  received 

official  authorization  in  accordance  with  Article  6  of  the  First 

Directive; 

(d)  "branch" means  an  agency  or  branch  of  an  assurance  undertaking,  having 

regard  to Article  3 of  the Second  Directive; 

(e)  "commitment"  means  a  commitment  represented  by  one  of  the  kinds  of 

insurance  or  operation  referred  to  in  Article  1  of  the  First 

Direct ive; 

(f)  "home Member  State" means  the Member  State  in which  the  head  office of 

the assurance  undertaking  covering  the commitment  is  situated; 

(g)  "Member  State  of  the  branch"  means  the  Member  State  in  which  the 

branch  covering  the commitment  is situated; 

-  46  -

(h)  "Member  State  of  provision  of  services"  means  the  Member  State  of  the 

commitment,  as  defined  in  Article  2  (e)  of  the  Second  Directive,  if 

the  commitment  is\ covered  by  an  assurance  undertaking  or  a  branch 

situated  in another  Member  State; 

(I)  "control"  means  the  relationship  between  a  parent  undertaking  and  a 
subsidiary,  as  defined  in Article  1 of  Council  Directive  83/349/EEC5, 

or  a  similar  relationship  between  any  natural  or  legal  person  and  an 

undertaking; 

(J)  "qualifying  holding"  means  a  direct  or  Indirect  holding  in  an 

undertaking  which  represents  10%  or  more  of  the  capital  or  of  the 

voting  rights  or  which  makes  It  possible  to  exercise  a  significant 

influence  over  the  management  of  the  undertaking  in  which  a  holding 

subsists. 

For  the  purposes  of  this  definition,  in  the  context  of  Articles  7  and 

14  and  of  the other  levels of  holding  referred  to  in  Article  14,  the 

voting 
Directive 88/627/EEC6  shall  be  taken  into consideration; 

Article 7 

referred 

rights 

in 

to 

of 

Council 

(k)  "parent  undertaking"  means  a  parent  undertaking  as  defined  in 

Articles  1 and  2 of  Directive  83/349/EEC; 

(I)  "subsidiary"  means  a  subsidiary  undertaking  as  defined  in  Articles 1 

and  2  of  Directive 83/349/EEC;  any  subsidiary  of  a  subsidiary 

undertaking  shall  also  be  regarded  as  a  subsidiary  of  the  parent 

undertaking which  is at  the  head of  those  undertakings. 

Article  2 

1. 

This  Directive  shall  apply  to  the  commitments  and  undertakings 

referred  to  in Article  1 of  the  First  Directive. 

5 

6 

OJ  No L  193, 18.7.1983, p.  1. 

OJ  No L 348, 17.12.1988, p. 62. 

2. 

In Article  1(2) of  the  First  Directive  the  words  "and  are  authorized 

in the country  concerned"  are  deleted. 

-  47 -

3. 

This Directive  shall  not  apply  to operations, undertakings  or  entities 

to  which  the  First  Directive  does  not  apply,  nor  to  the  entities 

referred  to  in Article  4 of  that  Directive. 

TITLE  II 

The  taking-up of  the business of  life  assurance 

Article  3 

Article  6 of  the First  Directive  is replaced  by  the  following: 

"Article  6 

1. 

The  taking-up  of  the  business  of  direct  life assurance  shall  be  subject  to 

prior  official  authorization. 

Such  authorization  shall  be  sought  from  the  authorities  of  the  home  Member 

State  by: 

(a) 

any  undertaking  which  establishes  its  head  office  in  the  territory 

of  such  State; 

(b) 

any  undertaking  which,  having  received  the  authorization  required, 

under  (a) above, extends  its business  to other  classes. 

2. 

Member  States  shall  not  make  authorization  subject  to  the  lodging  of  a 

deposit  or  the provision  of  security." 

-  48  -

Article  4 

Article  7 of  the  First  Directive  is replaced  by  the  following: 

"Article  7 

1. 

An  authorization  shall  be  valid  for  the  whole  Community.  It  shall 

permit  an  undertaking  to  carry  on  business  there,  either  by  way  of 

right  of  establishment  or  by way  of  freedom  to provide  services. 

2. 

An  authorization  shall  be  granted  for  a  particular  class  of  assurance 

as  listed  in  the  Annex.  It  shall  cover  the  entire  class,  unless  the 

applicant  wishes  to  cover  only  part  of  the  risks  pertaining  to  that 

class. 

The  supervisory  authorities  may  restrict  an  authorization  requested 

for  one  of  the  classes  to  the  operations  set  out  in  the  scheme  of 

operations  referred  to  in Article  9. 

Each  Member  State  may  grant  an  authorization  for  two  or  more  of  the 

classes, where  its national  laws permit  such  classes  to be  carried  on 

simultaneously." 

Article  5 

Article  8 of  the  First  Directive  is replaced  by  the  following: 

"Article  8 

1. 

The  home Member  State  shall  require  that  any  assurance  undertaking  for 

which  an  authorization  is sought  shall: 

(a) 

adopt  one of  the  following  forms: 

-  49 -

in  the  case  of  the  Kingdom  of  Belgium:  "société  anonyme/naamloze 

vennootschap",  "société  en  commandite  par  actions/commanditaire 

vennootschap 

op 

aandelen", 

"association 

d'assurance 

mutuelle/onderI Inge 

verzekeringmaatschappiJ", 

"société 

coopérât ive/cooperatieve  vennootschap"; 

in the case of  the Kingdom of  Denmark:  "aktieselskaber",  "gensidige 

selskaber"; 

in 

the 

case 

of 

the 

Federal 

Republic 

of 

Germany: 

"AktiengeselIschaft",  "Versicherungsverein  auf  GegenseItIgkeIt", 

"OffentIich-rechtIiches Wettbewerbs-Versicherungsunternehmen"; 

in  the  case  of  the  French  Republic:  "société  anonyme",  "société 

d'assurance  mutuelle"; 

in the case of  Ireland:  incorporated  companies  limited  by  shares or 

by guarantee or  unlimited; 

In the case of  the  Italian Republic:  "société per  azioni",  "société 

coopérâtiva",  "mutua di  assicurazione"; 

in  the  case  of  the  Grand  Duchy  of  Luxembourg:  " société  anonyme", 

"société  en  commandite  par  actions",  "association  d'assurances 

mutuelles",  "société  coopérative"; 

in  the  case  of  the  Kingdom  of  the  Netherlands:  "naamloze 

vennootschap",  "onderlinge waarborgmaatschappiJ"; 

-  50 -

in  the  case  of  the  United  Kingdom:  incorporated  companies  limited 

by  shares  or  by  guarantee  or  unlimited,  societies  registered  under 

the  Industrial  and  Provident  Societies  Acts,  societies  registered 

under  the  Friendly  Societies  Act,  the  association  of  underwriters 

known  as Lloyd's-, 

in the case of  the Hellenic Republic: 

" avûvuun etaipla " 

in  the  case  of  the  Kingdom  of  Spain:  "sociedad  anonima",  "sociedad 

mutua",  "sociedad  coopérâtiva"; 

in  the  case  of  the  Portuguese  Republic:  "sociedade  anonima",  mutua 

de  seguros". 

Assurance  undertakings  may  also  adopt  the  form  of  a  European  company  (SE), 

as  provided  for  in  Council  Regulation  (EEC)  No  .../...*  and  Council 

Directive  .../.../EEC**. 

Furthermore,  Member  States  may  set  up,  where  appropriate,  undertakings 

under  any  known  public-law  form  provided  that  such  institutions  have  as 

their  object  insurance  operations  in  conditions  equivalent  to  those  under 

which  private-1 aw undertakings  operate; 

(b)  limit  its  business  activities  to  the  business  of  insurance  and 

operations  directly  arising  therefrom,  to  the  exclusion  of  all  other 

commercial  business; 

(c)  submit  a scheme of operations  in accordance with Article  9; 

(d)  possess  the minimum  guarantee  fund provided  for  in Article  20(2); 

(e)  be  run by  technically-qualified  persons of  good  repute. 

-  51  -

2. 

An  undertaking  seeking  authorization  to  extend  its  business  to  other 

classes  shall  be  required  to  submit  a  scheme  of  operations  in 

accordance  with  Article  9. 

It shall,  furthermore, be  required  to show  proof  that  it possesses  the 

solvency  margin  provided  for  in  Article  19  and  the  guarantee  fund 

referred  to  in Article  20(1) and (2). 

3. 

Nothing  in this Directive shall  prevent  Member  States  from  maintaining 

in force or  introducing  laws, regulations or  administrative  provisions 

requiring  the  approval  of  the  memorandum  and  articles  of  association 

and  the  communication  of  any  other  documents  necessary  for  the  normal 

exercise  of  supervision. 

Member  States  shall  not,  however,  lay  down  provisions  requiring  the 

prior  approval  or  systematic  notification  of  general  and  special 

policy  conditions,  the  technical  bases used  inter  al la for  calculating 

scales  of  premiums  and  technical  provisions,  and  forms  and  other 

printed  documents  which  an  undertaking  intends  to  use  in  its  dealings 

with 

policy-holders.  They 

may 

require 

only 

non-systematic 

notification  of  those  conditions  and  other  documents  for  the  purpose 

of  verifying  compliance  with  laws,  regulations  and  administrative 

provisions  in respect  of  assurance  contracts, and  this  requirement  may 

not  constitute  a  prior  condition  for  an  undertaking  to  be  able  to 

carry  on  its activities. 

4. 

The  abovementioned  provisions may  not  require  that  any  application  for 

authorization  be  dealt  with  in  the  light  of  the  economic  requirements 

of  the market. 

* 

OJ  No L 

** 

OJ  No L 

-  52 -

Article  6 

Article  9 of  the  First  Directive  is replaced  by  the  following: 

"Article  9 

The  scheme  of  operations  referred  to  in  Article  8(1)(c)  and  (2)  shall 

contain  the  following  particulars  or  proof  concerning: 

(a) 

the  nature  of  the  commitments  which  the  undertaking 

proposes  to cover; 

(b) 

the guiding  principles as  to  reinsurance; 

(c) 

the  items constituting  the minimum  guarantee  fund; 

(d) 

estimates 

relating 

to  the  cost  of 

installing 

the 

administrative  services  and  the  organization  for  securing 

business  and  the  financial  resources  intended  to meet  such 

cost; 

and,  in addition,  for  the  first  three  financial  years: 

(e) 

a  plan  setting  out  detailed  estimates  of  income  and 

expenditure  in  respect  of  direct  business,  reinsurance 

acceptances  and  reinsurance  cessions; 

(f) 

a  forecast  balance  sheet; 

(g) 

estimates  relating  to  the  financial  resources  intended  to 

cover  underwriting  liabilities and  the solvency  margin." 

-  53 -

Article  7 

The  competent  authorities  of  the  home  Member  State  shall  not  grant 

authorization  for  taking  up  the business of  assurance  before  they  have  been 

informed  of  the  identities  of  the  shareholders  or  members,  whether  direct 

or  indirect,  natural  or  legal  persons, who  have  qualifying  holdings  and  of 

the amounts of  those  holdings. 

Those  same  authorities  shall  refuse  authorization  if,  taking  into  account 

the  need  to  ensure  the  sound  and  prudent  management  of  an  assurance 

undertaking,  they  are  not  satisfied  as  to  the  suitability  of  the  said 

shareholders or  members. 

-  54 -

TITLE  III 

Harmonization of conditions governing  pursuit  of  business 

Chapter 1 

Article  8 

Article  15 of  the First  Directive  is replaced  by  the  following: 

"Article 15 

1. 

The  financial  supervision  of  an  assurance  undertaking,  including  that 

of  the  activities  it carries  on  either  through  branches  or  by  way  of 

freedom  to  provide  services, shall  be  the  sole  responsibility  of  the 

home  Member  State.  If  the  authorities  of  the  Member  State  of  the 

commitment  have  reason  to suspect  that  the  activities of  an  assurance 

undertaking  might  affect  its  financial  soundness,  they  shall  inform 

the  authorities  of  the  undertaking's  home  Member  State.  The  latter 

authorities  shall  determine  whether  the undertaking  is complying  with 

the prudential  principles  laid down  in this Directive. 

2. 

The  financial  supervision  shall  include  verification, with  respect  to 

the  entire  business  of  the  assurance  undertaking,  of  its  state  of 

solvency,  the  establishment  of  technical  provisions,  including 

mathematical  provisions,  and  of  the  assets  covering  them,  in 

accordance  with  the  rules  laid  down or  practices  followed  in the  home 

Member  State pursuant  to provisions  adopted  at Community  level. 

3. 

The competent  authorities of  the home Member  State shall  require  every 

assurance  undertaking  to  have  sound  administrative  and  accounting 

procedures  and  adequate  internal  control  mechanisms." 

-  55  -

Article  9 

Article  16 of  the  First  Directive  is replaced  by  the  following: 

"Article  16 

Member  States  of  the  branch  shall  provide  that,  where  an  assurance 

undertaking  authorized  in  another  Member  State  carries  on  its  activities 

through  a  branch,  the  competent  authorities  of  the  home  Member  State  may, 

after  having  first  informed  the  competent  authorities  of  the  Member  State 

of  the  branch,  carry  out  themselves  or  through  the  intermediary  of  persons 

they  appoint  for  that  purpose  on-the-spot  verification  of  the  information 

necessary  to ensure  the  financial  supervision  of  the undertaking." 

Article  10 

The  following  Article  23a  is  inserted  in the  First  Directive: 

"Article  23a 

Without  prejudice  to  the  procedures  for  the  withdrawal  of  authorizations 

and  the  provisions  of  criminal  law, Member  States  shall  provide  that  their 

respective  competent  authorities  may,  as  against  assurance  undertakings  or 

those  who  effectively  control  the  business  of  assurance  undertakings  which 

breach  laws,  regulations  or  administrative  provisions  concerning  the 

supervision  or  pursuit  of  their  activities,  adopt  or  impose  in  respect  of 

them  penalties  or  measures  aimed  specifically  at  ending  observed  breaches 

or  the causes of  such  breaches." 

-  56  -

Article  11 

1. 

Article  6,  paragraphs  2 to 7, of  the Second  Directive  are  deleted. 

2. 

Each  Member  State  shall,  under  the  conditions  laid  down  by  national 

law, authorize  assurance  undertakings  whose  head  office  is established 

in  its  territory  to  transfer  all  or  part  of  their  portfolios  of 

contracts, whether  concluded  by  way  of  freedom  of  establishment  or  by 

way of  freedom  to provide  services,  to an accepting  office  established 

in  the  Community,  if  the  supervisory  authorities  of  the  home  Member 

State  of  the  accepting  office  certify  that  the  latter  possesses  the 

necessary  solvency  margin  after  taking  the  transfer  into  account. 

3. 

Where  a  branch  proposes  to  transfer  all  or  part  of  its  portfolio  of 

contracts, whether  concluded  by  way  of  freedom  of  establishment  or  by 

way  of  freedom  to  provide  services,  the  Member  State  of  the  branch 

shalI  be  consulted. 

4. 

In  the  circumstances  referred  to  in  paragraphs  2  and  3,  the 

supervisory  authorities  of  the  home  Member  State  of  the  transferring 

undertaking  shall  authorize  the  transfer  after  obtaining  the  agreement 

of  the supervisory  authorities of  the Member  States of  commitment. 

5. 

The  supervisory  authorities  of  the  Member  States  consulted  shall 

inform  the  competent  authorities  of  the  home  Member  State  of  the 

transferring  assurance  undertaking  of  their  opinion  within  three 

months  of  receipt  of  the  request  for  an  opinion;  if  no  response  is 

forthcoming  by  the  end  of  that  period,  the opinion  of  the  authorities 

consulted  shall  be  deemed  to be  favourable. 

6. 

A  transfer  authorized  in  accordance  with  this  Article  shall  be 

published,  under  the  conditions  laid  down  by  national  law,  in  the 

Member  State  of  the  commitment.  Such  transfer  shall  be  automatically 

valid  against  the  policy-holders,  the  lives  assured  and  any  other 

person  having  rights  and  obligations  arising  out  of  the  contracts 

transferred. 

-  57  -

Member  States may  provide  policy-holders with  the option of  cancelling 

the contract  within  a given  period  after  the  transfer. 

Article  12 

Article  24 of  the  First  Directive  is replaced  by  the  following: 

"Article  24 

1.  If  an  undertaking  does  not  comply  with  the  provisions  of  Article  17, 

the  supervisory  authority  of  its  home  Member  State  may  prohibit  the  free 

disposal  of  assets  after  having  informed  the supervisory  authorities  of  the 

Member  States of  commitment. 

2.  For  the purposes of  restoring  the  financial  situation  of  an  undertaking 

whose  solvency  margin  has  fallen  below  the  minimum  required  under 

Article  19,  the  supervisory  authority  of  the  home  Member  State  shall 

require  a  plan  for  the  restoration  of  a  sound  financial  position  to  be 

submitted  for  its approval. 

3.  If  the  solvency  margin  falls  below  the  guarantee  fund  as  defined  in 

Article  20,  the  supervisory  authority  of  the  home  Member  State  shall 

require  the  undertaking  to  submit  a  short-term  finance  scheme  for  its 

approval. 

It  may  also  restrict  or  prohibit  the  free  disposal  of  the  assets  of  the 

undertaking.  It  shall  inform  the  authorities  of  other  Member  States  in 

whose  territories  the  undertaking  carries  on  business  of  any  measures  and 

the  latter  shall, at  the  request  of  the  former,  take  the same  measures. 

4.  The  competent  supervisory  authorities  may  further  take  all  measures 

necessary  to  safeguard  the  interests  of  the  lives  assured  in  the  cases 

provided  for  in paragraphs  1 and  3. 

-  58 -

5.  Each  Member  State  shall  also  take  the measures  necessary  to be  able  to 

prohibit  the  free  disposal  of  assets  located  in  its  territory  at  the 

request  of  the undertaking's home Member  State." 

Article  13 

Article  26 of  the First  Directive  is replaced  by  the  following: 

"Article  26 

1. 

An  authorization  granted  to  an  assurance  undertaking  by  the  competent 

authority  of  the  home Member  State  may  be withdrawn  by  that  authority 

if the undertaking: 

(a) 

does  not  make  use  of  the  authorization  within  12 months, 

expressly  renounces  the  authorization  or  has  ceased  to 

engage  in  business  for  more  than  six  months,  unless  the 

Member  State  concerned 

has  made  provision 

for 

the 

authorization  to  lapse  in such  cases; 

(b) 

no  longer  fulfils the conditions  for  admission-, 

(c) 

has  been  unable,  within  the  time  allowed,  to  take  the 

measures  contained  in  the  restoration  plan  or  finance 

scheme  referred  to  in Article 24-, 

(d) 

fails seriously  in  its obligations under  the  regulations  to 

which  it  is subject. 

In  the  event  of  withdrawal  of  the  authorization,  the  supervisory 

authority  of  the  home Member  State  shall  notify  such  withdrawal  to 

the supervisory  authorities of  the other  Member  States, which  shall 

-  59  -

take  appropriate  measures  to  prevent 

the  undertaking 

from 

commencing  new  operations  in  their  territory,  whether  by  way  of 

freedom  of  establishment  or  by  way  of  freedom  to  provide  services. 

The  home  Member  State  supervisory  authority  shall,  in  conjunction 

with  those  authorities,  take  all  necessary  measures  to  safeguard 

the  interests  of  the  lives  assured  and,  in  particular,  shall 

restrict  the  free  disposal  of  the  assets  of  the  undertaking  in 

accordance  with  Article  24(1) and  (3), second  subparagraph. 

2. 

Any  decision  to  withdraw  an  authorization  shall  be  supported  by 

precise  reasons  and  notified  to  the undertaking  in question. 

Each  Member  State  shall  make  provision  for  a  right  to  apply  to  the 

courts  against  such  a  decision." 

Article  14 

1. 

Member  States  shall  require  any  natural  or  legal  person  who  proposes 

to  acquire,  directly  or  indirectly,  a  qualifying  holding  in  an 

assurance  undertaking  to  inform  the  competent  authorities  of  the  home 

Member  State,  indicating  the  size  of  the  intended  holding.  Such  a 

person  must  likewise  inform  the  competent  authorities  of  the  home 

Member  State  if he proposes  to  increase  his qualifying  holding  so  that 

the  proportion  of  the  voting  rights  or  of  the  capital  held  by  him 

would  reach  or  exceed  20%,  33%  or  50%  or  so  that  the  assurance 

undertaking would  become  his  subsidiary. 

The  competent  authorities  of  the  home  Member  State  shall  have  a 

maximum  of  three months  from  the date of  the notification  provided  for 

in  the  first  subparagraph  to  oppose  such  a  plan  if,  in  view  of  the 

need  to  ensure  sound  and  prudent  management  of  the  assurance 

undertaking,  they  are  not  satisfied  as  to  the  suitability  of  the 

person  referred  to  in  the  first  subparagraph.  If  they  do  not  oppose 

the plan  referred  to  in the  first  subparagraph,  they  may  fix  a maximum 

period  for  Its  implementation. 

-  60  -

2. 

Member  States  shall  require  any  natural  or  legal  person  who  proposes 

to  dispose,  directly  or  indirectly,  of  a  qualifying  holding  in  an 

assurance  undertaking  first  to  inform  the competent  authorities  of  the 

home  Member  State,  indicating  the  size  of  his  intended  holding.  Such 

a person  must  likewise  inform  the competent  authorities  if he  proposes 

to  reduce  his  qualifying  holding  so  that  the  proportion  of  the  voting 

rights  or  of  the  capital  held  by  him would  fall  below  20%, 33% or  50% 

or  so  that  the  assurance  undertaking  would  cease  to be  his  subsidiary. 

3. 

On  becoming  aware  of  them,  assurance  undertakings  shall  inform  the 

competent  authorities of  the  home Member  State  of  any  acquisitions or 

disposals  of  holdings  in  their  capital  that  cause  holdings  to  exceed 

or  fall  below one of  the  thresholds  referred  to  in paragraphs  1 and  2. 

They  shall  also,  at  least  once  a  year,  inform  them  of  the  names  of 

shareholders  and  members  possessing  qualifying  holdings  and  the  sizes 

of  such  holdings  as shown,  for  example,  by  the  information  received  at 

the annual  general  meetings of  shareholders  and members or  as a  result 

of  compliance  with  the  regulations  relating  to  companies  listed  on 

stock  exchanges. 

4. 

Member  States  shall  require  that, where  the  influence  exercised  by  the 

persons  referred  to  in  paragraph  1  is  likely  to  operate  to  the 

detriment  of  the  prudent  and  sound  management  of  the  assurance 

undertaking,  the  competent  authorities  of  the  home  Member  State  shall 

take  appropriate  measures  to  put  an  end  to  that  situation.  Such 

measures  may  consist,  for  example,  in  injunctions,  sanctions  against 

directors  and  managers,  or  the  suspension  of  the  exercise  of  the 

voting  rights  attaching  to  the  shares  held  by  the  shareholders  or 

members  in question. 

-  61  -

Similar  measures  shall  apply  to  natural  or  legal  persons  failing  to 

comply  with  the  obligation  to  provide  prior  information,  as  laid  down 

in  paragraph  1.  If  a  holding  is  acquired  despite  the  opposition  of 

the  competent  authorities,  the  Member  States  shall,  regardless  of  any 

other  sanctions  to  be  adopted,  provide  either  for  exercise  of  the 

corresponding  voting  rights  to  be  suspended,  or  for  the  nullity  of 

votes  cast  or  for  the possibility  of  their  annulment. 

Article  14a 

Article  13 of  the  First  Directive  is replaced  by  the  following: 

"Article  13 

1. 

Undertakings which,  in accordance  with  Article  6 of  the  first  non-life 

insurance  coordination  Directive  and  of  this  Directive,  receive 

authorizations  permitting  them  to  carry  on  simultaneously  the 

activities  referred  to  in  the  Annex  to  the  first  non-life  insurance 

coordination  Directive  and  those  listed  in Article  1 of  this  Directive 

shall  manage  each  activity  separately  in accordance  with  Article  14. 

2. 

Where  an  undertaking  carrying  on  the  activities  referred  to  in  the 

Annex  to  the  first  non-life  insurance  coordination  Directive  has 

financial,  commercial  or  administrative  links  with  an  undertaking 

carrying  on  the  activities  covered  by  this  Directive,  the  supervisory 

authorities  of  the  Member  States  in  whose  territory  the  head  offices 

of  those  undertakings  are  situated  shall  ensure  that  the  accounts  of 

the  undertakings  in  question  are  not  distorted  by  agreements  between 

these  undertakings  or  by  any  arrangement  which  could  affect  the 

apportionment  of  expenses  and  income. 

3. 

Subject  to paragraph  4, undertakings which  at  the  time of  notification 

of  this  Directive  carry  on  simultaneously  in  a  Member  State  both  of 

-  62  -

the  activities  referred  to  in paragraph  1 may  continue  to  do  so  there 

provided  that  each  activity  is  separately  managed  in  accordance  with 

Article  14. 

4. 

Any  Member  State  may  require  undertakings  whose  head  offices  are 

established  in  its  territory  to  cease,  within  a  period  to  be 

determined  by  the  Member  State  concerned,  the  simultaneous  pursuit  of 

activities  in which  they  were  engaged  at  the  time  of  notification  of 

this  Directive." 

Article  14b 

Article  18  of  the  Second  Directive  is  deleted  with  effect  from 

1  January  1996. 

Chapter  2 

Article  15 

Article  17 of  the  First  Directive  is replaced  by  the  following: 

"Article  17 

1. 

The  home  Member  State  shall  require  every  assurance  undertaking  to 

establish  sufficient  technical  provisions,  including  mathematical 

provisions,  in respect  of  its entire  business. 

The  amount  of  such  provisions  shall  be  determined  according  to  the 

following  principles: 

-  63  -

A.(i) 

The  amount  of  the  mathematical  provisions  shall  be 

calculated  by  a sufficiently  prudent  actuarial  valuation  of 

all 

future 

liabilities  for  all  existing 

policies, 

including: 

all  guaranteed  benefits,  including  guaranteed  surrender 

values; 

bonuses  which  have  already  been  guaranteed,  whether 

described  as vested,  declared  or  allotted; 

options  available  to  the  policy-holder  under  the  terms  of 

the  contract; 

expenses,  including  commissions; 

taking  credit  for  future  premiums due. 

(ii) 

The  use of  a  retrospective method  is allowed,  if  it  can  be 

shown  that  the  resulting  technical  provisions  are  not  lower 

than  would  be  required  under  a  sufficiently  prudent 

prospective  calculation  or  if  a  prospective  method  cannot 

be used  for  the  type of  policy  involved. 

(iii) 

A prudent  valuation  is not  a  'best  estimate' valuation, but 

shall  include  an  appropriate  margin  for  adverse  deviation 

of  the  relevant  factors. 

(iv) 

The  valuation  shall  take account  of  the method  of  valuation 

of  the  corresponding  assets,  depending  on  the  type  of 

policy,  and  the  extent  to  which  specific  assets  can  be 

identified. 

(v) 

Technical  provisions  shall  be  calculated  separately  for 

each  contract.  The  use  of  appropriate  approximations  or 

generalizations  is  allowed  however,  where  they  are  likely 

-  64  -

to  give  approximately  the  same  result  as  the  individual 

calculations.  The  principle  of  separate  calculation  shall 

in  no  way  prevent 

the  establishment  of 

additional 

provisions  for  general  risks which  are not  individualized. 

(vi) 

Where  the  surrender  value  of  a  policy  if  guaranteed,  the 

amount  of  the  mathematical  provisions  for  the  policy  shall 

be  at  least  as great  as  that  value. 

B. 

The  rate  of  interest  used  in  the  calculation  of  the 

technical  provisions  shall  be  chosen  prudently,  taking  into 

account  the  currency  In  which  the  policy  is  denominated, 

and  having  regard  to  the  yield  on  the  corresponding 

existing  assets  and  to  the  yield  which  it  is expected  will 

be obtained  on  sums  to be  invested  in the  future. 

C. 

The  elements of  the statistical  basis  and  the allowance  for 

expenses  used 

in  the  calculation  of  the  technical 

provisions  shall  be  chosen  prudently,  having  regard  to  the 

State  of  the  commitment,  the  type  of  policy,  and  the 

administrative  costs  and  commissions  expected  to  be 

incurred. 

D. 

In the  case of  participating  policies,  the  valuation  method 

shall  take  into  account,  either  implicitly  or  explicitly, 

future  bonuses  of  all  kinds,  in  a  manner  consistent  with 

the  other  assumptions  on  future  experience  and  with  the 

current  method  of  distribution of  bonus.  Where  no explicit 

allowance  is  made  for  future  bonuses  a  technical  rate  of 

interest  shall  be  used  which  is  lower  than  the  rate  chosen 

according  to principle B by  an  appropriate  amount. 

-  65  -

E. 

Allowance  for  future  expenses  may  be  made  implicitly,  for 

instance by  the use of  an appropriate net  premium.  However 

the  overall  allowance,  implicit  or  explicit,  shall  be  not 

less  than  a  prudent  estimate  of  the  relevant  future 

expenses. 

F. 

The method  of  calculation of  technical  provisions  from  year 

to  year  shall  be  such  as  to  recognize  profit  in  an 

appropriate way over  the duration of  each  policy, and  shall 

not  be  subject  to  discontinuities  arising  from  arbitrary 

changes  to  the method or  the bases of  calculation. 

2. 

Assurance  undertakings  shall  publish  the bases  and methods used  in the 

calculation  of  the  technical  provisions,  including  provisions  for 

bonuses. 

3. 

The  home  Member  State  shall  require  every  assurance  undertaking  to 

cover  the  technical  provisions  in  respect  of  its  entire  business  by 

matching  assets,  in  accordance  with  Article  21.  In  respect  of 

business  written  in  the  Community,  these  assets  must  be  localized  on 

the  territory  of  the  Community.  The  home  Member  State  may,  however, 

permit  relaxations  in the  rules on  the  localization of  assets." 

Article  16 

Premiums  for  new  business  shall  be  sufficient,  on  reasonable  actuarial 

assumptions,  to  enable  undertakings  to  meet  all  their  commitments  having 

regard  to all  aspects of  their  financial  situation. 

- 66  -

Article  17 

Assets  representing  the  technical  provisions  shall  be  invested  having 

regard  to  the  kind  of  business  transacted,  and  the  nature  and  duration  of 

the assets,  including  possible  future  variations  in their  yield  and  value. 

Article  18 

1. 

The  home Member  State  shall  allow every  assurance  undertaking  to cover 

the  technical  provisions only  from  amongst  the  following categories of 

assets: 

(a) 

debt  securities,  bonds  and  other  money  market  instruments 

issued  by  a  State  or  local  authority;  loans  to  or 

guaranteed  by  a State or  local  authority-, 

(b) 

debt  securities,  bonds  and  other  money  market  instruments 

issued  by  undertakings;  secured  loans  to  or  guaranteed  by 

undertakings; 

(c) 

secured  loans  to  natural  persons  other  than  those  listed 

under (h); 

(d) 

transferable  shares  and  other  transferable  variable  yield 

part icipations; 

(e) 

units  in  undertakings  for  collective 

investments  in 

transferable  securities and other  investment  pools; 

(f) 

hedging  instruments, such  as options,  futures, swaps-, 

(g) 

land and buildings-, 

-  67 -

(h) 

loans  guaranteed  by  mortgage  on  land,  buildings,  ships  or 

aircraft; 

(i) 

cash  at  bank  and 

in  hand,  deposits  with 

credit 

institutions; 

(J) 

reinsurance  amounts  of  technical  provisions,  determined  in 

accordance  with  the  stipulations  of  the  underlying 

reinsurance  contracts; 

(k) 

deposits with  and  debts owed  by ceding  undertakings; 

(I) 

debts owed  by policy-holders and  intermediaries arising out 

of  direct  and  reinsurance operations, up  to 30% of  premiums 

earned  in the financial  year; 

(m) 

accrued  interest  and  rent  and other  prepayments  and  accrued 

i ncome; 

(n) 

deferred  acquisition costs; 

(o) 

amounts  receivable  as a result  of  salvage  and  subrogation-, 

(p) 

recognized  tax  recoveries; 

(q) 

claims against  guarantee  funds; 

(r) 

tangible  fixed  assets, other  than  land and  buildings; 

(s) 

reversionary  interests; 

(t) 

loans on  policies. 

-  68 -

2. 

Notwithstanding  paragraph  1,  in  particular  circumstances  and  at  the 

assurance  undertaking's  request,  the  home  Member  State  may,  on  the 

basis  of  a  duly  motivated  decision,  allow  other  categories  of  assets 

for  the  purpose  of  covering  technical  provisions,  subject  to 

Article 17. 

Article  19 

1. 

The  home  Member  State  shall  require  every  assurance  undertaking  to 

invest  no more  than: 

(a) 

50%  of  the  total  of  the  technical  provisions,  net  of 

reinsurance, 

in  the  category  of  assets 

listed  in 

Article  18(1)(b); 

(b) 

50%  of  the  total  of  the  technical  provisions,  net  of 

reinsurance,  in  the  categories  of  assets  listed  in 

Article  18(1 )(g) and  (h), taken  together-, 

(c) 

80%  of  the  total  of  the  technical  provisions,  net  of 

reinsurance,  in  the  categories  of  assets  listed  in 

Article  18(1)(d),  (e) and  (f), taken  together, of  which  no 

more  than  10% shall  comprise  the  category  of  assets  listed 

in  Article  18(1)(f)  or  unlisted  transferable  shares  and 

other  transferable  variable  yield  participations  taken 

together; 

The  home Member  State may waive  the 80%  limit, on  condition 

that  the  10%  limit  laid down  in point  (g)  is reduced  to 5%. 

(d) 

5%  of  the  total  of  the  technical  provisions,  net  of 

reinsurance, 

in  the  category  of  assets 

listed  in 

Article  18(1)(c); 

-  69 -

(e) 

10%  of  the  total  of  the  technical  provisions,  net  of 

reinsurance,  in  any  one  piece  of  land  or  buildings,  or  a 

number  of  pieces of  such  buildings; 

(f) 

10%  of  the  total  of  the  technical  provisions,  net  of 

reinsurance,  in  any  one  loan  guaranteed  by  a  mortgage  on 

land, buildings, ships or  aircraft; 

(g) 

10%  of  the  total  of  the  technical  provisions,  net  of 

reinsurance,  taken  together  in  transferable  shares,  other 

transferable  variable  yield  participations,  debentures  and 

other  bonds  of  any  one  undertaking  and  loans  to  any  one 

undertaking. 

2. 

Member  States  shall  not  require  assurance  undertakings  to  invest  in 

particular  categories  of  assets  or  to  localize  their  assets  in  a 

particular  Member  State. 

3. 

Notwithstanding  paragraph  1,  in  particular  circumstances  and  at  the 

assurance  undertaking's  request,  the  home  Member  State  may,  on  the 

basis of  a duly motivated  decision, allow exceptions  to the  rules  laid 

down  in points  (a)  to  (g) of  paragraph  1 of  this  Article,  subject  to 

Article 17. 

Article  20 

At  the  request  of,  and  upon  proof  being  shown  by,  the  assurance 

undertaking,  the  home Member  State may  allow  any  hidden  reserves  resulting 

from  the  undervaluation  of  assets  as  cover  for  technical  provisions  in  so 

far  as those  hidden  reserves are not  of  an exceptional  nature. 

If  hidden  reserves  are  recognized  as  cover  for  technical  provisions,  an 

adequate  amount  of  latent  taxes and  selling  expenses  shall  be  deducted. 

-  70  -

Article  21 

For  the  purposes  of  Article  17(3)  and  Article  28  of  the  First  Directive, 

Member  States  shall  comply  with  Annex  1  to  this  Directive  as  regards  the 

matching  rules. 

Article  22 

Article  18(1) of  the  First  Directive  is replaced  by  the  following: 

"1.  the  assets  of  the  undertaking  free  of  any  foreseeable  liabilities, 

less  any 

intangible 

items.  In  particular 

the  following  shall  be 

considered: 

the  paid-up  share  capital  or,  in  the  case  of  a  mutual  concern,  the 

effective  fund; 

one-half  of  the  share  capital  or  the  fund  which  is  not  yet  paid-up, 

once  the  paid-up  part  reaches  25% of  this  capital  or  fund; 

reserves  (statutory  reserves  and  free  reserves)  not  corresponding  to 

underwriting  liabilities; 

any  carry-forward  of  profits; 

subordinated  loan  capital,  up  to  an  overriding  limit  of  25%  of  the 

margin,  if  the  following  criteria  are  met: 

there  must  be  a binding  agreement  by  which,  in  the  event  of 

bankruptcy  or  liquidation of  the  assurance  undertaking,  the 

subordinated  loan  capital  ranks  after  the  claims  of  all 

other  creditors  and  is  not  to  be  repaid  until  all  other 

debts  outstanding  at  that  time  have  been  settled; 

-  71  -

only  fully  paid-up  funds may  be  taken  into  account; 

the original  maturity  must  be of  at  least  five  years,  after 

which  the  subordinated  loan  capital  may  be  repaid;  if  its 

maturity  is  not  fixed,  it  shall  be  repayable  only  subject 

to  five years'  notice  unless  it  is no  longer  considered  as 

own  funds  or  unless  the  prior  consent  of  the  home 

Member  State  is specifically  required  for  early  repayment. 

The  home  Member  State  may  grant  permission  for  the  early 

repayment  of  such  loans provided  the  request  is made  on  the 

initiative  of  the  issuer  and  the  solvency  of  the  assurance 

undertaking  in question  is not  affected; 

the  extent  to  which  subordinated  loan  capital  may  rank  as 

own  funds  must  be  gradually  reduced  during  at  least  the 

last  five years  before  the agreed  repayment  date; 

the  loan  agreement  must  not  include  any  clause  providing 

that  in specified  circumstances,  other  than  the  winding-up 

of  the  assurance  undertaking,  the  debt  will  become 

repayable  before  the agreed  repayment  date." 

Article  23 

Article  21 of  the  First  Directive  is replaced  by  the  following: 

"Article  21 

1. 

Member  States  shall  not  prescribe  any  rules  as  to  the  choice  of  the 

assets  in  excess  of  those  representing  the  technical  provisions 

referred  to  in Article  17. 

-  72  -

2. 

Subject  to  Article  17(3),  Article  24(1),  (3)  and  (5)  and  the  second 

subparagraph  of  Article  26(1),  Member  States  shall  not  restrain  the 

free  disposal  of  the  assets,  whether  movable  or  immovable  property, 

forming  part  of  the assets of  authorized  businesses. 

3. 

This  Article  shall  not  preclude  any  measures  which  Member  States, 

while safeguarding  the  interests of  the  lives assured, are entitled  to 

take  as  owners,  members  or  associates  of  the  undertakings  in 

quest ion." 

Chapter  3 

Article  24 

The Member  State of  the commitment  shall  not  prevent  the policy-holder  from 

concluding  a  contract  conforming  with  the  rules  of  the  home  Member  State, 

as  long  as  it  does  not  conflict  with  legal  provisions  protecting  the 

general  good  in the Member  State of  the  commitment. 

Article  25 

Member  States shall  not  lay down provisions  requiring  the prior  approval  or 

systematic  notification  of  general  and  special  policy  conditions,  the 

technical  bases  used  Inter  al la  for  calculating  scales  of  premiums  and 

technical  provisions,  and  forms  and  other  printed  documents  which  an 

assurance undertaking  intends to use  in  its dealings with  policy-holders. 

-  73  -

They  may  require  only  non-systematic  notification  of  those  conditions  and 

other  documents  for  the  purpose  of  verifying  compliance  with  laws, 

regulations  and  administrative  provisions 

in  respect  of  assurance 

contracts,  and  this  requirement  may  not  constitute  a prior  condition  for  an 

undertaking  to be  able  to carry  on  its activities. 

Article  26 

In  the  first  subparagraph  of  Article  15(1)  of  the  Second  Directive  the 

words  "in one of  the  cases  referred  to  in Title  III" are  deleted. 

Article  27 

1. 

Before  any  commitment  is finalised,  the policy-holder  shall  receive at 

least  the  information  listed  in point  A of  Annex  2. 

2. 

The  policy-holder  shall  be  kept  informed  throughout  the  term  of  the 

contract  of  any  change  concerning  the  information  listed  in point  B of 

Annex  2. 

3. 

The  Member  State  of  the  commitment  may  require  assurance  undertakings 

to  furnish  information  in  addition  to  that  listed  in  Annex  2  only  if 

it  is  indispensable  to  a  proper  understanding  by  the  policy-holder  of 

the essential  elements of  the  commitment. 

-  74 -

TITLE  IV 

Provisions  relating  to freedom of  establishment 

and  freedom  to provide  services 

Article  28 

Article  10 of  the First  Directive  is replaced  by  the  following: 

"Article  10 

1. 

An  assurance  undertaking  wishing  to  establish  a  branch  in  another 

Member  State  shall  notify  the  competent  authorities  of  its  home 

Member  State. 

2. 

Member  States  shall  require  every  assurance  undertaking  wishing  to 

establish  a  branch  in  another  Member  State  to  provide  the  following 

information 

when 

effecting 

the  notification 

referred 

to 

in 

paragraph  1 : 

(a) 

the Member  State  in whose  territory  it plans  to establish a 

branch; 

(b) 

a  scheme  of  operations  setting  out  inter  al la  the  types  of 

business  envisaged  and  the  structural  organization  of  the 

branch; 

(c) 

the  address  in  the  Member  State  of  the  branch  from  which 

documents may  be  obtained; 

-  75  -

(d) 

the  name  of  the  person  responsible  for  the  management  of 

the  branch  and  possessing  sufficient  powers  to  bind  the 

undertaking  in  relation  to  third  parties  and  to  represent 

it  in  relations  with  the  authorities  and  courts  of  the 

Member  State of  the  branch. 

With  regard  to  Lloyd's,  in  the  event  of  any  litigation  in 

the  Member  State of  the branch  resulting  from  underwritten 

commitments, 

the 

lives  assured 

must 

not 

be 

more 

unfavourably  treated  than  if  the  litigation  had  been 

brought  against  businesses  of  a  more  conventional  type. 

The  authorized  agent  must,  therefore,  possess  sufficient 

powers  to  enable  proceedings  to  be  instituted  against  him 

and  must  in  that  capacity  be  able  to  bind  the  Lloyd's 

underwriters  concerned. 

3. 

Unless  the  competent  authorities of  the  home  Member  State  have  reason 

to doubt  the adequacy  of  the administrative  structure  or  the  financial 

situation  of  the  assurance  undertaking,  taking  into  account  the 

activities  envisaged,  they  shall  within  three months  of  receipt  of  the 

information  referred  to  in paragraph  2 communicate  that  information  to 

the  competent  authorities  of  the Member  State  of  the  branch  and  shall 

inform  the undertaking  concerned  accordingly. 

The  home Member  State  competent  authorities  shall  also  communicate  the 

amount  of  the  guarantee  fund  and  solvency  margin  of  the  assurance 

undertaking,  calculated  in accordance  with  Articles  19 and  20. 

Where  the  competent  authorities  of  the  home  Member  State  refuse  to 

communicate  the  information  referred  to  in  paragraph  2  to  the 

competent  authorities  of  the  Member  State  of  the  branch,  they  shall 

give  reasons  for  their  refusal  to  the  undertaking  concerned  within 

three months  of  receipt  of  all  the  information.  That  refusal  or 

failure  to  reply  shall  be subject  to a  right  to apply  to  the  courts  in 

the  home Member  State. 

-  76  -

4. 

Before  the  branch  of  an  assurance  undertaking  commences  its 

activities,  the  competent  authorities  of  the  Member  State  of  the 

branch  shall, within  two months of  receiving  the  information  mentioned 

in  paragraph  3,  if  necessary  indicate  the  conditions  under  which,  in 

the  interest  of  the  general  good,  those  activities must  be  carried  on 

in the Member  State of  the branch. 

5. 

On  receipt  of  a  communication  from  the  competent  authorities  of  the 

Member  State  of  the  branch,  or,  if  no  communication  is  received  from 

them,  on  expiry  of  the period  provided  for  in paragraph  4,  the  branch 

may  be established  and  commence  its activities. 

6. 

In  the  event  of  a  change  in  any  of  the  particulars  communicated 

pursuant  to paragraph  2(b), (c) or  (d), an assurance undertaking  shall 

give  written  notice of  the  change  to  the  competent  authorities  of  the 

home  Member  State  and  Member  State  of  the  branch  at  least  one  month 

before  making  the  change  so  as  to enable  the  competent  authorities of 

the  home  Member  State  to  take  a  decision  pursuant  to  paragraph  3  and 

the  competent  authorities  of  the Member  State  of  the branch  to  take a 

decision on  the change pursuant  to paragraph  4." 

Article  29 

Article  11 of  the First  Directive  is deleted. 

Article  30 

Article  11 of  the Second  Directive  is replaced  by  the  following: 

"Article  11 

-  77  -

Any  undertaking  intending  to carry  on  business  for  the  first  time by way  of 

freedom  to provide  services  shall  first  inform  the  competent  authorities of 

the  home  Member  State,  indicating  the  Member  State  or  Member  States  within 

the  territory  of  which  it contemplates  providing  services  and  the  nature  of 

the commitments  it proposes  to  cover." 

Article  31 

Article  14 of  the  Second  Directive  is replaced  by  the  following: 

"Article  14 

1. 

The  competent  authorities  of  the  home  Member  State  shall  communicate, 

within  one month  of  the  notification  provided  for  in  Article  11,  to 

the  Member  State  or  Member  States  within  the  territory  of  which  the 

undertaking  intends  to  carry  on  business  by  way  of  freedom  to  provide 

services: 

(a) 

the  amount  of  the  solvency  margin  calculated  in  accordance 

with  Articles  19 and  20 of  the  First  Directive-, 

(b) 

the  classes  which  the  undertaking  has  been  authorized  to 

transact; 

(c) 

the  nature  of  the  commitments  which  the  undertaking 

proposes  to  cover  in  the  Member  State  of  provision  of 

services. 

At  the  same  time,  they  shall  inform  the  undertaking  concerned 

accordingly. 

-  78 -

2. 

Where  the  competent  authorities  of  the  home  Member  State  do  not 

communicate  the  information  referred  to  in  paragraph  1  within  the 

period  laid down, they  shall  give  the reasons  for  their  refusal  to the 

undertaking  within  that  same  period.  The  refusal  shall  be  subject  to 

a right  to apply  to the courts  in the home Member  State. 

3. 

The  undertaking  may  commence  activities  as  from  the certified  date  on 

which  it  is  informed  of  the  communication  provided  for  in  the  first 

subparagraph  of  paragraph  1." 

Article  32 

Article  17 of  the Second  Directive  is replaced  by  the  following: 

"Article  17 

Any  amendment  which  the  undertaking  intends  to  make  to  the  information 

referred  to  in Article  11 shall  be subject  to the procedure  provided  for  in 

Articles  11  and 14." 

Article  33 

Articles  10, 12, 13, 16, 22 and  24 of  the Second  Directive  are  deleted. 

Article  34 

1.  Article  19 of  the Second  Directive  is deleted. 

-  79  -

2. 

Member  States  of  the  branch  or  of  provision  of  services  shall  not  lay 

down 

provisions 

requiring 

the  prior 

approval 

or 

systematic 

notification  of  general  and  special  policy  conditions,  the  technical 

bases used  inter  al la for  calculating  scales of  premiums  and  technical 

provisions,  and  forms  and other  printed  documents  which  an  undertaking 

intends  to  use.  For  the  purpose  of  verifying  compliance  with  their 

national  provisions,  they  shall  require  of  any  undertaking  wishing  to 

carry  on  assurance  business  in  their  territory,  whether  by  way  of 

freedom  of  establishment  or  by  way  of  freedom  to  provide  services, 

only  non-systematic  notification of  the conditions  it proposes  to use, 

although  this  requirement  may  not  constitute  a  prior  condition  for  an 

undertaking  to carry  on  its activities. 

Article  35 

1. 

Article  20 of  the Second  Directive  is deleted. 

2. 

Any  undertaking  carrying  on  business  by  way  of  freedom  of 

establishment  or  freedom  to  provide  services  shall  submit  to  the 

competent  authorities  of  the Member  State  of  the  branch  and/or  of  the 

Member  State  of  provision  of  services  all  documents  requested  of  it 

for  the  purposes  of  this  Article  in so  far  as undertakings  whose  head 

office  is  in those Member  States  are  also obliged  to do so. 

3. 

If  the  competent  authorities  of  a  Member  State  establish  that  an 

undertaking  with  a  branch  or  providing  services  in  its  territory  is 

not  complying  with  the  legal  provisions  applicable  to  it  in  that 

State,  they  shall  require  the  undertaking  concerned  to  put  an  end  to 

the  irregular  situation. 

-  80  -

4. 

If  the undertaking  in question  fails  to  take  the  necessary  steps,  the 

competent  authorities  of  the  Member  State  concerned  shall  inform  the 

competent  authorities  of  the  home  Member  State  accordingly.  The 

latter  authorities  shall,  at  the  earliest  opportunity,  take  all 

appropriate  measures  to  ensure  that  the undertaking  concerned  puts  an 

end  to  that  irregular  situation.  The  nature  of  those  measures  shall 

be  communicated  to  the  competent  authorities  of  the  Member  State 

concerned. 

5. 

If,  despite  the  measures  taken  by  the  home  Member  State  or  because 

such  measures  prove  inadequate  or  are  lacking  in  that  State,  the 

undertaking  persists  in violating  the  legal  provisions  in force  in the 

Member  State  concerned,  the  latter  may,  after  informing  the  competent 

authorities  of  the  home  Member  State,  take  appropriate  measures  to 

prevent  or  punish  further  irregularities,  including,  in  so  far  as  is 

strictly  necessary,  the  prevention  of  the  further  conclusion  of  new 

assurance 

contracts 

by 

that 

undertaking 

in 

its 

territory. 

Member  States  shall  ensure  that  in their  territories  it  is possible  to 

serve  the  legal  documents  necessary  for  these  measures  on  assurance 

undertakings. 

6. 

Paragraphs  2  to  5  shall  not  affect  the  power  of  the  Member  States 

concerned  to  take  -  in  the  case  of  urgency  -  appropriate  measures  to 

prevent  or  punish  irregularities  committed  within  their  territories. 

This 

shall 

include 

the  possibility  of 

preventing 

assurance 

undertakings  from  continuing  to  conclude  new  assurance  contracts 

within  their  territories. 

7. 

If  the  undertaking  which  has  committed  the  irregularity  has  an 

establishment  or  possesses  property  in the Member  State concerned,  the 

competent  authorities  of  the  latter  may,  in  accordance  with  national 

legislation,  apply  the  administrative  penalties  prescribed  for  that 

offence  by way  of  enforcement  against  that  establishment  or  property. 

- 81 -

8. 

Any  measure  adopted  pursuant  to  paragraphs  4  to  7  involving  penalties 

or  restrictions  on  the  carrying-on  of  assurance  business  must  be 

properly  Justified  and  communicated  to  the  undertaking  concerned. 

Provision  shall  be  made  for  a  right  to  apply  in  respect  of  any  such 

measure  to  the  courts  in the Member  State  in which  it was  adopted. 

9. 

Every  two years  the  Commission  shall  submit  to  the  Council  a  report 

summarizing  the  number  and  type  of  cases  in  which,  in  each 

Member  State,  decisions  refusing  authorization  have  been  communicated 

under  Article  28  or  measures  have  been  taken  under  paragraph  4. 

Member  States  shall  cooperate  with  the Commission  by  providing  it with 

the  information  required  for  the  report. 

Article  36 

Nothing  in  this  Directive  shall  prevent  assurance  undertakings  with  head 

offices  in other  Member  States  from  advertising  their  services  through  all 

available  means  of  communication  in  the  Member  State  of  the  branch  or 

Member  State  of  provision  of  services,  subject  to  any  rules  governing  the 

form  and  content  of  such  advertising  adopted  in the  interest  of  the  general 

good. 

Article  37 

1. 

Article  21 of  the  Second  Directive  is deleted. 

2. 

In  the  event  of  an  assurance  undertaking  being  wound  up,  commitments 

arising  from  contracts  underwritten  through  a  branch  or  by  way  of 

freedom  to  provide  services  shall  be  met  in  the  same  way  as  those 

arising  from  that  undertaking's  other  assurance  contracts,  without 

distinction  of  nationality  as  far  as  the  lives  assured  and  the 

beneficiaries are  concerned. 

-  82 -

Article  38 

1. 

Article  23 of  the Second  Directive  is deleted. 

2. 

Every  assurance  undertaking  shall  inform  the  supervisory  authority  of 

its home Member  State, separately  in respect  of operations effected  by 

way  of  freedom  of  establishment  and  in  respect  of  those  effected  by 

way  of  freedom  to  provide  services,  of  the  amount  of  the  premiums, 

without  deduction  of  reinsurance,  receivable  by  Member  State  and  by 

each  of  classes  I  to  VI,  as  defined  in  the  Annex  to  the  First 

Directive. 

The  supervisory  authority  of  the  home Member  State  shall  forward  this 

information  to  the  supervisory  authorities  of  each  of 

the 

Member  States concerned  which  so  request. 

Article  39 

1. 

Article  25 of  the Second  Directive  is deleted. 

2. 

Without  prejudice  to  any  subsequent  harmonization,  every  assurance 

contract  shall  be  subject  exclusively  to  the  indirect  taxes  and 

parafiscal  charges  on  assurance  premiums  in  the  Member  State  of  the 

commitment  within  the meaning of Article 2(e) of  the Second  Directive, 

and  also, with  regard  to Spain,  to  the surcharges  legally  established 

in  favour  of  the  Spanish  "Consorcio  de  Compensaciôn  de  Seguros"  for 

the  fulfilment  of  its functions  relating  to the compensation  of  losses 

arising  from extraordinary  events occurring  in that Member  State. 

The  law applicable  to the contract  pursuant  to Article  4 of  the Second 

Directive  shall  not  affect  the  fiscal  arrangements  applicable. 

-  83  -

Each  Member  State  shall,  subject  to  future  harmonization,  apply  to 

those  undertakings  which  carry  on  business  in  its  territory,  its  own 

national  provisions  for  measures  to ensure  the  collection  of  indirect 

taxes  and  parafiscal  charges  referred  to  in the  first  subparagraph. 

TITLE V 

Final  provisions 

Article  40 

1. 

The  technical  adjustments  to  be  made  to  the  First  and  Second 

Directives  and  to  this  Directive  in  the  following  areas  shall  be 

adopted  in  accordance  with  the  procedure  laid  down  in Article  ...  of 

Council  Directive  ...  (Committee on  Insurance): 

amendments  to  the  list  set  out  in  the  Annex  to  the  First 

Directive,  or  adaptation  of  the  terminology  used  in  that 

list  to take account  of  developments on  assurance markets; 

clarification of  the  items constituting  the solvency  margin 

listed  in Article  18 of  the First  Directive  to  take  account 

of  the creation of  new  financial  instruments; 

alteration  of  the  minimum  guarantee  fund  provided  for  in 

Article  20(2)  of  the  First  Directive  to  take  account  of 

developments  In the economic  and  financial  field; 

amendments  to the  list of  admissible  assets which  may  cover 

the  technical  provisions,  set  out  in  Article  18  of  this 

Directive, and of  the  rules on  the spreading  of  investments 

laid down  in Article  19 of  this  Directive; 

-  84  -

changes  to  the  exceptions  to  the  matching  principle, 

provided  for  in Annex  1  to  this  Directive,  to  take  account 

of  the  development  of  new  currency  hedging  instruments  or 

progress  towards economic  and monetary  union; 

clarification of  the definitions  in order  to ensure  uniform 

application  of  the  First  and  Second  Directives  and  of  this 

Directive  throughout  the  Community; 

consolidation  of  the  First  and  Second  Directives,  and  this 

Direct ive. 

Article  41 

1. 

Branches  which  have  commenced  their  activities,  in accordance  with  the 

provisions  in force  in their  Member  State of  establishment, before  the 

entry  into  force  of  the  provisions  adopted  in  implementation  of  this 

Directive  shall  be  presumed  to have  been  subject  to  the procedure  laid 

down  in  Article  10(1)  to  (5)  of  the  First  Directive.  They  shall  be 

governed,  from  the date of  that  entry  into  force, by Articles  17, 23a, 

24 and  26 of  the  First  Directive  and  by Article  35 of  this  Directive. 

2. 

Articles  30  and  31  shall  not  affect  rights  acquired  by  assurance 

undertakings  transacting  business  by  way  of  freedom  to  provide 

services  before  the  entry  into  force  of  the  provisions  adopted  in 

implementation of  this  Directive. 

Article  42 

The  following  Article  is  inserted  in the First  Directive: 

"Article  31a 

-  85  -

1. 

Each  Member  State  shall,  under  the  conditions  laid  down  by  national 

law,  authorize  agencies  and  branches  set  up  in  its  territory  and 

referred  to  in  this  Title  to  transfer  all  or  part  of  their  portfolios 

of  contracts  to  an  accepting  office  established  in  the  Community,  if 

the  supervisory  authorities  of  the  Member  State  of  the  accepting 

office  certify  that  the  latter  possesses  the necessary  solvency  margin 

after  taking  the  transfer  into  account. 

2. 

A  transfer  authorized  in  accordance  with  paragraph  1  shall  be 

published,  under  the  conditions  laid  down  by  national  law,  in  the 

Member  State  of  the  commitment.  Such  transfer  shall  be  automatically 

valid  against  the  policy-holders,  the  lives  assured  and  any  other 

person  having  rights  and  obligations  arising  out  of  the  contracts 

transferred. 

This  provision  shall  not  affect  the  right  of  Member  States  to  provide 

policy-holders  with  the  option  of  cancelling  the  contract  within  a 

given  period  after  the  transfer." 

Article  43 

Member  States  shall  ensure  that  decisions  taken  in  respect  of  an  assurance 

undertaking  in pursuance  of  laws, regulations and  administrative  provisions 

adopted  in  accordance  with  this  Directive  may  be  subject  to  the  right  to 

apply  to  the courts. 

Article  44 

Member  States  shall 

bring 

into  force 

the 

laws,  regulations  and 

administrative  provisions  necessary  to comply  with  this Directive  not  later 

than  ...  They  shall  forthwith  inform  the Commission  thereof. 

When  Member  States  adopt  these  provisions,  these  shall  contain  a  reference 

to  this  Directive  or  shall  be  accompanied  by  such  reference  at  the  time  of 

their  official  publication.  The  procedure  for  such  reference  shall  be 

adopted  by Member  States. 

-  86  -

Article  45 

Upon  notification  of  this  Directive, Member  States  shall  communicate  to  the 

Commission  the  texts  of  the  main  laws,  regulations  or  administrative 

provisions  which  they  adopt  in the  field  covered  by  this  Directive. 

Article  46 

This  Directive  is addressed  to  the Member  States. 

Done  at  Brussels, 

For  the  Council 

The  President 

-  87  -

MATCHING  RULES 

ANNEX 1 

The  currency  in  which  the  assurer's  commitments  are  payable  shall  be 

determined  in accordance  with  the  following  rules: 

1. 

Where  the  cover  provided  by  a  contract  is  expressed  in  terms  of  a 

particular  currency,  the  assurer's  commitments  are  considered  to  be 

payable  in that  currency. 

2. 

Where  the cover  provided  by  a contract  is directly  linked  to  the  value 

of  units  in  a  UCITS  or  some  other  reference  value,  the  technical 

provisions must  be  represented  by  directly  equivalent  assets. 

3. 

Member  States  may  authorize  undertakings  not  to cover  their  technical 

provisions,  including  their  mathematical  provisions,  by  matching 

assets  if  application  of  the  above  procedures  would  result  in  the 

undertaking  being  obliged,  in  order  to  comply  with  the  matching 

principle,  to  hold  assets  in a currency  amounting  to  not  more  than  7% 

of  the assets existing  in other  currencies. 

4. 

Member  States  may  choose  not  to  require  undertakings  to  apply  the 

matching  principle  where  commitments  are  payable  in  a  currency  other 

than  the  currency  of  one  of  the  Community  Member  States,  if 

investments  in that  currency  are  regulated,  if the currency  is subject 

to  transfer  restrictions  or  if,  for  similar  reasons,  it  is  not 

suitable  for  covering  technical  provisions. 

5. 

Undertakings  are  authorized  not  to  hold  matching  assets  to  cover  an 

amount  not  exceeding  20%  of  their  commitments  in  a  particular 

currency. 

-  88 -

However,  total  assets  in  all  currencies  combined  must  be  at  least 

equal  to total  commitments  in all  currencies  combined. 

6. 

Each  Member  State  may  provide  that,  whenever  under  the  preceding 

procedures  a  commitment  has  to  be  covered  by  assets  expressed  in  the 

currency  of  a Member  State,  this  requirement  shall  also  be  considered 

to be satisfied when  the assets are expressed  in ecus. 

-  89  -

ANNEX  2 

Information  for  policy-holders 

The  policy-holder  must  be  informed  of  the  following  information  before 
finalising  the  contract  (A),  or  during  the  term  of  the  contract  (B).  The 
information  must  be  provided  in a  clear  and  accurate  manner,  in writing,  and  in 
the official  language of  the Member  State of  the  commitment: 

A. 

Before  finalising  the  contract 

Information  about  the 
assurance  company 

Information  about  the 
assurance  policy 

a.1  The  name of  the company  and 

a.4 

its  legal  form 

Definition of  each  benefit 
and  each  opt ion 

a.2  The  name of  the Member  State 

a.5 

Term  of  the  policy 

in which  the  head office,  and 
where  appropriate  the  agency 
or  branch  which  issues  the 
policy,  is situated 

a.3  The  address of  the  head  office 

and  where  appropriate of  the 
agency  or  branch  which  issues 
the  policy 

a.6 

a.7 

a.8 

a.9 

Means of  terminating  the 
contract 

Means of  payment  of 
premiums 

Means of  calculation  and 
distribution  of  profit 
participation 

Indications 
and 
paid-up  values,  and  the  extent  to 
which  they  are  guaranteed 

surrender 

of 

a. 10 

Information  on  the  premiums  for 
each  benefit,  both  main  benefits 
and  supplementary  benefits 

a. 11 

un 11-11nked 

For 
definition  of  the  units  to  which 
the benefits  are  linked 

poIi c i es, 

a.12 

Indication  of  the  nature  of  the 
underlying  assets  for  un it-1 inked 
poIi c i es 

-  90  -

a.13 

Application 
per iod 

of 

the  cooling-off 

a.14 

Indication  of  the  tax  arrangements 
applicable  to  the policy 

a. 15 

the 

Member 

The  address  of  the  body  or  bodies 
in 
the 
commitment  to  which  any  complaints 
of  policyholders,  lives  assured  or 
beneficiaries 
contract 
of 
should  be  addressed 

State 

the 

of 

B. 

During  the  term  of  the  contract 

In  addition  to  the  policy  conditions,  both  general  and  specific,  the 
policy-holder  must  receive  the  following  information  throughout  the  term  of  the 
contract. 

Information  about  the 
assurance  company 

Information  about  the 
assurance  policy 

b.1  Any  change  in the name of  the 

b.2 

company,  its  legal  form or 
the address of  its head  office, 
and where  appropriate of  the 
agency  or  branch  which  issues 
the  policy 

All  the  information  listed 
in points  a.4 to a.13 of  A  in 
the event  of  a change  in the 
policy  conditions or 
amendment  of  the  law 
applicable  to  the  policy 

The  detailed  application of  the above  requirements  is to be  determined  according 
to  the  law of  the Member  State of  the  commitment. 

- 91 -

FICHE  FINANCIERE 

(délai  de consultation  requis pour  la DG XIX  : 10 Jours ouvrables) 

VOLET  1 : IMPLICATIONS FINANCIERES 

1.  Intitulé de  I'action 

Prop, de directive du Conseil  : 3ème directive de coordination  dans 
le domaine  de  l'assurance  directe sur  la vie. 

2.  Lignes budgétaires concernées  : crédits de fonctionnement 

3.  Base  légale  : Art. 57 para  2 et 66 du Traité CEE 

4.  Description  de  l'action 

4.1. 

Objectifs spécifiques de  l'action  : acte  législatif 

4.2. 

Durée  : pas d'application 

4.3. 

Population visée par  l'action  : autorités  dans  les E.M. 

5.  Classification de  la dépense ou des  recettes 

5.1. 
5.2. 

DO/DNO 
CD/CND 

5.3. 

Types de recettes visées 

Réponse  : pas d'application 

6.  Nature de  la dépense ou des recettes 

6.1. 
6.2. 

6.3. 
6.4. 
6.5. 

6.6. 

Subvention à 100 % 
Subvention pour co-fInancement  avec d'autres  sources du 
secteur  public et/ou privé 
Bonification d'Intérêt 
Autres 
En cas de réussite économique de  l'action, un  remboursement 
partiel  ou total  de  l'apport  financier  communautaire  est-
II prévu ? 
L'action proposée  Implique-t-elle une modification  du 
niveau des recettes? SI oui, de quelle nature est  la 
modification et quel  type de recettes est  visé ? 

Réponse  : pas d'application 

7.  Incidence  financière sur  les crédits d'intervention  (partie B du 

budget) 

7.1. 
7.2. 

7.3. 

Indiquez  le mode de calcul  du coût  total  de  l'action 
Indiquez  la part  du  "mini-budget" dans  le coût  total  de 
l'action, explicitez  le mode de calcul. 
Echéancier  Indicatif des crédits d'engagement  et de 
paiement 

Réponse  : pas d'application 

8.  Quelles sont  les dispositions anti-fraude prévues dans la 

proposition  d'action ? 

Réponse  : pas d'application 

- 92 -

VOLET 2 : DEPENSES ADMINISTRATIVES 

(partie A du budget) 

(Volet à transmettre à la DG  IX pour avis-, celle-ci  le transmet ensuite 
à  la DG XIX) 

1.  L'action prorposée  ImpIique-t-elle une augmentation du nombre 

d'effectifs de  la Commission ? Si oui, de combien 7 

Non. 

2.  Indiquez  le montant des dépenses de fonctionnement et de personnel 
généréres  la proposition d'action.  Explicitez le mode de calcul. 

Pas d'applIcat ion 

- 93 -

VOLET  3  : ELEMENTS D'ANALYSE  COUT-EFFICACITE 

1.  Objectifs et  cohérence  avec  la programmation  financière 

1.1. 

Objectifs spécifiques de  l'action  proposée.  Il doit  être 
quantifié dans  la msure du possible et  présenté  pour 
chacune des années concernées s'il  s'agit  d'une  action 
plurlannuel le. 

Réponse  : acte  législatif  comportant  harmonisation des  législations 

1.2. 

L'action  est-elle prévue dans  la programmation  financière 
de  la DG pour  les années concernées 7 

Réponse  : pas d'application 

1.3. 

Indiquez à quel objectif  plus général  défini  dans  la 
programmation  financière de  la DG correspond  l'objectif  de 
I'action proposée 

Réponse  : programme  de  travail  législatif  de  la DG XV 

2.  Justification de  l'action 

2.1. 

Justification de  l'action  choisie  par  rapport  à une 
alternative  qui  permettrait  d'atteindre  les mêmes 
objectifs. La  justification doit se baser  notamment  sur 
trois critères  : 

a) coût 
b) effets dérivés  (Impact  au-delà  des objectifs 

spécifiques) 

c) effet  multiplicateur  (capacité  de mobilisation  d'autres 

sources de financement 

Réponse  : pas d'application; proposition  faite dans  le cadre  du 
droit  d'initiative de  la Commission  en matière  législative. 

3.  Suivi  et  évaluation  de  l'action 

3.1. 

Indicateurs de performance  sélectionnés 

3.2. 

Modalités et  périodicité de  l'évaluation  prévues 

3.3. 

Principaux  facteurs d'Incertitude pouvant  affecter  les 
résultats spécifiques de  l'action 

Réponse  : pas d'application 

94 -

with special reference to small and medium-sized enterprises (SMEs) ' 

THE IMPACT OF TEE PROPOSAL CM BUSINESS 

Title of proposal: 

Proposal for a Third Council Directive on the 
coordination of lavs, regulations and 
administrative provisions relating to direct life 
assurance and amending Directives 79/267/EEC and 
90/619/EBC 

Reference number (Répertoire):  <Xt£(91) 

1. Taking account of the principle of subsidiarity, *hy Is Community 
législation necessary in this area and uhat are Its main alms? 

To complete the Internal market in direct life assurance in accordance 
with the principles laid down in the White Paper, in order to create a 
genuine single market in this important area of financial services. 

This proposal for a Third Directive fits into a wider pattern of work to 
be undertaken with a view to completing the single market in Insurance, 
both life and non-life. 

The adoption of the Second Directives on non-life insurance (1988) and 
life assurance (1990) contributed substantially to the attainment of 
this fundamental objective of the Community.  Those Instruments laid 
down two different sets of arrangements for the pursuit of business 
under conditions of freedom of services.  The first, based on the 
approach - as mapped out in the White Paper - of home country control, 
is applicable to policy-holders who are in no need of specific 
protection by the application of their own national rules (large risks, 
provision of services on the policy-holder's Initiative).  The second, 
based an application of the rules of the country In which the service is 
provided, concerns policy-holders who do need speclfio protection (mass 
risks, life assurance commitments entered Into by the policy-holder 
without his taking the Initiative in seeking cover abroad). 

When these two Directives were adopted, the Commission formally 
undertook to present new proposals aimed at completing the Internal 
market within the time-limits prescribed by the White Paper. 

- 95 -

A proposal for a third non-life insurance coordination Directive was 
transmitted to the Council on 27 July 1990.  The present proposal for a 
Third Directive concerns life assurance and Is designed to lay down the 
provisions necessary to complete the Internal market in that branch of 
insurance. 

The arrangements proposed are based on the strategy already used to 
create the Internal market in hanking and in Investment servioes (Second 
Banking Directive and proposal for a Directive on Investment servioes), 
namely the Introduction of a single authorization system and a system of 
home country control.  Once this Directive has been adopted, all direct 
life assurance business will be subject to a single regime under which 
life assurance undertakings will be able to sell their products anywhere 
In the Community and purchasers of life assurance will have aooess to 
the widest possible market in which to find the product best suited to 
their needs at the most reasonable price. 

The Impact nn frisinfiPR 

2. Who will be affected by the proposal? 

which sectors of hiffinflss 

Insurance undertakings authorized to carry on life assurance 
activities within the meaning of the First Directive 79/267/EEC. 

Moreover, the proposal will enable buyers of insurance, many of 
whom are SMEs, to benefit from the final completion of the Internal 
market and to have aooess as a result to the full range of life 
assurance products available In the the EBC. 

which sizes of hnslnass (what Is the concentration of snail and 
medium-sized firms) 

All insurance undertakings falling within the scope of the 
Directive.  Very small undertaking 
Directive.  Very small undertakings with a local base and a small 
market share are excluded (of. 5a 
a ). 

are there particular geographical areas of the Community where 
these businesses are found 

One measures contained in the proposal for a Directive are not 
likely to affect the regions of the Community unequally. 

3. What will businesses have to do to comply with the proposal? 

The proposal for a Directive Introduces into the direct life assurance 
sector, as Is the oase with other financial servioes, the system of a 

96 -

single official authorization for an undertaking's entire business in 
the Community, and prudential supervision by the authorities of the home 
Member State. 

This approach simplifies considerably the present situation as regards 
the taking-up and pursuit of this business, characterized as it Is by a 
multiplicity of authorizations and controls. 

At the same time, home country control, on the basis of coordinated 
rules, of the holding by insurance undertakings of adequate technical 
and mathematical provisions, and of the valuation of those provisions 
and their representation by matching assets located In the Community, 
will reduce the multiplicity of arrangements now in existence.  The 
strength of insurance undertakings will be increased and safeguarded, 
and policy-holders will be better protected as a result. 

4. What eoanoBdo effects is the proposal likely to have? 

— 

on employment 

No direct effect. 

an Investment and the creation of new businesses 

The Introduction of a system of home country control will reduce 
the operating costs of insurance undertakings owing to the 
calculation at head-office level of the technical provisions In 
respect of an undertaking's entire business. 

The measures proposed for the constitution of the solvency margin 
(Inclusion of subordinated loan capital) will facilitate the 
financing of undertakings, notably mutuals and Insurance 
cooperatives, by external resources. 

— 

an the competitive position of businesses 

Community insurance undertakings will be subject to coordinated 
rules an the taking-up and pursuit of the activities of direct life 
assurance and direct non-life Insurance.  Through the creation of a 
single market they will be able to offer their Insurance products 
anywhere In the Community to any Insurance buyer.  There is 
therefore likely to be Increased competition between insurance 
undertakings and between Insurance undertakings and other financial 
institutions offering similar products. 

SHE buyers of Insurance will have a much wider range of products 
from which to choose that which is best suited to their needs in 
terms of both cover proposed and price. 

- 97 -

5. Does the proposal contain measures to take account of the specific 
situation of email and medium-sized firms (reduced or different 
requirements, eto.)? 

(a) 

frigvrarme  undertakings 

The First Directive 79/267/EBC has already laid down a series of 
provisions specifioally aimed at small or medium-sized Insurance 
undertakings.  Article 3 states that the Directive does not apply 
to pertain small and medium-sized mutual associations.  Moreover, 
the Directive permits a one-quarter reduction in the minimum 
guarantee fund required of Insurance undertakings In the case of 
mutual associations and mutual-type associations. 

The proposal for a Third Directive does not modify this treatment 
of certain Insurance undertakings. 

(b)  Insurance buyers 

The proposal for a Third Directive contains provisions aimed at 
giving Insurance buyers the necessary degree of protection when 
they concise Insurance contracts.  Insurance undertakings will 
have to render the contract subject to the law that Is applicable 
In accordance with the provisions of the proposal (as a rule, the 
law of the country in which the policy-holder Is resident).  They 
will also have to provide the policy-holder with essential 
Information about the product (Article 27).  lastly, there is a 
cooling-off period of between 14 and 30 days within which the 
policy-holder can cancel the contract. 

Consultation 

6. List the organizations which have been consulted about the proposal and 

outline their main views. 

European Insurance Committee  (EIC). 

The ETC is In favour of the present proposal for a Directive, notably as 
regards the coordination of technical provisions and of the rules 
concerning the representation, valuation and looallTation of the assets 
covering the technical provisions. 

ISSN 0254-1475 

COM (91) 57 final 

DOCUMENTS 

EN 

10 06 

Catalogue number : CB-CO-91-113-EN-C 
ISBN 92-77-70449-7 

PRICE 

1 - 30 pages: 3 JO ECU 

per additional 10 pages: 1.25 ECU 

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