Proposal for a COUNCIL DIRECTIVE AMENDED PROPOSAL FOR A THIRD COUNCIL DIRECTIVE ON THE COORDINATION OF LAWS, REGULATIONS AND ADMINISTRATIVE PROVISIONS RELATING TO DIRECT INSURANCE OTHER THAN LIFE ASSURANCE AND AMENDING DIRECTIVES 73/239/EEC AND 88/357/EEC
Date: 1992-02-24
Institutions: European Commission
Subjects: approximation of laws, freedom to provide services, insurance, insurance company, right of establishment

COMMISSION OF THE EUROPEAN  COMMUNITIES 

C0MC92) 63  final  - SYN 291 

Brussels, 24  February  1992 

Proposal  for a 

COUNCIL DIRECTIVE 

AMENDED PROPOSAL FOR A THIRD COUNCIL DIRECTIVE 

ON THE COORDINATION OF LAWS, REGULATIONS 

AND ADMINISTRATIVE PROVISIONS RELATING TO DIRECT  INSURANCE 

OTHER THAN LIFE ASSURANCE AND AMENDING DIRECTIVES 

73/239/EEC AND 88/357/EEC 

(presented by the Commission) 

MiV 

EXPLANATORY  MEMORANDUM 

On the 27th of July 1990 the Commission sent to the Council  the Proposal for 

a Third Council Directive on the co-ordination of  laws, regulations and 

administrative provisions relating to direct  insurance other than life 

assurance and amending Directives 73/239/EEC and 88/357/EEC (proposal  for a 
Third Non-Life  Insurance Directive)(1^.  The aim of this proposal  is to 

complete the single market  In the area of direct  insurance other  than life 

assurance. 

The Economic and Social Committee gave  its opinion on the 28th of February 
1991(2).  The European Parliament gave  its opinion on the 12th of February 

1992, on the basis of a report from  its Legal Committee, thus completing the 

first reading of this proposal.  Both the European Parliament and the 

Economic and Social Committee approved the general approach of the initial 

proposal based on the principle of the single  licence and single control. 

The Commission has accepted a large number of the amendments proposed by the 

European Parliament, at  least  in their  intention, if not their exact 

wording.  The same goes for several of the comments made by the Economic and 

Social Committee. 

In accordance with Article 149, paragraph 3 of the Treaty, the Commission 

has decided to amend  its initial proposal.  The changes made take account, 

not only of the amendments proposed by the European Parliament and the 

comments of the Economic and Social Committee which  it has accepted, but 

also of the current state of work  in the Council. 

Apart from the new provisions which aim to complete the system of control of 

insurance companies (confidentiality of  information held by the supervisory 

authorities  (Art.16), transfer of portfolios for branches of  insurance 

companies whose head office is not situated within the Community  (Art.53)), 

the main changes concern the rules for financial  supervision, the rôle of 

the concept of the general good, the extension of the  legal  forms allowed 

for the creation of an insurance company and the transitional periods. 

(1) JO N* C 244 of 28.9.1990, p. 28 

(2) JO N* C 102 of 18.4.1991, p. 7. 

For  the prudential  rules, the Commission  can  accept  most  of  Parliament's 

amendments  concerning  the  investment  rules,  in so  far  as they  are 

compatible with  the approach  of  the  initial  proposal  which  is to  lay down 

prudential  rules allowing mutual  recognition  of  the control  systems 

without  obstructing  the  freedom  of  action of  insurance  companies  more  than 

is necessary  for  consumer  protection  (Arts 21  and  22).  At  the same  time 

the structure of  these  articles  has been changed  in the  interests of 

clarity  and  precision. 

Further,  in as  far  as  the elements making  up  the solvency  margin  are 

concerned,  the amended  proposal  adds  to subordinated  loans,  subordinated 

securities  and  cumulative  preference  shares, with  these  three  categories 

together  being  able  to represent  up  to 50% of  the margin  (Art. 2 4 ). 

Article  28 has been  changed  to highlight  more clearly  the rôle of 

'community  filter' which  must  be played  by  the concept  of  the general  good 

in order  to avoid  the  free choice of  policyholders being  restricted  by 

national  legislation  for  reasons other  than  the needs of  consumer 

protection.  The  conditions of  application of  this concept  have  been  made 

more  precise  in a new  recital  (No.19) which  takes  account  of  the case  law 

of  the Court  of  Justice.  Going  further,  the extent  of  the general  good 

has been defined  in two areas - health  insurance  as a substitute  for 

social  security  and  insurance  against  accidents  at work  - where  the 

protection  of  the persons  insured  is particularly  important  (recitals  No. 

23 to 26 and Articles  54 and 55). 

Article  6 has also been  reviewed  to update  the  legal  forms  that  can  be 

used  in France  by  insurance  companies.  This amendment  results  from  the 

fact  that  French  provident  institutions  and mutuals  have  recently  been 

brought  under  the supervisory  rules of  the  insurance  directives.  For  the 

different  forms of  European  company  which may  be adopted  in future, 

Article  51  as amended  will  allow  the Commission  to  include  them  directly 

after  taking  the opinion  of  the  Insurance  Committee. 

-  Finally, Article  50 adapts  the  transitional  provisions of  the  Second 

Directive 88/357/EEC  to the conditions  laid down by  this proposal  for 

those Member  States who must  make  a great  effort  to adapt  to the  creation 

of  a single market. 

On  the other  hand  the Commission  has not  considered  it appropriate  to  take 

up certain other  amendments, particularly  in the  three  following  areas, 

which would  reduce  the  impact  of  the creation of  the single  market. 

-  Amendments  10, 12 and  29 would  replace non-systematic  a posteriori  control 

of  policy  conditions and  tariffs by periodic or  systematic  communication. 

The Commission  considers  that  the system of  a posteriori  control,  already 

implemented  for  large  risks  in the second  directive,  is the most 

appropriate  for  the conditions of  the single  market. 

This  is a key  element  of  the proposal  for  a third  directive;  not  to 

restrict  the  free provision of  innovative  and competitive  products, whilst 

still  allowing Member  states  to maintain  their  legal  provisions  for  the 

protection  of  the general  good. 

-  In the same way  the Commission  considers  that  the amendments which  aim  to 

maintain  the exclusive  right  of  certain  bodies  referred  to  in Article  4 of 

the  first  directive  (amendment  No. 32), even  if only  for  a  transitional 

period  (amendment  No. 6 ), go beyond  the criteria of  necessity  and 

proportionality  fixed  by  the Court  of  Justice  to  Justify  restrictions  on 

the  freedoms of  establishment  and of  provision  of  services. 

-  Finally, given  the guarantees  already  provided  by  recitals  23  to 25 and 

the new article  54, the same  reasoning  leads to the  rejection  of 

amendments  No. 8 and  44 which  aim  to maintain  the principle of 

specialisation or  the  restriction  of  separate  accounting  for  health 

insurance which  is a substitute  for  social  security. 

v. 

AMENDED  PROPOSAL  FOR  A THIRD COUNCIL  DIRECTIVE 

ON THE COORDINATION OF LAWS, REGULATIONS 

AND ADMINISTRATIVE PROVISIONS RELATING TO DIRECT  INSURANCE 

OTHER  THAN  LIFE ASSURANCE  AND AMENDING  DIRECTIVES 

.  73/239/EEC  AND  88/357/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 co-operation with the European Parliament 

(2) 

Having regard  to the Opinion of the Economic and Social  Committee 

(3) 

(1) OJ No C 244, 28.9.1990, p. 28. 
(2) Opinion delivered on  12 February  1992 (not yet published  in the Official 

Journal) and Decision of 
Journal). 

(3) OJ No C  102, 18.4.1991, p.  7. 

(not yet published  in the Official 

(1) Whereas  it is necessary  to complete the internal market  in direct  insurance 

other than  life assurance from the point of view both of the right of 

establishment  and of the freedom to provide services, to make  it easier for 

insurance undertakings with head offices  in the Community  to cover risks 

situated within the Community; 

(2) Whereas the Second Council Directive of 22 June  1988 on the co-ordination of 

laws, regulations  and administrative provisions  relating  to direct  insurance 

other than  life assurance and  laying down provisions  to facilitate the 

effective exercise of freedom to provide services and amending 

Directive 73/239/EEC  (88/357/EEC) 

has already contributed  substantially  to 

the achievement of the  internal market  in direct  insurance other  than  life 

assurance by granting policy-holders who, by virtue of their status, iheir 

size or the nature of the risks to be insured, do not  require special 

protection  in the Member State  in which a risk  is situated  complete  freedom to 

avail themselves of the widest possible  insurance market; 

(3) Whereas Directive 88/357/EEC therefore  represents an  important  stage  in the 

merging of national markets  into an integrated market  and  that stage must be 

supplemented  by other Community  instruments with a view  to enabling all 

policy-holders, irrespective of their status, their size or the nature of the 

risks to be  insured,  to have  recourse  to any  insurer with a head office  in the 

Community who carries on business  there, under the right of establishment  or 

the freedom to provide services, while guaranteeing  them adequate protection; 

(1) OJ No L  172. 4.7.1988, p.  1.  Directive  as  1-isf .-wnt»*-^ Uy 

Direct ivp 90/018/KKC  <<».J No  !. 330  2° . 1 1 1'-»°0  t 

(4) Whereas this Directive  forms part of the body of Community  legislation already 

enacted which  includes the First Council Directive of 24 July  1973 on the 

co-ordination of  laws, regulations and administrative provisions  relating to 

the taking up and pursuit of the business of direct  insurance other  than life 

assurance  (73/239/EEC) 

and the Council Directive of  19 December  1991 on 

the annual  accounts and consolidated  accounts of  insurance  undertakings 

(91/674/EEC)  ( 2 ); 

(5) Whereas the approach adopted  consists  in bringing about such harmonization as 

is essential, necessary and sufficient  to achieve  the 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 supervision by the home Member State; 

(6) Whereas, as a result, the taking up and  the pursuit  of the business of 

insurance are henceforth  to be subject  to the grant of a single  official 

authorization  issued by the competent  authorities of the Member State  in which 

an insurance undertaking has  its head office; whereas such  authorization 

enables an undertaking  to carry on business  throughout  the Community, under 

the right of establishment  or the freedom to provide services; whereas  the 

Member State of the branch or of the provision of services may no  longer 

require  insurance undertakings which wish to carry on  insurance business  there 

and which have already been authorized  in their home Member State to seek 

fresh authorization; whereas Directives  73/239/EEC and 88/357/EEC  should 

therefore be amended  along  those lines; 

(1) OJ No L 228, 16. 8.1973, p. 3.  Directive as  last amended by 

Directive 88/357/EEC  (OJ No L 172. 4.7.^988. p. 1). 

(2) OJ No L 374,  31.12.1991. p. 7. 

7. 

(7) Whereas the competent  authorities of home Member States will henceforth be 

responsible for monitoring the financial  health of  insurance undertakings, 

including their state of solvency, the establishment  of adequate  technical 

provisions and  the covering of those provisions by matching assets; 

(8) Whereas certain provisions of this Directive define minimum standards; 

whereas a home Member State may  lay down stricter  rules for  insurance 

undertakings authorized  by its own competent authorities: 

(9) Whereas the competent  authorities of the Member States must have at  their 

disposal such means of supervision  as are necessary  to ensure  the orderly 

pursuit of business by insurance undertakings  throughout  the Community 

whether carried on under the right of establishment or the 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 the internal market comprises an area without  internal  frontiers and 

involves access to all insurance business other than  life assurance 

throughout  the Community and, hence, the possibility  for any duly  authorized 

insurer to cover any of the risks referred  to in the Annex to 

Directive 73/239/EEC; whereas, to that end, the monopoly enjoyed  by certain 

bodies in certain Member States in respect of the coverage of certain  risks 

must be abolished; 

(11) Whereas the provisions on transfers of portfolios must  be adapted  to bring 

them into line with  the single authorization system  introduced  by this 

Direct ive: 

(12) Whereas Directive 91/674/EEC has already effected  the necessary  harmonization 

of the Member States' rules on the technical provisions which  insurers are 

required  to establish  to cover their commitments,  and that  harmonization 

makes  it possible  to grant mutual  recognition of those provisions; 

(13) Whereas  the rules governing  the spread,  localization and matching  of the 

assets used  to cover technical provisions must  be co-ordinated  in order to 

facilitate  the mutual  recognition of Member States' rules; whereas  that 

co-ordination must  take account  of the measures on the  liberalization of 

capital movements provided  for in the Council  Directive of 24 June  1988 for 

the implementation  of Article 67 of the Treaty  (88/361/EEC) 

and  the 

progress made by the Community  towards economic and monetary  union; 

(14) Whereas, however,  the home Member State may not  require  insurance 

undertakings  to invest  the assets covering  their technical  provisions  in 

particular categories  of assets, as such a requirement  would be  incompatible 

with the measures on the liberalization  of capital movements provided  for in 

Directive 88/361/EEC; 

(15) Whereas, pending  the adoption of a Directive on  investment  services 

harmonizing  inter alia the definition of the concept  of regulated  market, for 

the purposes of  this Directive and without  prejudice  to such  future 

harmonization  that  concept  must  be defined provisionally; whereas  that 

definition will  be  replaced by that harmonized  at Community  level which will 

give  the home Member  State of the market  the responsibilities  for these 

matters which  this Directive  transitionally gives to the  insurance 

undertaking's  home Member State; 

(1) OJ No L 178, 8.7.1988,  p. 5 

â. 

(16) Whereas the list of  items of which  the solvency margin  required  by 

Directive 73/239/EEC 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; 

(17) Whereas within the  framework of an  integrated  insurance market  policy-holders 

who. by virtue of their status, their size or the nature of  the risks  to be 

insured, do not  require special protection  in the Member State  in which a 

risk is situated  should be granted complete  freedom  to choose  the law 

applicable  to their  insurance contracts; 

(18) Whereas the harmonization  of insurance contract  law is not  a prior rendition 

for the achievement  of the internal market  in insurance; whereas,  therefore, 

the opportunity afforded  to the Member States of  imposing  the application of 

their law to insurance contracts covering  risks situated within  their 

territories  is likely  to provide adequate  safeguards  for policy-holders who 

require special protection; 

(19) 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 insurance products available  in the Community  so that  he can choose 

that which  is best  suited  to his needs; whereas  it is for the Member  State in 

which the risk  is situated  to ensure  that  there  is nothing to prevent  the 

marketing within  its territory of all  the  insurance  products offered  for sale 

in the Community  as  long as they do not  conflict  with  the  legal  provisions 

protecting the general  good  in force  in the Member State  in which  the  v\n\  is 

situated,  and  insofar as the general  good  is not  safeguarded  by  the  rules of 

the home Member State, provided  that  such  provisions must  be applied  without 

discrimination  to all undertakings  operating  in that Member  State  and be 

objectively  necessary  and  in proportion  to the objective  pursued; 

A*. 

(20) Whereas  the Member  States must be able to ensure  that  the  insurance  products 

and contract  documents used, under the right of establishment  or the freedom 

to provide services, to cover risks situated within  their territories  comply 

with such specific  legal provisions protecting  the general good  as are 

applicable; whereas  the systems of supervision  to be employed  must meet  the 

requirements  of an  integrated market  but  their employment  may not  constitute 

a prior condition  for carrying on insurance business; whereas  from this 

standpoint  systems  for the prior approval  of policy conditions do not  appear 

to be justified;  whereas  it is therefore necessary  to provide  for other 

systems better suited  to the requirements of an internal market  which enable 

every Member State  to guarantee policy-holders  adequate protection; 

(21) Whereas  if a policy-holder  is a natural person, he should  be informed  by the 

insurance undertaking  of the law which will  apply  to the contract  and of the 

arrangements  for handling policy-holders*  complaints  concerning  contracts; 

(22) Whereas Member States may provide that private health cover or health cover 

taken out on a voluntary basis may serve as a partial or complete  alternative 

to the health  cover provided  by the social  security systems; 

(23) Whereas  the nature  and social  consequences of health  insurance  contracts 

justify the competent  authorities of the Member State in which a risk is 

situated  in requiring  systematic notification of the general  and  special 

policy conditions  in order to verify that  such contracts are a partial  or 

complete  alternative  to the health cover provided  by the social  security 

system; whereas  such verification must  not be a prior condition  for the 

marketing of the products; whereas  the particular nature of health  insurance, 

serving as a partial  or complete  alternative  to the health cover provided 

44 

by the social security  system, distinguishes  it from other classes of 

indemnity  insurance  and  life assurance  insofar as it is necessary  to ensure 

that policy-holders have effective access  to private health cover or health 

cover taken out on a voluntary basis  regardless of their age or  risk profile; 

(24) Whereas  to this end some Member States have adopted  specific  legal 

provisions; whereas, to protect  the general good, it  is possible  to adopt  or 

maintain such  legal provisions  insofar as they do not unduly  restrict  the 

right of establishment  or the freedom to provide services, it being 

understood  that  such provisions must  apply  in an identical manner  whatever 

the home Member State of the undertaking may be; whereas these  legal 

provisions may differ  in nature according  to the conditions  in each  Member 

State; whereas these measures may provide for open enrolment,  rating on a 

uniform basis according to the type of policy and  lifetime  cover; whereas 

that objective may also be achieved  by requiring undertakings  offering 

private health cover or health cover taken out on a voluntary  basis  to offer 

standard policies  in line with the cover provided by statutory  social 

security schemes at a premium  rate at or below a prescribed  maximum  and to 

participate  in loss compensation  schemes; whereas, as a further  possibility, 

it may be required  that  the technical basis of private health cover or health 

cover taken out on a voluntary basis be similar  to that of  life assurance; 

(2b) Whereas, because of  the co-ordination effected  by Directive  73/239/EEC as 

amended by this Directive, the possibility,  afforded  to the Federal  Republic 

of Germany under Article  7(2)(c) of the same Directive, of prohibiting  the 

simultaneous  transaction of health  insurance and other classes  is no  longer 

justified  and must  therefore be abolished; 

It-

(26) Whereas Member States may  require any  insurance undertakings  offering 

compulsory  insurance  against  accidents at work at  their own  risk within  their 

territories  to comply with the specific provisions  laid down  in  their 

national  law on such  insurance; whereas, however,  this requirement  may not 

apply to the provisions  concerning  financial supervision,  which  are the 

exclusive  responsibility  of the home Member State; 

(27) Whereas exercise of the right of establishment  requires an undertaking  to 

maintain a permanent  presence  in the Member State of the branch;  whereas 

responsibility  for the specific  interests of insured persons and  victims in 

the case of third-party-liability motor  insurance  requires  adequate 

structures  in the Member State of the branch  for the collection  of all the 

necessary  information  on compensation  claims relating  to that  risk, with 

sufficient  powers  to represent  the undertaking vis-à-vis  injured  parties who 

could claim  compensation,  including powers  to pay such compensation,  and to 

represent  the undertaking or,  if necessary,  to arrange  for it  to be 

represented  in the courts and before  the competent  authorities  of  that  Member 

State in connection with claims  for compensation; 

(28) Whereas within  the  framework of the internal  market no Member State may 

continue to prohibit  the simultaneous  carrying on of insurance  business 

within its territory  under  the right  of establishment  and  the  freedom  to 

provide services; whereas  the option granted  to Member States  in this 

connection by Directive 88/357/EEC  should  therefore be abolished; 

(29) Whereas provision  should  be made  for a system of penalties  to be  imposed 

when,  in the Member  State  in which a risk  is situated, an  insurance 

undertaking  does not  comply with  those provisions protecting  the general good 

that are applicable  to it; 

/13. 

(30) Whereas some Member States do not subject  insurance transactions  to any  form 

of indirect  taxation, while the majority apply special  taxes and other  forms 

of contribution, including surcharges  intended  for compensation bodies; 

whereas the structures and rates of such  taxes and contributions  vary 

considerably  between  the Member States  in which  they are applied; whereas it 

is desirable  to prevent  existing differences*  leading to distortions of 

competition  in insurance services between Member States; whereas, pending 

subsequent harmonization, application of the tax systems and other  forms of 

contribution provided  for by the Member States  in which  risks are situated is 

likely to remedy that problem and  it is for the Member States  to make 

arrangements  to ensure  that such taxes and contributions are collected; 

(31) Whereas technical  adjustments  to the detailed  rules laid down  in this 

Directive may be necessary  from time to time to take account  of  the  future 

development  of the  insurance  industry; whereas the Commission will make such 

adjustments as and when necessary, after consulting  the  Insurance Committee 

set up by Directive 91/675/EEC 

, in the exercise of the  implementing 

powers conferred on  it by the Treaty; 

(32) Whereas  it  is necessary  to adopt  specific provisions  intended  to ensure 

smooth transition  from the  legal  regime in existence when this Directive 

becomes applicable  to the regime  that  it introduces, taking care not  to place 

an additional workload  on Member States' competent authorities; 

(1) 0J  No  1. 174  11.1?. 199 1  n  3? 

/y. 

(33) Whereas under Article 8c of the Treaty account  should be taken of the extent 

of the effort which must be made by certain economies at different  stages of 

development: whereas, therefore, transitional  arrangements  should  be adopted 

for the gradual application of this Directive by certain Member States, 

HAS ADOPTED THIS DIRECTIVE: 

TITLE I 

DEFINITIONS AND SCOPE 

Article 1 

For the purposes of this Directive: 

(a) "insurance undertaking" shall mean an undertaking which has  received  official 

authorization  in accordance with Article 6 of Directive 73/239/EEC; 

(b) "branch" shall mean an agency or branch of an insurance undertaking, having 

regard to Article  3 of Directive 88/357/EEC; 

(c) "home Member State" shall mean the Member State in which the head office of 

the insurance undertaking  covering a risk  is situated; 

(d) "Member State of the branch" shall mean  the Member State  in which  the branch 

covering a risk  is situated; 

It-

(e) "Member State of the provision of services" shall mean the Member State in 

which a risk  is situated, as defined  in Article 2(d) of Directive 88/357/EEC, 

if it is covered by an insurance undertaking or a branch situated  in another 

Member State; 

(f) "control" shall mean the relationship between a parent undertaking  and a 

subsidiary, as defined  in Article  1 of Directive 83/349/EEC 

, or a similar 

relationship between any natural  or  legal person and an undertaking; 

(g) "qualifying holding" shall mean 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  8 and  15 and 

of the other levels of holding referred  to in Article  15, the voting  rights 

referred to in Article 7 of Directive 88/627/EEC 

(2) 

shall  be taken  into 

account ; 

(h) "parent undertaking" shall mean a parent undertaking as defined  in Articles 1 

and 2 of Directive 83/349/EEC; 

(i) "subsidiary" shall mean 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 undertaking which  is those 

undertakings' ultimate parent undertaking; 

(I) OJ No L  193.  10. 7.1983. p.  1. 
<'.?.) 0 1 No I, MM.  17.12  1908. p. 02. 

46. 

(j) "regulated  market" shall mean a financial market  regarded  by an  undertaking's 

home Member State as a regulated market  pending  the adoption of a definition 

in a Directive on investment  services and characterized  by: 

- regular operation, and 

- the fact  that  regulations  issued or approved  by  the appropriate  authorities 

define the conditions  for the operation of the market,  the conditions  for 

access to the market  and, where  the Council  Directive of 5 March  1979 

co-ordinating  the conditions  for the admission  of securities  to official 

stock-exchange  listing  (79/279/EEC) 

applies,  the conditions  for 

admission  to  listing  imposed  in that  Directive or, where  that  Directive does 

not apply,  the conditions  to be satisfied by a financial  instrument  in order 

to be effectively  dealt  in on the market. 

For the purposes of  this Directive, a regulated market  may be situated  in a 

Member State or in a third country.  In the latter event,  the market  must be 

recognized  by  the home Member State and meet  comparable  requirements.  Any 

financial  instruments  dealt  in must  be of a quality  comparable  to that  of the 

instruments dealt  in on  the regulated market  or markets of the Member  State in 

question; 

(k) "competent  authorities" shall mean  the national  authorities which are 

empowered  by  law or regulation  to supervise  insurance undertakings. 

(1) OJ No L 66,  13.3.1979. p. 21.  Directive  as  last  amended by 

Directive 82/148/EEC  (OJ No L 62. 5.3.1982. p. 22). 

4?. 

Article 2 

1.  This Directive shall apply to the types of  insurance and undertakings  referred 

to in Article  1 of Directive 73/239/EEC. 

2.  This Directive shall apply neither to classes of  insurance or operations, nor 

to undertakings or institutions  to which Directive 73/239/EEC does not  apply, nor 

to the bodies referred  to in Article 4 of that Directive. 

Article 3 

Notwithstanding Article 2(2), Member States shall take every  step to ensure that 

monopolies  in respect of the taking up of the business of certain  classes of 

insurance, granted  to bodies established within  their territories  and  referred to 

in Article 4 of Directive 73/239/EEC, are abolished by  1 July  1994. 

TITLE II 

THE TAKING UP OF THE BUSINESS OF  INSURANCE 

Article 4 

Article 6 of Directive 73/239/EEC shall be replaced  by the following: 

"Article 6 

The  taking up of the business of direct  insurance shall  be subject  to prior 

official  authorization. 

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

Member State by: 

(a) any undertaking which establishes  its head office within the territory of 

that State; 

(b) any undertaking which, having received  the authorization  referred  to in the 

first subparagraph, extends  its'business to an entire class or to other 

classes". 

Article 5 

Article 7 of Directive 73/239/EEC shall be replaced by the following: 

"Article 7 

1.  Authorization shall be valid for the entire Community.  It shall permit an 

undertaking to carry on business  there, under either the right of establishment 

or the freedom to provide services. 

2.  Authorization shall be granted  for a particular class of insurance.  It shall 

cover the entire class, unless the applicant wishes to cover only some of the 

risks pertaining to that class, as listed  in point A of the Annex. 

However: 

(a) Member States may grant  authorization  for the groups of classes  listed in 

point B of the Annex, attaching to them the appropriate  denominations 

specified  therein; 

(b) authorization granted  for one class or a group of classes shall  also be valid 

for the purpose of covering ancillary  risks  included  in another  class  if the 

conditions  imposed  in point C of the Annex are  fulfilled". 

M. 

Article 6 

Article 8 of Directive 73/239/EEC shall be replaced by the following: 

"Article 8 

1.  The home Member State shall require every  insurance undertaking  for which 

authorization  is sought to: 

(a) adopt one of the following forms: 

- 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/onderlinge 

verzekeringmaatschappij". "société coopérâtive/cobperatieve vennootschap"; 

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

selskaber"; 

- in the case of the Federal Republic of Germany: "Aktiengesellschaft", 

"Versicherungsverein auf Gegenseitigkeit", "Offentlich-rechtlichcs 

Wettbewerbsversicherungsunternehmen"; 

- in the case of the French Republic: "société anonyme", "société  d'assurance 

mutuelle", "institution de prévoyance  régie par  le code de  la sécurité 

sociale", "institution de prévoyance régie par  le code  rural" and 

"mutuelles  régies par  le code de  la mutualité"; 

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

guarantee or unlimited; 

ZP. 

-  in the case of the  Italian Republic: "società per azioni", "società 

cooperativa",  "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"; 

-  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 

Acts,  the association  of underwriters  known as Lloyd's; 

-  in the case of the Hellenic Republic: "Avovupn etatpeta". 

"A\kr)kaa<pakLOT  Ixoq OUVETOiplopoç" ; 

-  in the case of the Kingdom of Spain: "sociedad  anônima", "sociedad mutua", 

"sociedad  cooperativa"; 

-  in the case of the Portuguese Republic: "sociedade  anônima", "mûtua de 

seguros". 

An  insurance undertaking may also adopt  the form of a European Company  (SE) 

when that  has been  established. 

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

public-law  form provided  that  such bodies have as their objects  insurance 

operations  under conditions equivalent  to those under which  private-law 

undertakings  operate; 

tA. 

(b) limit its objects to the business of insurance and operations  arising 

directly  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  17(2); 

(e) be effectively  run by persons of good repute with appropriate  professional 

qualifications or experience. 

2.  An undertaking seeking authorization to extend  its business to other classes 

or to extend an authorization covering only some of the risks pertaining  to one 

class 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  16 and, if with regard to such other classes 

Article  17(2) requires a higher minimum guarantee fund  than before, that it 

possesses that minimum. 

3.  Nothing  in this Directive shall prevent Member States  from maintaining  in 

force or introducing  laws, regulations or administrative provisions  requiring 

approval of the memorandum and articles of association and communication  of any 

other documents necessary  for the normal exercise of supervision. 

Member States shall not, however, adopt provisions  requiring  the prior approval 

or systematic notification of general  and special policy  conditions, scales of 

premiums and forms and other printed documents which an undertaking  intends to 

use in its dealings with policy-holders. 

Member States may not  retain or introduce prior notification  or approval of 

proposed  increases  in premium  rates except  as part of general  price-control 

systems. 

Nothing in this Directive shall prevent  Member States  from subjecting 

undertakings  seeking or having obtained  authorization  for class  18 in point  A of 

the Annex to checks on their direct  or indirect  resources  in staff  and  equipment, 

including  the qualification of their medical  teams and  the quality  of the 

equipment  available  to such undertakings  to meet  their commitments  arising out of 

this class of insurance. 

4.  The abovementioned provisions may not  require  that any application  for 

authorization be considered  in the light of the economic requirements  of the 

market". 

Article 7 

Article 9 of Directive  73/239/EEC shall be replaced by the following: 

"Article 9 

The scheme of operations  referred  to in Article 8(1)(c) shall  include  particulars 

or proof  concerning: 

(a) the nature of the risks which  the undertaking proposes  to cover; 

(b) the guiding principles  as to reinsurance; 

(c) the  items constituting  the minimum guarantee  fund; 

Zi. 

(d) estimates of the costs of setting up the administrative  services and  the 

organization  for securing business; the financial  resources  intended  to meet 

those costs and,  if the risks to be covered are classified  in class  18 in 

point A of the Annex, the resources at the undertaking's  disposal  for the 

provision of the assistance promised 

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

(e) estimates of management  expenses other than installation  costs, in particular 

current general expenses and commissions; 

(f) estimates of premiums or contributions and claims; 

(g) a forecast  balance sheet; 

(h) estimates of the financial  resources intended  to cover underwriting 

liabilities and the solvency margin". 

Article 8 
_______ 

f 

The competent  authorities of the home Member State shall not grant  an undertaking 

authorization  to take up the business of insurance before  they have been  informed 

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

natural or legal persons, who have qualifying holdings  in that undertaking  and of 

the amounts of those holdings. 

The same authorities  shall refuse authorization  if, taking into account  the need 

to ensure the sound and prudent management  of an  insurance undertaking,  they are 

not satisfied  as to the qualifications of the shareholders  or members. 

TITLE III 

HARMONIZATION  OF THE CONDITIONS GOVERNING THE BUSINESS OF  INSURANCE 

Chapter 1 

Article 9 

Article  13 of Directive 73/239/EEC shall be replaced by the following: 

"Article 13 

1.  The financial  supervision  of an insurance undertaking,  including  that  of the 

business  it carries on either through branches or under the freedom  to provide 

services, shall be the sole responsibility of the home Member State. 

2.  That  financial  supervision shall  include verification, with  respect  to the 

insurance undertaking's entire business, of its state of solvency,  of the 

establishment  of technical  provisions and of the assets covering  them in 

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

State under provisions adopted at Community  level. 

Where the undertaking  in question  is authorized  to cover the risks classified in 

class  18 in point  A of the Annex, supervision  shall extend  to monitoring  of the 

technical  resources which  the undertaking has at  its disposal  for the purpose of 

carrying out the assistance operations  it has undertaken  to perform,  where  the 

law of the home Member State provides  for the monitoring of such resources. 

3.  The competent  authorities  of the home Member State shall  require every 

insurance undertaking  to have sound administrative and accounting  procedures and 

adequate  internal  control mechanisms". 

t*. 

Article  10 

APticle 14 of Directive 73/239/EEC shall be replaced by the  following: 

"Article  14 

The Member State of the branch shall provide that where an insurance  undertaking 

authorized  in another Member State carries on business  through a branch the 

competent  authorities of the home Member State may, after having  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.  The authorities of the Member State of the branch may 

participate  in that  verification". 

Article 11 

Article  19(2) and  (3) of Directive 73/239/EEC shall be replaced  by the  following: 

"2.  Member States shall  require  insurance undertakings with head offices within 

their territories  to render periodically  the returns, together with  statistical 

documents, which are necessary  for the purposes of supervision.  The  competent 

authorities shall provide each other with any documents and  information  that are 

useful  for the purposes of supervision. 

3.  Every Member State shall take all  steps necessary  to ensure  that  the 

competent  authorities have  the powers and means necessary  for the supervision of 

the business of insurance undertakings with head offices within  their 

territories,  including business carried  on outwith those  territories,  in 

accordance with  the Council  Directives governing such business and  for the 

purpose of seeing that  they are  implemented. 

These powers and means must,  in particular, enable  the competent  authorities to: 

(a) make detailed  enquiries  regarding  an undertaking's  situation  and  the whole of 

its business, inter alia by: 

- gathering  information  or requiring  the submission  of documents  concerning 

its insurance business; 

- carrying out on-the-spot  investigations at the undertaking's premises; 

(b) take any measures with  regard  to an undertaking,  its directors or managers or 

the persons who control  it. that  are appropriate  and necessary  to ensure that 

that undertaking's  business continues  to comply with  the  laws,  regulations 

and administrative  provisions with which the undertaking must  comply  in each 

Member State and  in particular with  the scheme of operations  insofar as it 

remains mandatory,  and  to prevent  or remedy any  irregularities  prejudicial  to 

the interests of insured persons; 

(c) ensure that  those measures are carried  out, if need be by enforcement  and 

where appropriate  through judicial channels. 

Member States may also make provision  for the competent  authorities  to obtain any 

information regarding  contracts which  are held by intermediaries". 

Vf. 

Article  12 

1.  Article  11(2) to  (7) of Directive 88/357/EEC  is hereby  repealed. 

2.  Under the conditions  laid down by national  law, each Member State  shall 

authorize  insurance undertakings with head offices within  its territory  to 

transfer all or part  of their portfolios  of contracts, concluded  either under the 

right of establishment  or the freedom  to provide  services,  to an accepting  office 

established within  the Community,  if the competent  authorities  of the home  Member 

State of the accepting office certify  that after taking the transfer  into account 

the latter possesses  the necessary  solvency margin. 

3.  Where a branch proposes  to transfer all or part of  its portfolio  of contracts, 

concluded either under the right of establishment  or the freedom to provide 

services, the Member State of the branch shall be consulted. 

4.  In the circumstances  referred  to in paragraphs 2 and 3, the competent 

authorities of the home Member State of the transferring undertaking  shall 

authorize the transfer after obtaining the agreement  of the competent  authorities 

of the Member States  in which the risks are situated. 

V  The competent  authorities of the Member States consulted  shall give  their 

opinion or consent  to the competent  authorities of the home Member State of  the 

transferring  insurance undertaking within  three months of receiving a request;  the 

absence of any response within  that period  from the authorities  consulted  shall be 

considered  equivalent  to a favourable opinion or  tacit  consent. 

f>  A transfer authorized  in accordance with  this Article shall  be published  as 

laid down by national  law  in the Member  State  in which  the risk  is situated.  Such, 

transfers shall  automatically be valid  against  policy-holders,  insured  persons and 

any other persons having  rights or obligations  arising out  of  the contracts 

t r «M»'; f or  t od . 

ti. 

This provision shall not  affect  the Member States' rights  to give  policy-holders 

the option of cancelling  contracts within a fixed period  after a transfer. 

Article  13 

Article 20 of Directive  73/239/EEC shall be replaced  by the following: 

"Article 20 

1.  If an undertaking does not comply with Article  15, the competent  authority of 

its home Member State may prohibit  the free disposal of  its assets after having 

communicated  its intention to the competent  authorities of the Member States in 

which the risks are situated. 

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

solvency margin of which has fallen below the minimum required  under 

Article  16(3),  the competent  authority of the home Member State shall  require 

that a plan for the restoration of a sound  financial  situation be submitted  for 

its approval. 

In exceptional  circumstances, if the competent  authority  is of the opinion that 

the financial  situation of the undertaking will deteriorate  further, it may also 

restrict or prohibit  the free disposal of the undertaking's  assets.  It shall 

inform the authorities  of other Member States within  the territories of which the 

undertaking  carries on business of any measures  it has taken and  the  latter 

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

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

Article  17, the competent  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 undertaking's assets. 

It shall inform the authorities of other Member States within  the territories of 

which the undertaking carries on business accordingly and  the  latter shall, at 

the request of the former, take the same measures. 

4.  The competent authorities may further take all measures necessary  to 

safeguard  the interests of  insured persons  in the cases provided  for in 

paragraphs  1, 2 and 3. 

5.  Each Member State shall take the measures necessary  to be able, in accordance 

with its national  law, to prohibit  the free disposal of assets  located within  its 

territory at the request, in the cases provided  for in paragraphs  1, 2 and  3, of 

the undertaking's home Member State, which shall designate  the assets  to be 

covered by such measures". 

Article  14 

Article 22 of Directive 73/239/EEC shall be replaced by the following: 

"Article 22 

1.  Authorization granted  to an insurance undertaking by the competent  authority 

of its home Member State may be withdrawn by that authority  if that undertaking: 

(a) does not make use of that authorization within twelve months, expressly 

renounces  it or ceases to carry on business for more than six months, unless 

the Member State concerned has made provision  for 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  specified  in 

the restoration plan or finance scheme  referred  to in Article 20; 

(d) fails seriously  in its obligations  under the regulations  to which  it is 

subject. 

In the event  of  the withdrawal  or lapse of authorization,  the competent  authority 

of the home Member State shall  notify the competent  authorities  of the other 

Member States accordingly, and  they shall  take appropriate measures  to prevent 

the undertaking  from commencing  new operations within  their territories, under 

either the right  of establishment  or the freedom to provide  services.  The home 

Member State's competent  authority  shall, in conjunction with  those authorities, 

take all measures necessary  to safeguard  the  interests of insured  persons and, in 

particular,  shall  restrict  the free disposal  of the undertaking's  assets in 

accordance with Article  20(1),  (2), second  subparagraph, or  (3), second 

subparagraph. 

2.  Any decision  to withdraw authorization  shall be supported  by precise  reasons 

and communicated  to the undertaking  in question". 

Article  15 

1.  Member States shall  require any natural  or  legal person who proposes to 

acquire, directly or indirectly,  a qualifying  holding  in an insurance  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 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  he holds 

would  reach or exceed  20%.  33% or 50% or so that  the  insurance undertaking would 

become his  subsidiary. 

H 

The competent  authorities of the home Member State shall have up to 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 

insurance undertaking  in question, they are not satisfied as to the qualification 

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

plan in question, they may  fix a maximum period  for its implementation. 

2.  Member States shall  require any natural  or  legal person who proposes to 

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

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 he holds would  fall  below 

20%. 33% or 50% or so that the insurance undertaking would cease  to be his 

subsidiary. 

3.  On becoming aware of them, insurance undertakings shall  inform  the competent 

authorities of their home Member States of any acquisitions or disposals of 

holdings  in their capital  that cause holdings  to exceed or fall below any 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 annual general meetings of 

shareholders or members or as a result of compliance with the regulations  relating 

to companies  listed on stock exchanges. 

A.  Member States shall  require  that, where  the  influence exercised  by  the persons 

referred to in paragraph  1 is likely to operate against  the prudent  and sound 

management of an insurance 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 suspension of the exercise of the voting  rights 

attaching to the shares held by the shareholders or members  in question. 

Similar measures  shall apply to natural or  legal persons  failing  to comply with 

the obligation  to provide prior information  imposed  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  16 

1.  The Member States shall provide that all persons working or who have worked 

for the competent  authorities, as well as auditors and experts acting on behalf of 

the competent  authorities, shall be bound by the obligation of professional 

secrecy.  This means  that no confidential  information which  they may  receive while 

performing their duties may be divulged  to any person or authority whatsoever, 

except  in summary or aggregate form, such that  individual  insurance  undertakings 

cannot be identified, without  prejudice  to cases covered by criminal  law. 

31. 

Nevertheless, -where an insurance undertaking has been declared bankrupt or is 

being compulsorily wound up. confidential  information which does not concern third 

parties involved  in attempts  to rescue that undertaking may be divulged  in civil 

or commercial proceedings. 

2.  Paragraph  1 shall not prevent  the competent  authorities of different  Member 

States from exchanging  information  in accordance with the Directives  applicable to 

insurance undertakings.  Such  information shall be subject  to the conditions of 

professional  secrecy  laid down  in paragraph  1. 

3.  Member States may conclude co-operation agreements providing  for exchanges of 

information with the competent  authorities of third countries only  if the 

information disclosed  is subject  to guarantees of professional  secrecy at  least 

equivalent  to those provided  for in this Article. 

4.  Competent  authorities  receiving confidential  information under paragraph 1 

or 2 may use it only  in the course of their duties: 

- to check  that the conditions governing  the taking up of the business of 

insurance are met  and to facilitate monitoring of the conduct of such business, 

especially with regard  to the monitoring of technical  provisions, solvency 

margins, and administrative  and accounting procedures and  internal  control 

mechanisms, 

- to impose sanctions, 

-  in administrative  appeals against decisions of the competent  authorities, or 

- in court proceedings  initiated  under Article  55 or under special  provisions 

provided  for in the Directives adopted  in the field of insurance undertakings. 

5.  Paragraphs  1 and 4 shall not preclude  the exchange of information within a 

Member State, where there are two or more competent  authorities  in the same Member 

State, or between Member States, between competent  authorities and: 

- authorities  responsible  for the official  supervision of credit  institutions and 

other financial organizations  and the authorities  responsible  for the 

supervision of financial markets, 

- bodies  involved  in the  liquidation and bankruptcy of  insurance undertakings and 

in other similar procedures, and 

- persons responsible  for carrying out statutory audits of the accounts of 

insurance undertakings  and other financial  institutions, 

in the discharge of their supervisory  functions, or the disclosure  to bodies which 

administer compulsory winding-up proceedings or guarantee  funds of  information 

necessary  to the performance  of their duties.  The information  received  by those 

authorities, bodies and persons shall be subject to the conditions of professional 

secrecy  laid down in paragraph  1. 

6.  In addition, notwithstanding  paragraphs  1 and 4, the Member States may, under 

provisions  laid down by  law, authorize  the disclosure of certain  information to 

other departments of their central government  administrations  responsible  for 

legislation on the supervision of credit  institutions, financial  institutions, 

investment  services  and  insurance companies and to inspectors acting on behalf of 

those departments. 

jr. 

However, such disclosures may be made only where necessary  for reasons of 

prudential  control. 

The Member States shall, however, provide that information  received  under 

paragraphs 2 and 5 and that obtained by means of the on-the-spot  verification 

referred to in Article  14 of Directive 73/239/EEC may never be disclosed  in the 

cases referred  to in this paragraph except with the express consent  of the 

competent  authorities which disclosed  the information or of the competent 

authorities of the Member State  in which the on-the-spot verification  was carried 

out. 

Chapter 2 

Article 17 

Article  15 of Directive 73/239/EEC shall be replaced by  the following: 

"Article  15 

1.  The home Member State shall require every insurance undertaking  to establish 

adequate technical provisions  in respect of its entire business. 

'The amount of such technical provisions shall be determined  in accordance with 

the rules  laid down  in Directive 91/674/EEC. 

2.  The home Member State shall require every insurance undertaking  to cover the 

technical  provisions  in respect of  its entire business by matching  assets in 

accordance with Article 6 of Directive 88/357/EEC.  In respect  of  risks situated 

within  the European Community, those assets must be  localized within  the 

Community.  Member States  shall not  require  insurance undertakings  to  localize 

their assets  in any particular Member State.  The home Member  State may, however, 

permit  relaxations  in the rules on the  localization of assets. 

3.  If the home Member State allows any technical  provisions  to be covered by 

claims against  reinsurers, it shall  fix the percentage  so allowed.  In such 

cases,  it may not  specify  the localization of the assets  representing  such 

claims". 

Article 18 

Article  15a of Directive  73/239/EEC  shall be replaced  by the  following: 

"Article  15a 

1.  Member States shall  require every  insurance undertaking with  a head  office 

within their territories which underwrites  risks included  in class  14 in point A 

of the Annex  (hereinafter  referred  to as "credit  insurance") to set  up an 

equalization  reserve  for the purpose of offsetting  any technical  deficit  or 

above-average  claims  ratio arising  in that  class  in any financial  year. 

2.  The equalization  reserve shall be calculated  in accordance with  the rules 

laid down by the home Member State  in accordance with one of  the  four methods set 

out  in point  D of the Annex, which shall be regarded as equivalent. 

3.  Up to the amount  calculated  in accordance with the methods  set  out  in point D 

of the Annex,  the equalization  reserve shall be disregarded  for  the purpose of 

calculating  the solvency margin. 

3?. 

4.  Member States may exempt  insurance undertakings with head  offices within 

their territories  from the obligation  to set up equalization  reserves  for credit, 

insurance business where the premiums or contributions  receivable  in respect of 

credit  insurance are  less than 4% of the total premiums or  contributions 

receivable by them and  less than ECU 2 500 000". 

Article  19 

Article 23 of Directive 88/357/EEC  is hereby  repealed. 

Article 20 

The assets covering  the technical provisions  shall  take account  of the type of 

business carried  on by an undertaking  in such a way as to secure  the safety, yield 

and marketability of its investments, which the undertaking  shall  ensure are 

diversified  and adequately  spread. 

Article 21 

1. The home Member State may not authorize  insurance undertakings  to cover their 

technical provisions with any but  the following categories of assets: 

A.  Investments 

(a) debt securities, bonds and other money and capital market  instruments; 

(b) loans; 

(c) shares and other variable-yield  participations; 

n-

(d) units  in undertakings  for collective  investment  in transferable  securities 

and other investment funds; 

(e) land, buildings and  immovable property rights; 

B. Debts and claims 

(f) debts owed by reinsurers, including  reinsurers' shares of  technical 

provisions; 

(g) deposits with and debts owed by ceding undertakings; 

(h) debts owed by policy-holders and  intermediaries arising out of direct and 

reinsurance operations; 

(i) claims arising out of salvage and subrogation; 

(j) tax recoveries; 

(k) claims against guarantee funds; 

C. Others 

(1) tangible fixed  assets, other than  land and buildings, valued  on the basis 

of prudent  amortization; 

(m) cash at bank and  in hand, deposits with credit  institutions  and any other 

bodies authorized  to receive deposits; 

(n) deferred  acquisition costs; 

(o) accrued  interest  and  rent, other accrued  income and prepayments. 

#. 

In the case of the association of underwriters known as Lloyd's, asset  categories 

shall also  include guarantees and  letters of credit  issued by credit  institutions 

within the meaning of Directive  77/780/EEC 

or by insurance undertakings, 

together with verifiable  sums arising out of  life assurance policies,  to the 

extent  that  they represent  funds belonging  to members. 

The inclusion of any asset or category of assets  listed  in this paragraph  shall 

not mean that  all  categories of assets must  automatically be accepted  as cover for 

technical  provisions.  The home Member State shall  lay down more detailed  rules 

fixing the conditions  for the use of acceptable assets;  in this connection,  it may 

require valuable  security or guarantees, particularly  in the case of debts owed by 

reinsurers. 

In the determination  and  the application of the rules which  it lays down, the home 

Member State shall, in particular, ensure that  the following principles  are 

complied with: 

(i) assets covering technical provisions must  be valued  net of any debts arising 

out of their acquisition; 

(ii) all assets must  be valued on a prudent  basis, allowing  for the  risk of any 

amounts' not being  realizable.  In particular,  tangible  fixed  assets other 

than  land and buildings may be accepted as cover for technical  provisions 

only  if they are valued on the basis of prudent  amortization; 

MI  o.j No L 322,  17.12.1977, p. 30.  Directive as  last  amended by 

Directive 89/646/EEC  (OJ No L 386.  30.12.1989. p.  I). 

*0 

(iii) loans, whether to undertakings, to State authorities or  international 

organizations, to local or regional authorities or to natural  persons, may 

be accepted  as cover for technical  provisions only  if there are  sufficient 

guarantees as to their security, whether these are based on the status of 

the borrower, mortgages, bank guarantees or guarantees granted  by  insurance 

undertakings or other forms of security; 

(iv) derivative  instruments  such as options, futures and swaps  in connection 

with assets covering technical provisions may be used  insofar as they 

contribute  to a reduction of investment  risks or facilitate  efficient 

portfolio management.  They must  be valued on a prudent  basis and may be 

taken into account  in the valuation of the underlying assets; 

(v) transferable securities which are not dealt  in on a regulated  market may be 

accepted  as cover for technical  provisions only  if they can be  realized in 

the short  term; 

(vi) debts owed by and claims against  a third party may be accepted  as cover for 

technical provisions only after deduction of all amounts owed  to the same 

third party; 

(vii) the value of any debts and claims accepted as cover for technical  provisions 

must be calculated  on a prudent basis, with due allowance  for the risk of 

any amounts not being  realizable.  In particular, debts owed by 

policy-holders  and intermediaries  arising out of  insurance and  reinsurance 

operations may be accepted only  insofar as they have been outstanding for 

not more than three months; 

f1. 

(vin) where the assets held  include an investment  in a subsidiary  undertaking 

which manages all or part of the insurance undertaking's  investments  on its 

behalf, the home Member State must, when applying  the rules and  principles 

laid down in this Article, take into account  the underlying assets held by 

the subsidiary undertaking;  the home Member State may  treat  the assets of 

other subsidiaries  in the same way; 

d x) deferred  acquisition costs may be accepted as cover for technical 

provisions only  to the extent  that that  is consistent with the calculation 

of the technical provision for unearned premiums. 

2.  Notwithstanding  paragraph  1, in exceptional  circumstances and at an insurance 

undertaking's request, the home Member State may. temporarily  and under a properly 

reasoned decision, accept other categories of assets as cover for technical 

provisions, subject  to Article 20. 

Article 22 

1.  As regards the assets covering technical provisions, the home Member State 

shall require every insurance undertaking  to invest no more than: 

(a) 10%,of its total gross  technical provisions  in any one piece of  land or 

building, or a number of pieces of land or buildings close enough to each 

other to be effectively  considered  as one investment; 

ftz. 

(b) 5% of its total gross  technical provisions  in shares and other negotiable 

securities treated  as shares, bonds, debt  securities and other money and 

capital market  instruments from the same undertaking, or in loans granted to 

the same borrower, taken together, the  loans being  loans other  than  those 

granted  to a State, regional or local authority or to an  international 

organization of which one or more Member States are members.  This  limit may 

be raised  to  10% if an undertaking does not  invest more than 40% of  its gross 

technical provisions  in the loans or securities of  issuing bodies and 

borrowers  in each of which  it invests more than 5% of its assets; 

(c) 5% of its total gross technical provisions  in unsecured  loans, including  1% 

for any single unsecured  loan, other than loans granted  to credit 

institutions, insurance undertakings  - insofar as Article 8 of  Directive 

73/239/EEC allows  it - and  investment undertakings established  in a Member 

State; 

(d) 3% of its total gross technical provisions  in the form of cash  in hand; 

(e) 10% of its total gross technical provisions  in shares, other securities 

treated as shares and debt securities, which are not dealt  in on a regulated 

market. 

2.  The absence of a limit  in paragraph  1 on investment  in any particular  category 

does not  imply that assets  in that category  should be accepted  as cover for 

technical provisions without  limit.  The home Member State shall  lay down more 

n. 

detailed  rules fixing the conditions  for the use of acceptable  assets. In 

particular it shall  ensure,  in the determination  and  the application of those 

rules,  that  the following principles are complied with: 

(i) assets covering  technical  provisions must  be diversified  and  spread  in such 

a way as to ensure  that  there is no excessive  reliance on any  particular 

category of asset,  investment  market  or  investment; 

(ii) investment  in particular types of asset which show high  levels of risk, 

whether because of the nature of the asset  or the quality  of the issuer, 

must be restricted  to prudent  levels; 

(iii) limitations  on particular categories of asset must  take account  of the 

treatment  of reinsurance  in the calculation of technical provisions; 

d v) where the assets held  include an  investment  in a subsidiary  undertaking 

which manages all or part of the insurance undertaking's  investments  on its 

behalf,  the home Member State must, when applying  the rules and  principles 

laid down  in this Article, take  into account  the underlying  assets held by 

the subsidiary  undertaking;  the home Member State may  treat  the assets of 

other subsidiaries  in the same way; 

(v) the percentage of assets covering  technical  provisions which are the 

subject  of non-liquid  investments must  be kept  to a prudent  level; 

V-Y 

(vi) where the assets held  include  loans to or debt  securities  issued  by certain 

credit  institutions, the home Member State may, when applying  the rules and 

principles  laid down  in this Article, take into account  the underlying 

assets held by such credit  institutions.  This treatment  may be applied  only 

where the credit  institution has  its head office  in a Member  State, is 

entirely  owned  by that Member State and/or that State's  local  authorities 

and  its business, according  to its memorandum  and articles  of association, 

consists of extending,  through  its intermediaries,  loans  to or guaranteed by 

the State or local  authorities, or  loans to bodies closely  linked  to the 

State or to  local authorities. 

3.  In the context  of the detailed  rules  laying down the conditions  for the use of 

acceptable assets, the Member State shall give more  limitative  treatment  to: 

- any loan unaccompanied  by a bank guarantee, a guarantee  issued  by an  insurance 

undertaking,  a mortgage or any other form of security,  as compared  with  loans 

accompanied  by such collateral; 

- UCITS not co-ordinated  within  the meaning of Directive 85/611/EEC 

and other 

investment  funds, as compared  with UCITS co-ordinated  within  the meaning of that 

Directive; 

- securities which are not  dealt  in on a regulated market,  as compared  with  those 

which are; 

(1) OJ No L 375, 31.12.1985, p. 3.  Directive  as amended  by Directive  88/220/EEC 

(OJ No L 100,  19.4.1988. p. 31). 

V5 

- bonds, oebt securities and other money and capital market  instruments not  issued 

by States, local or regional  authorities or undertakings belonging  to Zone A as 

defined  in Directive 89/647/EEC 

, or the issuers of which are  international 

organizations not numbering at  least one Community Member State among  their 

members, as compared with the same  financial  instruments  issued by such bodies. 

4.  Member States may  raise  the  limit  laid down  in paragraph  K b)  to 40% in the 

case of certain debt  securities when these are issued by a credit  institution 

which has its head office  in a Member State and  is subject  by  law to special 

official supervision designed  to protect  the holders of those debt  securities.  In 

particular, sums deriving  from the issue of such debt securities must  be  invested 

in accordance with the  law in assets which, during the whole period of validity of 

the debt securities, are capable of covering claims attaching  to the debt 

securities and which would  be used on a priority basis  for the reimbursement  of 

the principal  and payment of the accrued  interest. 

5.  Member States shall not  require  insurance undertakings  to invest  in particular 

categories of assets. 

6.  Notwithstanding paragraph  1, in exceptional  circumstances and at an  insurance 

undertaking's  request, the home Member State may, temporarily and under a properly 

reasoned decision, allow exceptions  to the rules  laid down in paragraph  1(a) 

to (e). subject  to Article 20. 

(I) OJ No I, 386. 30.12.1989. p. 14. 

fir. 

Article 23 

Points 8 and 9 of Annex  1 to Directive 88/357/EEC shall be replaced  by the 

following: 

"8.  Insurance undertakings may hold non-matching  assets to cover an amount  not 

exceeding 20% of their commitments  in a particular  currency. 

9.  A Member State may provide  that when under the preceding procedures a 

commitment  must  be covered by assets expressed  in a Member State's  currency  that 

requirement  shall also be considered  as satisfied when the assets  are expressed 

in ecus". 

Article 24 

Article  16(1) of Directive  73/239/EEC  shall  be replaced by the following: 

"1.  The home Member State shall  require every  insurance undertaking  to establish 

an adequate solvency margin  in respect  of  its entire business. 

The solvency margin shall correspond  to the assets of the undertaking  free of any 

foreseeable  liabilities  less any intangible  items.  In particular  the  following 

shall be included: 

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

the effective  initial  fund plus any members' accounts which meet  all  the 

following criteria: 

(a) the memorandum  and articles of association must  stipulate  that payments may 

be made from these accounts  to members  only  insofar as that does not  cause 

the solvency margin  to fall below  the required  level, or, after  the 

dissolution of the undertaking,  if all of the undertaking's  other debts 

have been settled; 

<? 

(b) the memorandum  and articles of association must  stipulate, with  respect  to 

any such payments  for reasons other than the  individual  termination of 

membership,  that  the competent  authorities must  be notified  at  least one 

month in advance and can prohibit  the payment  within  that  period and 

(c) the relevant  provisions of the memorandum  and articles of association may 

be amended  only after  the competent  authorities have declared  that  they 

have no objection  to the amendment,  without  prejudice  to the criteria 

stated  in  (a) and (b); 

- one-half of the unpaid  share capital or initial  fund, once  the paid-up part 

amounts to 25% of that  share capital or fund: 

- reserves  (statutory  reserves and free reserves) not corresponding  to 

underwriting  liabilities; 

- any profits brought  forward; 

-  in the case of a mutual  or mutual-type association with variable contributions, 

any claim which  it has against  its members by way of a call  for supplementary 

contribution, within  the financial year, up to one-half  of the difference 

between the maximum  contributions  and the contributions  actually  called  in, and 

subject  to a limit of 50% of the margin; 

- at  the request  of and on the production  of proof by the insurance undertaking, 

any hidden  reserves arising out  of  the undervaluation of assets,  insofar ar* 

those hidden  reserves  are not of an exceptional nature; 

Ht 

cumulative preferential  share capital and  subordinated  loan capital, up to 50% 

of the margin, no more than 25% of which shall consist  of subordinated  loans 

with a fixed maturity,  or fixed-term cumulative  preferential  share capital, if 

the following minimum  criteria are met: 

(a) in the event  of the bankruptcy  or  liquidation  of the  insurance  undertaking, 

binding agreements must  exist  under which  the subordinated  loan capital or 

preferential  share capital  ranks after the claims of all other  creditors 

and  is not  to be repaid until all other debts outstanding  at  the time have 

been settled. 

Subordinated  loan capital must  fulfil  the following additional  conditions: 

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

(c) for loans with a fixed maturity  the original maturity must  be at  least  five 

years.  No  later than one year before the repayment  date the  insurance 

undertaking must  submit  to the competent  authorities  for their approval a 

plan showing how the solvency margin will be kept at or brought  to the 

required  level at maturity, unless the extent  to which  the  loan may  rank as 

a component  of the solvency margin  is gradually  reduced  during at  least the 

last  five years before  the repayment  date.  The competent  authorities may 

authorize the early  repayment  of such  loans provided  application  is made by 

the issuing  insurance undertaking and  its solvency margin will not  fall 

below the required  level; 

H. 

(d) loans the maturity of which  is not  fixed must  be repayable  only  subject  to 

five years' notice  unless  the  loans are no  longer considered  a component  of 

the solvency margin or unless the prior consent  of  the  competent 

authorities  is specifically  required  for early  repayment.  In the  latter 

event  the  insurance undertaking must  notify  the competent  authorities at 

least  six months before  the date of the proposed  repayment,  specifying  the 

actual and  required  solvency margins both before and after  that  repayment. 

The competent  authorities shall authorize  repayment  only  if the  insurance 

undertaking's  solvency margin will  not  fall below  the required  level; 

(e) the  loan agreement  must  not  include any clause providing  that  in specified 

circumstances, other than the winding-up of the insurance undertaking,  the 

debt will become  repayable before  the agreed  repayment  date; 

(f) the loan agreement  may be amended only after the competent  authorities  have 

declared  that  they have no objection  to the amendment; 

securities with no specified maturity  date and other  instruments  that  fulfil 

the following  conditions,  including  cumulative preferential  shares other than 

those mentioned  in the preceding  indent, up to 50% of the margin  for the  total 

of such securities and  the subordinated  loan capital  referred  to  in the 

preceding  indent : 

(a) they may not  be repaid on the initiative of the bearer or without  the prior 

consent  of the competent  authority; 

(b) the contract  of  issue must  enable  the  insurance undertaking  to deter  the 

payment  of  interest  on the loan; 

r<> 

(c) the lender's claims on the insurance undertaking must  rank entirely after 

those of all non-subordinated  creditors; 

(d) the documents governing  the  issue of the securities must  provide  for the 

loss-absorption  capacity of the debt  and unpaid  interest, while enabling 

the insurance undertaking  to continue  its business; 

(e) only fully paid-up amounts may be taken into account". 

Article 25 

No more than three years after the date of application of this Directive  the 

Commission  shall submit a report  to the  Insurance Committee  on the need  for 

further harmonization of the solvency margin. 

Article 26 

Article  18 of Directive 73/239/EEC shall be replaced  by the  following: 

"Article 18 

1.  Member States shall not prescribe any rules as to the choice of assets that 

need not be used  as cover for the technical  provisions  referred  to in Article 15. 

2.  Subject  to Article  15(2), Article  20(1).  (2).  (3) and  (5) and  the last 

subparagraph of Article  22(1),  Member States shall not  restrain  the free disposal 

of those assets, whether movable or immovable, that  form part  of  the assets of 

authorized  insurance undertakings. 

•ri. 

3.  Psraeraohs  1 and 2 shall not preclude any measures which Member States, while 

safeguarding the interests of insured persons, are entitled  to take as owners or 

members of or partners  in the undertakings  in question". 

Chapter 3 

Article 27 

Article 7(1)(f) of Directive 88/357/EEC  shall be replaced by the  following: 

"(f) in the case of the risks referred  to in Article  5(d) of Directive  73/239/EEC, 

the parties  to the contract may choose any  law". 

Article 28 

The Member State  in which a risk is situated  shall not  prevent  a policy-holder 

from concluding a contract  with an insurance undertaking authorized  under the 

conditions of Article 6 of Directive 73/239/EEC, as  long as that  does not  conflict 

with  legal provisions protecting  the general  good  in the Member State  in which the 

risk  is situated. 

Article 29 

Member States shall  not adopt provisions  requiring  the prior approval  or 

systematic notification of general and special policy  conditions, scales of 

premiums, or forms and other printed  documents which  an  insurance  undertaking 

intends to use  in its dealings with policy-holders.  They may only  require 

non-systematic notification  of those policy conditions and other documents  for the 

J%. 

purpose of verifying compliance with national provisions  concerning  insurance 

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

undertaking's  carrying on its business. 

Member States may not retain or introduce prior notification  or approval of 

proposed  increases in premium rates except as part of general  price-control 

systems. 

Article 30 

1.  Article 8(4)(b) of Directive 88/357/EEC shall be deleted.  Article 8(4)(a)of 

that Directive  shall therefore be amended  to read as follows: 

"(a) Subject to subparagraph  (c), the third subparagraph of Article 7(2) shall 

apply where the insurance contract provides cover in two or more Member 

States, at least one of which makes insurance compulsory". 

2.  Notwithstanding  any provision to the contrary, a Member State which makes 

insurance compulsory may require that the general and special conditions of the 

compulsory  insurance be communicated  to its competent  authority before being 

circulated. 

Article 31 

1.  Before an insurance contract  is concluded  the insurance undertaking  shall 

inform the policy-holder of: 

- the law applicable  to the contract where the parties do not have a free choice 

or the fact  that the parties are free to choose the  law applicable  and, in the 

latter case, the law the insurer proposes to choose; 

* 3. 

- the arrangements for handling policy-holders*  complaints  concerning  contracts 

including, where appropriate,  the existence of a complaints  body, -without 

prejudice  to the policy-holder's right  to take  legal proceedings. 

2.  The obligation  referred  to  in paragraph  1 shall apply only where  the 

policy-holder  is a natural  person. 

3.  The rules for implementing  this Article shall  be determined  in accordance with 

the  law of the Member State  in which the risk  is situated. 

TITLE IV 

PROVISIONS RELATING TO THE RIGHT OF  ESTABLISHMENT 

AND THE FREEDOM TO PROVIDE SERVICES 

Article 32 

Article  10 of Directive  73/239/EEC shall be replaced  by the  following: 

"Article  10 

1.  An insurance undertaking  that proposes to establish a branch within  the 

territory of another Member  State shall notify  the competent  authorities  of its 

home Member State. 

2.  The Member States  shall  require every  insurance undertaking  that  propose:- to 

establish a branch within  the territory of another Member State  to provide  the 

following  information when effecting  the notification  provided  for in 

paragraph  1 : 

(n)  the Member  State within  the territory  of which  it proposes  to establish n 

branch; 

*¥• 

(b) a scheme of operations setting out  inter alia 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  and to which  they may be delivered,  it being understood  that  that 

address shall be the one to which communications  to the authorized  agent are 

sent; 

(d) the name of the branch's authorized  agent, who must  possess  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 arising out of underwritten  commitments,  insured persons must not 

be treated  less favourably  than  if the  litigation had been brought  against 

businesses of a conventional  type.  The authorized  agent must,  therefore, 

possess sufficient  powers for proceedings  to be taken against  him and must  in 

that capacity be able to bind  the Lloyd's underwriters  concerned. 

Where the undertaking  intends  its branch  to cover risks  in class  10 of point A of 

the Annex to Directive  73/239/EEC, not  including carrier's  liability,  it must 

produce a declaration  that  it has become a member of the national  bureau  and the 

national guarantee  fund of the Member State of the branch. 

ff. 

3.  unless  tne competent  authorities of  the home Member State have  reason to 

doubt  tne aoequacy 01 the administrative  structure or the  financial  situation of 

the insurance undertaking or the good  repute and professional  qualifications or 

experience of the directors or managers or the authorized  agent,  taking  into 

account  the business planned, they shall within  three months of receiving all 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 competent authorities of the home Member State shall also attest  that the 

insurance undertaking has the minimum solvency margin calculated  in accordance 

with Articles  16 and 17. 

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 the reasons for their refusal  to the 

undertaking concerned within three months of receiving all  the information in 

question.  That  refusal or failure to act may be subject  to a right  to apply to 

the courts in the home Member State. 

4.  Before the branch of an insurance undertaking  starts business, the competent 

authorities of  the Member State of the branch shall, within  two months of 

receiving the information  referred to in paragraph  3. inform the competent 

authority of the home Member State, if appropriate, of  the conditions under 

winch,  in the interest oi  the general good, that business must  be carried  on in 

the Member State of the branch. 

ft 

5.  On receiving 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 start 

business. 

6.  In the event  of a change  in any of the particulars  communicated  under 

paragraph  2(b), (c) or  (d), an insurance undertaking  shall give written  notice of 

the change to the competent  authorities of the home Member State and of the 

Member State of the branch at  least one month before making  the change  so that 

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

of the Member State of the branch may  fulfil their respective  roles  under 

paragraphs  3 and 4". 

-  Article  11  of  Directive  73/239/EEC  is  hereby  repealed. 

Article 33 

Article  34 

Article  14 of Directive 88/357/EEC shall be replaced by the  following: 

"Article  14 

Any undertaking  that  intends to carry on business  for the first  time  in one or 

more Member States under the freedom  to provide services shall  first  inform  the 

competent  authorities  of the home Member State, indicating  the nature of the 

risks  it proposes  to cover". 

*?• 

Article 35 

Article  16 of Directive  88/357/EEC shall be replaced by  the following: 

"Article  16 

1.  Within one month of  the notification provided  for  in Article  14, the 

competent  authorities  of  the home Member State shall  communicate  to  the Member 

State or Member States within  the territories of which an undertaking  intends to 

carry on business under  the freedom  to provide services: 

(a) a certificate  attesting  that  the undertaking has the minimum  solvency  margin 

calculated  in accordance with Articles  16 and  17 of Directive  73/239/EEC; 

(b) the classes of insurance which the undertaking has been authorized  to offer; 

(c) the nature of the risks which the undertaking proposes  to cover  in the 

Member State of the provision of services. 

At the same time,  they shall  inform  the undertaking  concerned  accordingly. 

fcach Member State within  the territory of which  an undertaking  intends, under 

the freedom to provide  services, to cover risks  in class  10 of point  A of the 

Annex to Directive  73/239/EEC other than carrier's  liability may  require  that 

the undertaking: 

- communicate  the name and address of the representative  referred  to in 

Article  12a(4) of  this Directive. 

- produce a declaration  that  the undertaking  has become a member  of  the national 

bureau  and national  guarantee  fund of  the Member State of  the provision of 

servi ces. 

Si. 

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. 

That  refusal  shall be subject  to a right  to apply  to the courts  in the home Member 

State. 

3.  The undertaking may start  business on the certified  date on which  it is 

informed of the communication  provided  for in the first  subparagraph of 

paragraph 1". 

Article  17 of Directive  88/357/EEC  shall be replaced by  the  following: 

Article 36 

"Article 17 

Any change which an undertaking  intends  to make  in the  information  referred  to 

in Article  14 shall be subject  to the procedure provided  for in Articles  14 

and 16". 

Article 37 

Article  12(2),  second  and  third  subparagraphs. Article  12(3) and Articles  13 

and  15 of Directive 88/357/EEC  are hereby  repealed. 

Article 38 

The competent authorities  of the Member  State of the branch or the Member State of 

the provision of services may  require that  the information which  they are 

authorized under this Directive  to request with  regard  to the business of 

insurance undertakings  operating within  the territory  of that  State  shall  be 

supplied  to them  in the official  language or  languages of  that State. 

a 

Article 39 

1.  Article  18 of Directive 88/357/EEC  is hereby  repealed. 

2.  The Member State of the branch or of the provision of services  shall  not adopt 

provisions  requiring the prior approval  or systematic notification of general and 

special policy conditions, scales of premiums, or forms and other printed 

documents which an undertaking  intends  to use  in its dealings with policy-holders. 

It may only require an undertaking  that proposes  to carry on insurance  business 

within  its territory, under the right of establishment  or the freedom  to provide 

services, to effect non-systematic notification of those policy conditions and 

other documents  for the purpose of verifying compliance with  its national 

provisions concerning  insurance contracts, and that  requirement may not  constitute 

a prior condition  for an undertaking's carrying on its business. 

3.  The Member State of the branch or of the provision of services may not retain 

or introduce prior notification or approval of proposed  increases  in premium rates 

except as part of general  price-control systems. 

Article 40 

1  Article  19 of Directive 88/357/EEC  is hereby  repealed. 

2.  Any undertaking  carrying on business under the right of establishment  or the 

freedom to provide services shall submit  to the competent authorities of the 

Member State of the branch and/or the Member State of  the provision  of service 

all documents requested  of  it for the purposes of this Article  insofar as 

undertakings with  head offices  in those Member States are also obliged  to do so 

to 

3.  If the competent  authorities of a Member State establish  that  an undertaking 

with a branch or carrying on business under the freedom  to provide  services within 

its territory  is not  complying with the  legal provisions  applicable  to it in that 

State, they shall  require the undertaking  concerned  to remedy  that  irregular 

situation. 

4.  If the undertaking  in question  fails  to take the necessary  action, 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  remedies 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  those 

measures prove  inadequate or are lacking  in that State,  the undertaking  persists 

in infringing 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 penalize  further  infringements,  including, 

insofar as is strictly necessary, preventing  that undertaking  from continuing to 

conclude new  insurance  contracts within  its territory.  Member States shall ensure 

that within their territories  it is possible to serve  the  legal  documents 

necessary  for such measures on insurance undertakings. 

6.  Paragraphs  3, 4 and  5 shall not  affect  the emergency  powers of the Member 

States concerned  to take appropriate measures  to prevent  irregularities within 

their territories.  This shall  include  the possibility  of preventing  insurance 

undertakings  from continuing  to conclude new insurance  contracts within  their 

territories. 

£4 

7.  p^r^ar-aphR  ?  4 and  5 shall  not affect  the powers of the Member States to 
penal i?.*1 inf ring<*tnents within  their territories. 

8.  If an undertaking which has committed  an  infringement  has an establishment or 

possesses property  in the Member State concerned,  the competent  authorities  of the 

latter may,  in accordance  with national  law, apply  the administrative  penalties 

prescribed  for that  infringement  by way of enforcement  against  that  establishment 

or property. 

9.  Any measure adopted  under paragraphs  4 to 8 involving penalties or 

restrictions on the conduct  of insurance business must  be properly  reasoned and 

«•ommunicated to the undertaking  concerned. 

10.  Every two years the Commission  shall  submit  to the  Insurance Committee  set up 

by Directive 91/675/EEC a report  summarizing  the number and  types of cases in 

which, in each Member State, authorization  has been refused under Article  10 of 

Directive 73/239/EEC or Article  16 of Directive 88/357/EEC as amended  by  this 

Directive or measures have been taken under paragraph  5.  Member States  shall 

co-operate with  the Commission  by providing  it with  the  information  required  for 

that  report. 

Article 41 

Nothing  in this Directive  shall  prevent  insurance undertakings with head  offices 

in Member States  from  advertising  their services,  through  all available means of 

eomrniinioat ion. in the Member  State of the branch or the Member  State of the 

provision of services,  subject  to any  rules governing  the form and  content  of such 

advertising  adopted  in the  interest  of the general  good. 

u. 

Article 42 

1.  Article 20 of Directive 88/357/EEC  is hereby  repealed. 

2.  In the event of an insurance undertaking's being wound up, commitments  arising 

out of contracts underwritten  through a branch or under the freedom  to provide 

services shall be met  in the same way as those arising out of that  undertaking's 

other insurance contracts, without distinction as to nationality  as far as the 

persons  insured and the beneficiaries are concerned. 

1.  Article  21 of Directive 88/357/EEC  is hereby repealed. 

Article 43 

2.  Where  insurance  is offered under the right of establishment  or the freedom to 

provide services, the policy-holder shall, before any commitment  is entered  into, 

be informed of the Member State in which the head office or, where appropriate, 

the branch with which  the contract  is to be concluded  is situated. 

Any documents  issued  to the policy-holder must convey the information  referred  to 

in the first subparagraph. 

The obligations  imposed  in the first two subparagraphs shall not apply to the 

risks referred  to in Article 5(d) of Directive 73/239/EEC. 

3.  The contract or any other document granting cover, together with  the insurance 

proposal where  it is binding upon the policy-holder, must state  the address of the 

head office, or, where appropriate, of the branch of the insurance  undertaking 

which grants  the cover. 

Bi 

Each Member State may  require  that the name and address of the representative of 

the insurance undertaking  referred  to in Article  12a(4) of Directive  88/357/EEC 

also appear in the documents  referred  to in the first subparagraph. 

Article 44 

1.  Article 22 of Directive 88/357/EEC  is hereby  repealed. 

2.  Every insurance undertaking  shall  inform the competent  authority  of  its home 

Member State, separately  in respect of transactions  carried out under  the right oi 

establishment  and those carried out under the freedom  to provide services, of the 

amount of the premiums, claims and commissions, without deduction of reinsurance, 

by Member State and by group of classes, and also as regards class  10 of point A 

of the Annex to Directive  73/239/EEC, not  including carrier's  liability, the 

frequency and average cost of claims. 

The groups of classes are hereby defined as follows: 

- accident and sickness  (classes  1 and 2 ); 

-  motor  (classes  3. 7 and  10, the figures for class  10. excluding carriers' 

liability, being given  separately); 

- fire and other damage  to property  (classes 8 and 9 ); 

- aviation, marine and  transport  (classes 4, 5. 6.  7,  11 and 12); 

- general  liability  (class 13); 

- credit  and suretyship  (classes  14 and 15); 

- other classes  (classes  16, 17 and 18). 

The competent  authority of the home Member State shall  forward  that  information 

within a reasonable  time and  in aggregate  form  to the competent  authorities of 

each of the Member States concerned which so request. 

Article 45 

1.  Article 24 of Directive 88/357/EEC  is hereby  repealed. 

2.  Nothing in this Directive shall affect  the Member States' right  to require 

undertakings  carrying on business within  their territories under the right of 

establishment  or the freedom to provide services  to join and participate, on the 

same terms as undertakings authorized  there,  in any scheme designed  to guarantee 

the payment  of insurance  claims to insured persons and injured  third parties. 

Article 46 

1.  Article 25 of Directive 88/357/EEC  is hereby  repealed. 

2.  Without  prejudice  to any subsequent  harmonization, every  insurance  contract 

shall be subject  exclusively  to the indirect  taxes and parafiscal  charges on 

insurance premiums  in the Member State  in which  the risk is situated  as defined in 

Article  2(d) of Directive 88/357/EEC. and also, in the case of Spain,  to the 

surcharges  legally established  in favour of the Spanish "Consorcio  de Compensaciôn 

de Seguros" for the performance  of its functions  relating  to the compensation of 

losses arising  from extraordinary  events occurring  in that Member State. 

& 

In derogation  from the first  indent  of Article 2(d) of Directive B8/357/EEC, and 

for the Durposes of this paragraph, moveable property  contained  i-n a building 

situated within  the territory of a Member State, except  for goods  in  commercial 

transit, shall be a risk  situated  in that Member State, even  if the building and 

its contents are not  covered  by the same  insurance policy. 

The  law applicable  to the contract  under Article 7 of Directive 88/357/EEC shall 

not affect  the fiscal  arrangements applicable. 

Fending future harmonization, each Member State shall apply  to those  undertakings 

which cover risks situated within  its territory  its own national  provisions  to 

ensure the collection  of  indirect  taxes and parafiscal  charges due under  the first 

subparagraph. 

TITLE V 

TRANSITIONAL  PROVISIONS 

Article 47 

The Federal Republic of Germany may postpone until  1 January  1996 the application 

of the first sentence of  the second subparagraph  of Article  53(2).  During  that 

period,  the provisions  of  the following  subparagraph  shall  apply  in the  situation 

referred  to in Article  53(2). 

When  the technical  basis  for the calculation  of premiums has been communicated *«o 

the competent  authorities  of the home Member State  in accordance with  the  third 

sentence of the second  subparagraph  of Article  53(2),  those authorities  shall 

without  delay  forward  that  information  to the competent  authorities  oi  the Member 

State  in which  the  risk  i «; situated  so  that  they may comment 

If the competent 

.'Mil \\')r i t i es of the home Member  State  take no account  of those comments  th*»v 

66. 

shall inform the competent  authorities of the Member State  in which  the risk is 

situated accordingly  in detail and state their reasons. 

Article 48 

Member States may allow insurance undertakings with head offices within  their 

territories, the buildings and  land of which that cover their technical  provisions 

exceed, at the time of the notification of this Directive, the percentage  laid 

down in Article 22(1)(a) a period expiring no  later than 31 December  1998 within 

which to comply with that provision. 

Article 49 

The Kingdom of Denmark may postpone until  1 January  1999 the application of this 

Directive to compulsory  insurance against accidents at work.  During  that period 

the exclusion provided  for in Article  12(2) of Directive 88/357/EEC  for accidents 

at work shall continue to apply in the Kingdom of Denmark. 

Article 50 

Spain, until 31 December  1996, and Greece and Portugal, until  31 December 1998, 

may operate the following transitional  arrangements  for contracts covering risks 

situated exclusively  in one of those Member States other than those defined  in 

Article 5(d) of Directive 73/239/EEC: 

(a) in derogation from Article 8(3) of Directive  73/239/EEC and from Articles 29 

and 39 of this Directive, the competent  authorities of the Member States in 

question may require  the communication, before use. of general  and  special 

insurance policy conditions; 

6? 

(b) the amount of  the technical provisions relating to the contracts  referred to 

in this Article shall oe determined under the supervision of  the Merr.oer State 

concerned in accordance with its own rules or, failing that, in accordance 

with the procedures established within  its territory  in accordance with  this 

Directive.  Cover of those technical provisions by equivalent  and matching 

assets and the  localization of those assets shall be effected  under  the 

supervision of that Member State  in accordance with  its rules and  practices 

adopted in accordance with this Directive. 

TITLE VI 

FINAL PROVISIONS 

Article 51 

The following technical adjustments to be made to Directives  73/239/EEC and 

88/357/EEC and to this Directive shall be adopted  in accordance with  the procedure 

laid down in Directive 91/675/EEC: 

- extension of the  legal  forms provided  for in Article 8(l)(a) of  Directive 

73/239/EEC; 

- amendments  to the  list set out  in the Annex to Directive  73/239/EEC, < 

adaptation of the terminology used  in that  list  to take account  of  the 

development  of  insurance markets; 

- clarification of the items constituting  the solvency margin  listed  in 

Article  16(1) of Directive  73/239/EEC  to take account  of  the créait 

oi new 

financial  instruments; 

- «.* I t.ci ation of the minimum guarantee  fund provided  for in Article  1V < <"• î 

)\ 

Directive  73/239/EEC  to take account  of economic and  financial  development:;; 

6t. 

-  amendments, to take account of the creation of new financial  instruments, to the 

list of assets acceptable  as cover  for technical  provisions  set out  in 

Article 21 and to the rules on the spreading of investments  laid down in 

Article 22; 

- changes  in the relaxations  in the matching  rules  laid down  in Annex  1 to 

Directive 88/357/EEC, to take account of the development  of new  currency-hedging 

instruments or progress made towards economic and monetary  union; 

- clarification of the definitions  in order  to ensure uniform application  of 

Directives  73/239/EEC  and 88/357/EEC  and of this Directive  throughout  the 

Community. 

Article  52 

1.  Branches which have started  business, in accordance with the provisions  in 

force in their Member States 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  Directive 

73/239/EEC.  They shall be governed,  from the date of that entry  into force, by 

Articles  15.  19, 20 and  22 of Directive 73/239/EEC  and by Article  40 of  this 

Directive. 

2.  Articles  34 and  35 shall  not affect  rights acquired  by  insurance  undertakings 

carrying on business under  the freedom  to provide  services  before  the entry  into 

force of the provisions  adopted  in implementation  of  this Directive. 

a. 

Article 53 

The following Article shall be inserted  in Directive 73/239/EEC: 

"Article 28a 

1.  Under the conditions  laid down by national  law, each Member State  shall 

authorize agencies and branches set up within  its territory  and  covered  by  this 

Title to transfer all or part of their portfolios of contracts  to an  accepting 

office established  in the same Member State if the competent  authorities  of that 

Member State or, if appropriate, of the Member State referred  to in Article  26 

certify  that after taking the transfer into account  the accepting  office 

.possesses the necessary  solvency margin. 

2.  Under the conditions  laid down by national  law, each Member State  shall 

authorize agencies and branches set up within  its territory  and  covered  by this 

Title to transfer all or part of their portfolios of contracts  to an  insurance 

•undertaking with a head office in another Member State if the competent 

authorities of  that Member State certify  that after taking  the transfer  into 

account  the accepting office possesses  the necessary  solvency margin. 

3.  If under the conditions  laid down by national  law a Member State authorizes 

•agencies and branches  set up within its territory and covered by  this Title to 

transfer all or part of their portfolios of contracts  to an agency  or branch 

covered by  this Title and set up within  the territory  of another  Member State it 

shall ensure  that  the competent  authorities of the Member State of  the accept *ng 

office or, if appropriate, of the Member State  referred  to in Article  26 certify 

that after taking the transfer into account  the accepting office possesses  t lie 

necessary  solvency margin, that the  law of  the Member State of  the accepting 

office permits  such a transfer and that  that State has agreed  to the  transfer 

?.. 

4.  In the circumstances  referred  to in paragraphs  1, 2 and  3 the Member State in 

which the transferring agency or branch  is situated shall authorize  the transfer 

after obtaining  the agreement of the competent authorities of the Member State in 

which the risks are situated, where different  from the Member State  in which the 

transferring  agency or branch is situated. 

5.  The competent  authorities of the Member States consulted  shall give  their 

opinion or consent  to the competent authorities of the home Member State of the 

transferring  insurance undertaking within three months of receiving a request; the 

absence of any response from the authorities consulted within that period  shall be 

considered equivalent  to a favourable opinion or tacit consent. 

6.  A transfer authorized  in accordance with this Article shall be published as 

laid down by national  law in the Member State in which the risk  is situated.  Such 

transfers shall automatically be valid against policy-holders, insured persons and 

any other persons having rights or obligations arising out of the contracts 

transferred. 

This provision shall not affect  the Member States' rights to give policy-holders 

the option of cancelling contracts within a fixed period after a transfer. 

Article 54 

1.  Notwithstanding  any provision  to the contrary, a Member State in which 

contracts covering the risks  in class 2 of point A of the Annex to 

Directive 73/239/EEC may serve as a partial or complete alternative  to health 

cover provided  by the statutory social security system may  require that  those 

contracts comply with the specific  legal provisions adopted  by that Member State 

to protect  the general good  in that class of  insurance, and  that  the general  and 

special conditions of that  insurance be communicated  to the competent  authorities 

of that Member State before use. 

7< 

2.  Member States may require that the health  insurance system referred  to in 

paragraph  1 De operated on a technical basis similar to that of life assurance 

where : 

- the premiums paid are calculated on the basis of sickness tables and other 

statistical data relevant  to the Member State  in which  the risk  is situated in 

accordance with the mathematical methods used  in insurance; 

- a reserve is set up for increasing age; 

- the insurer may cancel  the contract only within a fixed period determined  by the 

Member State in which the risk is situated; 

- the contract  provides  that premiums may be  increased or payments  reduced, even 

for current contracts; 

- the contract provides that the policy-holder may change his existing  contract 

into a new contract  complying with paragraph  1, offered  by the same  insurance 

undertaking or the same branch and taking account of his acquired  rights.  In 

particular, account must be taken of the reserve for increasing age and a new 

medical examination may be required only for increased cover. 

In that event, the competent  authorities of the Member State concerned  shall 

publish the sickness tables and other relevant  statistical  data referred  to in the 

first, subparagraph  and  transmit  them to the competent  authorities of  the home 

Member State.  The premiums must be sufficient, on reasonable  actuarial 

assumptions, for undertakings  to be able  to meet  all  their  commitments  having 

regard to all aspects of their financial  situation.  The home Member State shall 

require that the technical  basis for the calculation of premiums be communicafe.il 

to its competent  authorities before the product  is circulated.  This paragraph 

shall  also apply where existing contracts are modified. 

n. 

Article 55 

Member States may require  that any insurance undertaking offering,  at  its own 

risk, compulsory  insurance  against  accidents at work within  their  territories 

comply with the specific provisions of their national  law concerning  such 

insurance, except  for the provisions  concerning  financial  supervision,  which shall 

be the exclusive  responsibility  of the home Member State. 

Article 56 

Member States shall ensure  that decisions  taken  in respect  of an  insurance 

undertaking under  laws, regulations and administrative  provisions  adopted  in 

accordance with this Directive may be subject  to the right  to apply  to the courts. 

Article 57 

1.  The Member States shall adopt  the laws, regulations  and  administrative 

provisions necessary  for their compliance with this Directive no  later than 

31 December  1993 and bring  them into force no later than  1 July  1994. They shall 

forthwith  inform  the Commission  thereof. 

When  they adopt  such measures  the Member States shall  include  references  to this 

Directive or shall make such  references when they effect  official  publication. 

The manner in which such references are to be made shall  be  laid down by the 

Member States. 

2.  The Member States  shall  communicate  to the Commission  the texts of the main 

provisions of national  law which  they adopt  in the field  covered  by this 

Directive. 

73. 

Article 58 

This Directive  is addressed  to the Member States 

Done at Brussels, 

For the Counci1 

The President 

ISSN 0254-1475 

COM (92) 63 final 

DOCUMENTS 

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Catalogue number : CB-CO-92-068-EN-C 

ISBN 92-77-41463-4 

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