Common Position (EC) No 43/2002 of 27 May 2002 adopted by the Council, acting in accordance with the procedure referred to in Article 251 of the Treaty establishing the European Community, with a view to adopting a Directive of the European Parliament and of the Council concerning life assurance
Date: 2002-05-27
Institutions: Council of the European Union
Subjects: freedom to provide services, insurance, insurance company, insurance law, life assurance, right of establishment, single market

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COMMON POSITION (EC) No 43/2002

adopted by the Council on 27 May 2002

with a view to the adoption of a Directive 2002/. . ./EC of the European Parliament and of the
Council of . . . concerning life assurance (recast version)

(2002/C 170 E/04)

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE
EUROPEAN UNION,

Having regard to the Treaty establishing the European
Community, and in particular Articles 47(2) and 55 thereof,

Having regard to the proposal from the Commission (1),

Having regard to the opinion of the Economic and Social
Committee (2),

Acting in accordance with the procedure laid down in Article
251 of the Treaty (3),

Whereas:

(1) The First Council Directive 79/267/EEC of 5 March 1979
on the coordination of
laws, regulations and adminis-
trative provisions relating to the taking up and pursuit
of the business of direct life assurance (4), the Second
Council Directive 90/619/EEC of 8 November 1990 on
the coordination of laws, regulations and administrative
provisions relating to direct life assurance,
laying down
provisions to facilitate the effective exercise of freedom to
provide services and amending Directive 79/267/EEC (5)
and Council Directive 92/96/EEC of 10 November 1992
laws, regulations and adminis-
on the coordination of
trative provisions relating to direct
life assurance and
amending Directives 79/267/EEC and 90/619/EEC (third
assurance Directive) (6) have been substantially
life
amended several times. Since further amendments are to
be made, the Directives should be recast in the interests of
clarity.

(2) In order to facilitate the taking up and pursuit of the
business of
to eliminate
it
certain divergences which exist between national super-

life assurance,

is essential

(1) OJ C 365 E, 19.12.2000, p. 1.
(2) OJ C 123, 25.4.2001, p. 24.
(3) Opinion of the European Parliament of 15 March 2001 (OJ C 343,
5.12.2001, p. 202), Council Common Position of 27 May 2002
and Decision of the European Parliament of . . . (not yet published
in the Official Journal).

(4) OJ L 63, 13.3.1979, p. 1. Directive as last amended by Directive
2002/12/EC of the European Parliament and of the Council (OJ L
77, 20.3.2002, p. 11).

(5) OJ L 330, 29.11.1990, p. 50. Directive as amended by Directive

92/96/EEC (OJ L 360, 9.12.1992, p. 1).

(6) OJ L 360, 9.12.1992, p. 1. Directive as amended by Directive
2000/64/EC of the European Parliament and of the Council (OJ L
290, 17.11.2000, p. 27).

visory legislation. In order to achieve this objective and at
the same time ensure adequate protection for policy-
holders and beneficiaries
the
provisions relating to the financial guarantees required
of life assurance undertakings should be coordinated.

in all Member States,

(3) It is necessary to complete the internal market in direct
life assurance, from the point of view both of the right of
establishment and of the freedom to provide services in
the Member States, to make it easier for assurance under-
takings with head offices in the Community to cover
commitments situated within the Community and to
make it possible for policy-holders to have recourse not
only to assurers established in their own country, but also
to assurers which have
in the
Community and are established in other Member States.

their head office

(4) Under

the Treaty, any discrimination with regard to
freedom to provide services based on the fact that an
undertaking is not established in the Member State in
which the services are provided is prohibited. That
prohibition applies to services provided from any estab-
lishment in the Community, whether it be the head office
of an undertaking or an agency or branch.

stage must be

(5) This Directive therefore represents an important step in
the merging of national markets into an integrated market
and that
supplemented by other
Community instruments with a view to enabling all
policy-holders to have recourse to any assurer 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.

(6) This Directive forms part of the body of Community
legislation in the field of
life assurance which also
includes Council Directive 91/674/EEC of 19 December
1991 on the annual accounts and consolidated accounts
of insurance undertakings (7).

(7) The approach adopted consists in bringing about such
harmonisation as is essential, necessary and sufficient to
achieve the mutual recognition of authorisations and
prudential control systems, thereby making it possible
the
to grant a single authorisation valid throughout
Community and apply the principle of supervision by
the home Member State.

(7) OJ L 374, 31.12.1991, p. 7.

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(8) As a result, the taking up and the pursuit of the business
of assurance are subject to the grant of a single official
authorisation issued by the competent authorities of the
Member State in which an assurance undertaking has its
head office. Such authorisation enables an undertaking to
carry on business throughout the Community, under the
right of establishment or the freedom to provide services.
The Member State of the branch or of the provision of
services may not require assurance undertakings which
wish to carry on assurance business there and which
have already been authorised in their home Member
State to seek fresh authorisation.

(9) The

competent authorities

should not authorise or
continue the authorisation of an assurance undertaking
where they are liable to be prevented from effectively
exercising their supervisory functions by the close links
between that undertaking and other natural or
legal
persons. Assurance undertakings already authorised must
also satisfy the competent authorities in that respect.

(10) The definition of ‘close links’ in this Directive lays down
minimum criteria and that does not prevent Member
States from applying it to situations other than those
envisaged by the definition.

(11) The sole fact of having acquired a significant proportion
of a company's capital does not constitute participation,
within the meaning of ‘close links’,
if that holding has
been acquired solely as a temporary investment which
does not make it possible to exercise influence over the
structure or financial policy of the undertaking.

Moreover, it is desirable to distinguish between activities
pursued by way of establishment and activities pursued by
way of freedom to provide services.

(14) A classification by class of assurance is necessary in order
to

in particular,

the activities

subject

to determine,
compulsory authorisation.

(15) Certain mutual associations which, by virtue of their legal
status, fulfil requirements as to security and other specific
financial guarantees should be excluded from the scope of
this Directive. Certain organisations whose activity covers
only a very restricted sector and is limited by their articles
of association should also be excluded.

(16) Life assurance is subject

to official authorisation and
supervision in each Member State. The conditions for
the granting or withdrawal of such authorisation should
be defined. Provision must be made for the right to apply
to the courts should an authorisation be refused or
withdrawn.

(17) It is desirable to clarify the powers and means of super-
vision vested in the competent authorities.
is also
desirable to lay down specific provisions regarding the
taking up, pursuit and supervision of activity by way of
freedom to provide services.

It

(18) The competent authorities of home Member States should
be responsible for monitoring the financial health of
assurance undertakings, including their state of solvency,
the establishment of adequate technical provisions and the
covering of those provisions by matching assets.

(12) The principles of mutual

such as

authorities

should not grant or
factors

recognition and of home
Member State supervision require that Member States'
should
competent
withdraw authorisation where
the
content of programmes of operations or the geographical
distribution of the activities actually carried on indicate
clearly that an assurance undertaking has opted for the
legal system of one Member State for the purpose of
evading the
in another
standards
Member State within whose territory it carries on or
intends to carry on the greater part of its activities. An
assurance undertaking must be authorised in the Member
State in which it has its registered office.
In addition,
Member States must require that an assurance under-
taking's head office always be situated in its home
Member State and that it actually carries on its business
there.

in force

stricter

(19) It

for

to provide

is appropriate

the possibility of
exchanges of information between the competent auth-
orities and authorities or bodies which, by virtue of
their function, help to strengthen the stability of
the
In order to preserve the confidential
financial system.
nature of the information forwarded, the list of addressees
must remain within strict limits.

(20) Certain behaviour, such as fraud and insider offences, is
including integrity, of the
even when involving undertakings

liable to affect the stability,
financial
system,
other than assurance undertakings.

(21) It is necessary to specify the conditions under which the
abovementioned exchanges of information are authorised.

(13) For practical reasons, it is desirable to define provision of
services taking into account both the assurer's estab-
lishment and the place where the commitment is to be
covered. Therefore, commitment should also be defined.

(22) Where it is stipulated that information may be disclosed
only with the express agreement of the competent auth-
orities,
their
agreement subject to compliance with strict conditions.

these may, where

appropriate, make

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(23) Member States may conclude agreements on exchange of
information with third countries provided that
the
information disclosed is subject to appropriate guarantees
of professional secrecy.

(31) The provisions on transfers of portfolios must be in line
with the single legal authorisation system provided for in
this Directive.

(24) For the purpose of strengthening the prudential super-
vision of assurance undertakings and protection of
clients of assurance undertakings, it should be stipulated
that an auditor must have a duty to report promptly to
the competent authorities, wherever, as provided for by
this Directive, he becomes aware, while carrying out his
tasks, of certain facts which are liable to have a serious
effect on the financial situation or the administrative and
accounting organisation of an assurance undertaking.

(25) Having regard to the aim in view,

is desirable for
Member States to provide that such a duty should apply
in all circumstances where such facts are discovered by an
auditor during the performance of his tasks in an under-
taking which has close links with an assurance under-
taking.

it

(26) The duty of auditors to communicate, where appropriate,
to the competent authorities certain facts and decisions
concerning an assurance undertaking which they discover
during the performance of their tasks in a non-assurance
undertaking does not in itself change the nature of their
tasks in that undertaking nor the manner in which they
must perform those tasks in that undertaking.

(27) The performance of the operations of management of
group pension funds cannot under any circumstances
affect the powers conferred on the respective authorities
with regard to the entities holding the assets with which
that management is concerned.

(28) Certain provisions of

this Directive define minimum
standards. A home Member State may lay down stricter
rules for assurance undertakings authorised by its own
competent authorities.

(29) 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
assurance undertakings
the Community
whether carried on under the right of establishment or
the freedom to provide services. In particular, they must
be able to introduce appropriate safeguards or impose
sanctions
and
infringements of the provisions on assurance supervision.

irregularities

throughout

preventing

aimed

at

(30) The provisions on transfers of portfolios should include
provisions specifically concerning the transfer to another
undertaking of the portfolio of contracts concluded by
way of freedom to provide services.

(32) Undertakings formed after the dates referred to in Article
18(3) should not be authorised to carry on life assurance
and non-life insurance activities simultaneously. Member
States should be allowed to permit undertakings which,
on the relevant dates referred to in Article 18(3), carried
on these activities simultaneously to continue to do so
provided that separate management is adopted for each
of their activities, in order that the respective interests of
life policy-holders and non-life policy-holders are safe-
guarded and the minimum financial obligations
in
respect of one of the activities are not borne by the
other activity. Member States
should be given the
option of requiring those existing undertakings established
in their
territory which carry on life assurance and
non-life insurance simultaneously to put an end to this
practice. Moreover, specialised undertakings should be
subject
to special supervision where a non-life under-
taking belongs to the same financial group as a life under-
taking.

(33) Nothing in this Directive prevents a composite under-
taking from dividing itself
into two undertakings, one
active in the field of life assurance, the other in non-life
insurance. In order to allow such division to take place
is desirable to
it
under the best possible conditions,
permit Member States,
in accordance with Community
rules of competition law, to provide for appropriate tax
arrangements,
in particular with regard to the capital
gains such division could entail.

(34) Those Member States which so wish should be able to
grant the same undertaking authorisations for the classes
referred to in Annex I and the insurance business coming
under classes 1 and 2 in the Annex to Council Directive
73/239/EEC of 24 July 1973 on the coordination of laws,
regulations and administrative provisions relating to the
taking up and pursuit of the business of direct insurance
assurance (1). That possibility may,
other
to certain conditions as regards
however, be subject
compliance with
on
winding-up.

accounting

than life

rules

rules

and

(35) It is necessary from the point of view of the protection of
lives assured that every assurance undertaking should
establish adequate technical provisions. The calculation
of
the most part on
is based for
actuarial principles. Those principles should be coor-
dinated in order to facilitate mutual recognition of the
prudential rules applicable in the various Member States.

such provisions

(1) OJ L 228, 16.8.1973, p. 3. Directive as last amended by Directive
2000/26/EC of the European Parliament and of the Council (OJ L
181, 20.7.2000, p. 65).

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(36) It is desirable, in the interests of prudence, to establish a
minimum of coordination of rules limiting the rate of
interest used in calculating the technical provisions. For
the purposes of such limitation, since existing methods
are all equally correct, prudential and equivalent, it seems
appropriate to leave Member States a free choice as to the
method to be used.

services in the securities field (1) provides for a definition
of regulated market, although it excludes from its scope
life assurance activities.
It is appropriate to apply the
concept of
regulated market also to life assurance
activities.

(37) The

the

rules

governing

calculation of

the assets used to cover

technical
provisions and the rules governing the spread, localisation
and matching of
technical
provisions must be coordinated in order to facilitate the
mutual recognition of Member States' rules. That coor-
the liberalisation of
dination must
take account of
capital movements provided for in Article 56 of
the
Treaty and the progress made by the Community
towards economic and monetary union.

(38) The home Member State may not

require assurance
undertakings to invest the assets covering their technical
provisions in particular categories of assets, as such a
requirement would be incompatible with the liberalisation
of capital movements provided for in Article 56 of the
Treaty.

supervision for
insured persons and policy-holders.

(39) It is necessary that, over and above technical provisions,
including mathematical provisions, of sufficient amount
to meet
their underwriting liabilities, assurance under-
takings should possess a supplementary reserve, known
as the solvency margin, represented by free assets and,
with the agreement of
the competent authority, by
other implicit assets, which shall act as a buffer against
is an
adverse business fluctuations. This requirement
the
important element of prudential
protection of
In
order to ensure that the requirements imposed for such
purposes are determined according to objective criteria
whereby undertakings of the same size will be placed
is
on an equal
desirable to provide that this margin shall be related to
all the commitments of the undertaking and to the nature
and gravity of the risks presented by the various activities
falling within the scope of this Directive. This margin
should therefore vary according to whether the risks are
of
It should
accordingly be determined in terms of mathematical
provisions and capital at risk underwritten by an under-
received, of
taking, of premiums or
provisions only or of the assets of tontines.

investment, death or management only.

contributions

competition,

footing as

regards

it

(40) Directive 92/96/EEC provided for a provisional definition
of a regulated market, pending the adoption of a directive
on investment services in the securities field, which would
harmonise that concept at Community level. Council
Directive 93/22/EEC of 10 May 1993 on investment

(41) The list of items of which the solvency margin required
by this Directive may be made up takes account of new
financial instruments and of the facilities granted to other
financial
institutions for the constitution of their own
funds. In the light of market developments in the nature
of reinsurance cover purchased by primary insurers, there
is a need for the competent authorities to be empowered
solvency margin
the
to decrease
reduction to the
requirement
to
In order
in certain circumstances.
improve the quality of the solvency margin, the possibility
in the available solvency
of
margin should be limited and subject to conditions and
should in any case cease after 2009.

including future profits

the

that

(42) It is necessary to require a guarantee fund, the amount
and composition of which are such as to provide an
adequate
assurance
resources when they are set up and that in the subsequent
course of business the solvency margin in no event falls
below a minimum of security. The whole or a specified
part of this guarantee fund must consist of explicit asset
items.

undertakings

possess

(43) To avoid major and sharp increases in the amount of the
minimum guarantee fund in the future, a mechanism
should be established providing for its increase in line
with the European Index of Consumer Prices. This
Directive should lay down minimum standards for the
solvency margin requirements and home Member States
should be able to lay down stricter rules for insurance
undertakings authorised by their own competent auth-
orities.

(44) The provisions in force in the Member States regarding
contract law applicable to the activities referred to in this
Directive differ. The harmonisation of assurance contract
law is not a prior condition for the achievement of the
internal market in assurance. Therefore, the opportunity
afforded to the Member States of imposing the application
of their law to assurance contracts covering commitments
within their
likely to provide adequate
safeguards for policy-holders. The freedom to choose, as
the law applicable to the contract, a law other than that
of the State of the commitment may be granted in certain
cases, in accordance with rules which take into account
specific circumstances.

territories

is

(1) OJ L 141, 11.6.1993, p. 27. Directive as last amended by Directive

2000/64/EC of the European Parliament and of the Council.

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(45) For life assurance contracts the policy-holder should be
given the opportunity of cancelling the contract within a
period of between 14 and 30 days.

(46) Within the framework of an internal market it is in the
policy-holder's interest that they should have access to the
widest possible range of assurance products available in
the Community so that they can choose that which is best
suited to their needs. It is for the Member State of the
commitment to ensure that there is nothing to prevent
the marketing within its territory of all the assurance
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 of the
commitment and in so far 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.

(47) The Member States must be able to ensure that

the
assurance products and contract documents used, under
the right of establishment or the freedom to provide
to cover commitments within their territories
services,
comply with such specific legal provisions protecting
the general good as are applicable. The systems of super-
vision to be employed must meet the requirements of an
internal market but their employment may not constitute
a prior condition for carrying on assurance business.
From this standpoint, systems for the prior approval of
policy conditions do not appear to be justified.
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.

It

(48) It is necessary to make provision for cooperation between
the Member States and

the competent authorities of
between those authorities and the Commission.

(49) Provision should be made for a system of penalties to be
imposed when,
in the Member State in which the
commitment is entered into, an assurance undertaking
does not comply with those provisions protecting the
general good that are applicable to it.

it

for

to meet

(50) It is necessary to provide for measures in cases where the
financial position of the undertaking becomes such that it
its underwriting liabilities.
is difficult
In specific situations where policy-holders'
rights are
threatened, there is a need for the competent authorities
to be empowered to intervene at a sufficiently early stage,
but in the exercise of those powers, competent authorities
should inform the insurance undertakings of the reasons
motivating such supervisory action,
in accordance with
the principles of sound administration and due process.
As long as such a situation exists, the competent auth-

should be prevented from certifying that

orities
insurance undertaking has a sufficient solvency margin.

the

(51) For the purposes of implementing actuarial principles in
conformity with this Directive, the home Member State
may require systematic notification of the technical bases
used for calculating scales of premiums and technical
technical bases
provisions, with such notification of
excluding notification of the general and special policy
conditions and the undertaking's commercial rates.

(52) In an internal market for assurance the consumer will
have a wider and more varied choice of contracts. If he
is to profit fully from this diversity and from increased
competition, he must be provided with whatever
information is necessary to enable him to choose the
contract best
information
suited to his needs. This
requirement is all the more important as the duration
of commitments can be very long. The minimum
provisions must therefore be coordinated in order for
the consumer to receive clear and accurate information
on the essential characteristics of the products proposed
to him as well as the particulars of the bodies to which
any complaints of policy-holders, assured persons or
beneficiaries of contracts may be addressed.

(53) Publicity for assurance products is an essential means of
enabling assurance business to be carried on effectively
within the Community. It is necessary to leave open to
assurance undertakings the use of all normal means of
advertising in the Member State of
the branch or of
provision of services. Member States may nevertheless
rules on the
require compliance with their national
form and content of advertising, whether
laid down
pursuant
to Community legislation on advertising or
adopted by Member States for reasons of the general
good.

(54) Within the framework of the internal market, no Member
State may continue to prohibit the simultaneous carrying
on of assurance business within its territory under the
right of establishment and the freedom to provide
services.

apply

special

and other

to any form of

(55) Some Member States do not subject assurance trans-
taxation, while the
indirect
actions
majority
forms of
taxes
contribution. The structures and rates of such taxes and
contributions vary considerably between the Member
States in which they are applied.
is desirable to
leading to distortions of
prevent existing differences
competition in assurance
services between Member
States. Pending subsequent harmonisation, application of
the tax systems and other forms of contribution provided
for by the Member States in which commitments entered
into are likely to remedy that problem and it is for the
Member States to make arrangements to ensure that such
taxes and contributions are collected.

It

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(56) It is important to introduce Community coordination on
the winding-up of assurance undertakings. It is henceforth
essential to provide, in the event of the winding-up of an
assurance undertaking, that the system of protection in
place in each Member State must guarantee equality of
treatment
irrespective of
nationality and of
the method of entering into the
commitment.

for all assurance creditors,

(57) The coordinated rules concerning the pursuit of

the
insurance within the Community
business of direct
should, in principle, apply to all undertakings operating
on the market and, consequently, also to agencies and
the undertaking is
branches where the head office of
situated outside
the
regards
methods of supervision this Directive lays down special
provisions for such agencies or branches, in view of the
fact that the assets of the undertakings to which they
belong are situated outside the Community.

the Community. As

(58) It is desirable to provide for the conclusion of reciprocal
agreements with one or more third countries in order to
permit the relaxation of such special conditions, while
observing the principle that such agencies and branches
should not obtain more
than
Community undertakings.

favourable

treatment

(59) A provision should be made for a flexible procedure to
make it possible to assess reciprocity with third countries
on a Community basis. The aim of this procedure is not
to close the Community's financial markets but rather, as
the Community intends to keep its financial markets open
to the rest of the world, to improve the liberalisation of
the global financial markets in other third countries. To
for
that end,
for procedures
the
negotiating with third countries. As a last resort,
possibility of taking measures involving the suspension
of new applications for authorisation or the restriction
of new authorisations should be provided for using the
regulatory procedure under Article 5 of Council Decision
1999/468/EC (1).

this Directive provides

(61) In order to clarify the legal regime applicable to life
assurance activities covered by this Directive,
some
provisions of Directives 79/267/EEC, 90/619/EEC and
92/96/EEC should be adapted. For that purpose some
the
provisions
solvency margin and the rights acquired by branches of
assurance undertakings established before 1 July 1994
should be amended. The content of
the scheme of
operation of branches of third-country undertakings to
be established in the Community should also be defined.

establishment of

concerning

the

the future development of

(62) Technical adjustments to the detailed rules laid down in
this Directive may be necessary from time to time to take
account of
the assurance
industry. The Commission will make such adjustments
as and when necessary, after consulting the Insurance
Committee set up by Council Directive 91/675/EEC (2),
in the exercise of the implementing powers conferred
on it by the Treaty. These measures being measures of
general scope within the meaning of Article 2 of Decision
1999/468/EC, they should be adopted by the use of the
regulatory procedure provided for in Article 5 of that
Decision.

(63) Pursuant to Article 15 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.
Therefore, transitional arrangements should be adopted
for the gradual application of this Directive by certain
Member States.

(64) Directives 79/267/EEC and 90/619/EEC granted special
derogation with regard to some undertakings existing at
the time of the adoption of these Directives. Such under-
takings have thereafter modified their structure. Therefore
they do not need any longer such special derogation.

(65) This Directive

should not affect

the obligations of
Member States concerning the deadlines for transposition
and for application of the Directives set out in Annex V,
Part B,

(60) This Directive should establish provisions concerning
proof of good repute and no previous bankruptcy.

HAVE ADOPTED THIS DIRECTIVE:

(1) OJ L 184, 17.7.1999, p. 23.

(2) OJ L 374, 31.12.1991, p. 32.

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TABLE OF CONTENTS

TITLE I

DEFINITIONS AND SCOPE ............................................................................. ..................................

Article 1

Definitions ................................................................................................ ..............................................

Article 2

Scope ................................................................................................ .......................................................

Article 3

Activities and bodies excluded ................................................................................................ ..........

TITLE II

THE TAKING UP OF THE BUSINESS OF LIFE ASSURANCE ..................................................

Article 4

Principle of authorisation ................................................................................................ ...................

Article 5

Scope of authorisation ............................................................................. ...........................................

Article 6

Conditions for obtaining authorisation .................................................................. .........................

Article 7

Scheme of operations ........................................................................................ ..................................

Article 8

Shareholders and members with qualifying holdings .................................................................

Article 9

Refusal of authorisation .................................................................. ....................................................

TITLE III

CONDITIONS GOVERNING THE BUSINESS OF ASSURANCE ...............................................

Chapter 1

Principles and methods of financial supervision ..................................................................

Article 10

Competent authorities and object of supervision ........................................................................

Article 11

Supervision of branches established in another Member State ................................................

Article 12

Prohibition on compulsory ceding of part of underwriting .....................................................

Article 13

Accounting, prudential and statistical information: supervisory powers ...............................

Article 14

Transfer of portfolio ................................................................................................ ............................

Article 15

Qualifying holdings ..............................................................................................................................

Article 16

Professional secrecy ..............................................................................................................................

Article 17

Duties of auditors ................................................................... .............................................................

Article 18

Pursuit of life assurance and non-life insurance activities .........................................................

Article 19

Separation of life assurance and non-life insurance management ...........................................

Chapter 2

Rules relating to technical provisions and their representation ....................................

Article 20

Establishment of technical provisions ............................................................................. ................

Article 21

Premiums for new business ............................................................................. ..................................

Article 22

Assets covering technical provisions................................................................................................ .

Article 23

Categories of authorised assets ......................................................................................... ................

Article 24

Rules for investment diversification ......................................................................................... .......

Article 25

Contracts linked to UCITS or share index ............................................................................. .......

Article 26

Matching rules .......................................................................................................................................

Chapter 3

Rules relating to the solvency margin and to the Guarantee Fund .............................

Article 27

Available solvency margin ........................................................................................ .........................

Article 28

Required solvency margin ......................................................................................... .........................

Article 29

Guarantee fund ................................................................................................ .....................................

Article 30

Review of the amount of the guarantee fund ..............................................................................

Article 31

Assets not used to cover technical provisions .............................................................................

45

45

46

46

47

47

47

48

49

49

49

49

49

49

50

50

50

50

51

51

53

54

54

55

55

57

57

57

58

59

60

60

60

61

62

62

62

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Chapter 4

Contract law and conditions of assurance ..............................................................................

63

Article 32

Law applicable ................................................................................................ ......................................

63

Article 33

General good ................................................................... ......................................................................

63

Article 34

Rules relating to conditions of assurance and scales of premiums ........................................

63

Article 35

Cancellation period ..............................................................................................................................

63

Article 36

Information for policy-holders ................................................................................................ ..........

64

Chapter 5

Assurance undertakings in difficulty or in an irregular situation .................................

64

Article 37

Assurance undertakings in difficulty ........................................................................................ .......

64

Article 38

Financial recovery plan ................................................................... ....................................................

64

Article 39

Withdrawal of authorisation ................................................................... ...........................................

65

TITLE IV

PROVISIONS RELATING TO RIGHT OF ESTABLISHMENT AND FREEDOM TO PROVIDE
SERVICES ................................................................................................................................................

65

Article 40

Conditions for branch establishment .............................................................................. ................

65

Article 41

Freedom to provide services: Prior notification to the home Member State .......................

66

Article 42

Freedom to provide services: Notification by the home Member State ................................

66

Article 43

Freedom to provide services: Changes in the nature of commitments .................................

66

Article 44

Language .................................................................................................................................................

66

Article 45

Rules relating to conditions of assurance and scales of premiums ........................................

67

Article 46

Assurance undertakings not complying with the legal provisions ..........................................

67

Article 47

Advertising ......................................................................................... ....................................................

Article 48

Winding up ........................................................................................ ....................................................

67

67

Article 49

Statistical information on cross-border activities .................................................................. .......

68

Article 50

Taxes on premiums ................................................................................................ .............................

68

TITLE V

RULES APPLICABLE TO AGENCIES OR BRANCHES ESTABLISHED WITHIN THE
COMMUNITY AND BELONGING TO UNDERTAKINGS WHOSE HEAD OFFICES ARE
OUTSIDE THE COMMUNITY ................................................................................................ ...........

68

Article 51

Principles and conditions of authorisation ............................................................................. .......

68

Article 52

Rules applicable to branches of third-country undertakings ....................................................

69

Article 53

Transfer of portfolio ................................................................................................ ............................

69

Article 54

Technical provisions ................................................................................................ ............................

70

Article 55

Solvency margin and guarantee fund ............................................................................. ................

70

Article 56

Advantages to undertakings authorised in more than one Member State ............................

70

Article 57

Agreements with third countries ............................................................................. .........................

70

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TITLE VI

RULES APPLICABLE TO SUBSIDIARIES OF PARENT UNDERTAKINGS GOVERNED BY
THE LAWS OF A THIRD COUNTRY AND TO THE ACQUISITIONS OF HOLDINGS BY
SUCH PARENT UNDERTAKINGS......................................................................................................

Article 58

Information from Member States to the Commission ...............................................................

Article 59

Third-country treatment of Community assurance undertakings ............................................

TITLE VII

TRANSITIONAL AND OTHER PROVISIONS ...............................................................................

Article 60

Derogations and abolition of restrictive measures ......................................................................

Article 61

Proof of good repute ........................................................................................ ..................................

TITLE VIII

FINAL PROVISIONS ................................................................................................ ............................

Article 62

Cooperation between the Member States and the Commission ..............................................

Article 63

Reports on the development of the market under the freedom to provide services .........

Article 64

Technical adjustment ......................................................................................... ..................................

Article 65

Committee procedure ........................................................................................ ..................................

Article 66

Rights acquired by existing branches and assurance undertakings .........................................

Article 67

Right to apply to the courts .................................................................. ...........................................

Article 68

Review of amounts expressed in euro .................................................................. .........................

Article 69

Implementation of new provisions ................................................................................................ ..

Article 70

Information to the Commission .............................................................................. .........................

Article 71

Transitional period for Articles 3(6), 27, 28, 29, 30 and 38 ..................................................

Article 72

Repealed Directives and their correlation with this Directive ..................................................

Article 73

Entry into force ......................................................................................... ...........................................

Article 74

Addressees ................................................................................................ ..............................................

Annex I

Classes of assurance ................................................................................................ .............................

Annex II

Matching rules .......................................................................................................................................

Annex III

Information for policy-holders ................................................................................................ ..........

Annex IV

1. Professional secrecy ............................................................................. ...........................................

2. Activities and bodies excluded from this Directive ................................................................

3. Until 1 January 2004, Member States shall apply the following provisions ..................

Annex V

Part A — Repealed Directives together with their successive amendments (referred to in
Article 72) ........................................................................................ ..................................

Part B — Deadlines for implementation (Referred to in Article 72) .....................................

Annex VI

Correlation table ........................................................................................ ...........................................

71

71

71

72

72

72

72

72

72

72

73

73

73

73

73

74

74

74

74

74

75

76

77

78

78

78

82

82

83

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TITLE I

DEFINITIONS AND SCOPE

Article 1

Definitions

1.

For the purposes of this Directive:

(a)

assurance undertaking shall mean an undertaking which
has received official authorisation in accordance with
Article 4;

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;

this definition,

in the context of
For the purposes of
Articles 8 and 15 and of
the other levels of holding
referred to in Article 15, the voting rights referred to in
Article 92 of Directive 2001/34/EC of
the European
Parliament and of the Council of 28 May 2001 on the
admission of securities to official stock exchange listing
and
those
published
securities (2) shall be taken into consideration;

information

on

on

be

to

(b) branch shall mean an agency or branch of an assurance

undertaking;

(k) parent undertaking shall mean a parent undertaking as
defined in Articles 1 and 2 of Directive 83/349/EEC;

Any permanent presence of an undertaking in the territory
of a Member State shall be treated in the same way as an
agency or branch, even if that presence does not take the
form of a branch or agency, but consists merely of an
office managed by the undertaking's own staff or by a
person who is independent but has permanent authority
to act for the undertaking as an agency would;

(c)

establishment shall mean the head office, an agency or a
branch of an undertaking;

(d) commitment shall mean a commitment represented by
one of the kinds of insurance or operations referred to
in Article 2;

(e) home Member State shall mean the Member State in
the assurance undertaking

which the head office of
covering the commitment is situated;

(f) Member State of the branch shall mean the Member State
in which the branch covering the commitment is situated;

(g) Member State of the commitment shall mean the Member
State where the policy-holder has his habitual residence or,
if the policy-holder is a legal person, the Member State
where the latter's establishment, to which the contract
relates, is situated;

(h) Member State of the provision of services shall mean the
Member State of the commitment, if the commitment is
covered by an assurance undertaking or a branch situated
in another Member State;

(i)

control shall mean the relationship between a parent
undertaking and a subsidiary, as defined in Article 1 of
Council Directive 83/349/EEC (1), or a similar relationship
between any natural or legal person and an undertaking;

(j)

qualifying holding shall mean a direct or indirect holding
in an undertaking which represents 10 % or more of the

(1) OJ L 193, 18.7.1983, p. 1. Directive as last amended by European
and Council Directive 2001/65/EC (OJ L 283,

Parliament
27.10.2001, p. 28).

(l)

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;

(m) regulated market shall mean:

— in the case of a market situated in a Member State, a
regulated market as defined in Article 1(13) of
Directive 93/22/EEC, and

— in the case of a market situated in a third country, a
financial market recognised by the home Member State
of the assurance undertaking which meets comparable
requirements. Any financial
instruments dealt in on
that market 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;

(n) competent authorities shall mean the national authorities
which are empowered by law or regulation to supervise
assurance undertakings;

(o) matching assets shall mean the representation of under-
writing liabilities which can be required to be met in a
particular currency by assets expressed or realisable in the
same currency;

(p)

localisation of assets shall mean the existence of assets,
whether movable or immovable, within a Member State
but shall not be construed as involving a requirement that
movable assets be deposited or that immovable assets be
subjected to restrictive measures such as the registration of
mortgages; assets represented by claims against debtors
shall be regarded as situated in the Member State where
they are realisable;

(q) capital at risk shall mean the amount payable on death less

the mathematical provision for the main risk;

(2) OJ L 184, 6.7.2001, p. 1.

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(r)

close links shall mean a situation in which two or more
natural or legal persons are linked by:

(i) participation, which shall mean the ownership, direct
or by way of control, of 20 % or more of the voting
rights or capital of an undertaking; or

in

to

(ii) control, which shall mean the relationship between a
parent undertaking and a subsidiary, in all the cases
referred
of
Article
(2)
Directive 83/349/EEC, or
relationship
between any natural or legal person and an under-
taking; any subsidiary undertaking of a subsidiary
undertaking shall also be considered a subsidiary of
the parent undertaking which is at the head of those
undertakings.

similar

1(1)

and

a

A situation in which two or more natural or legal persons
are permanently linked to one and the same person by a
control relationship shall also be regarded as constituting a
close link between such persons.

2. Wherever this Directive refers to the euro, the conversion
value in national currency to be adopted shall as from 31
December of each year be that of
the
preceding month of October
for which euro conversion
values are available in all the relevant Community currencies.

the last day of

(d) the type of

insurance existing in Ireland and the
health

permanent

United
Kingdom known
insurance not subject to cancellation.

as

2) The following operations, where they are on a contractual
basis, in so far as they are subject to supervision by the
administrative authorities responsible for the supervision of
private insurance:

(a) tontines whereby associations of subscribers are set up
with a view to jointly capitalising their contributions
thus
distributing
and
accumulated among the survivors or among the bene-
ficiaries of the deceased;

subsequently

assets

the

(b) capital redemption operations based on actuarial calcu-
lation whereby,
single or periodic
in return for
payments agreed in advance, commitments of specified
duration and amount are undertaken;

for

the

(c) management of group pension funds,

i.e. operations
consisting,
in
concerned,
managing the investments, and in particular the assets
representing the reserves of bodies that effect payments
on death or survival or in the event of discontinuance
or curtailment of activity;

undertaking

Article 2

Scope

(d) the operations referred to in (c) where they are accom-
panied by insurance covering either conservation of
capital or payment of a minimum interest;

This Directive concerns the taking up and pursuit of the self-
employed activity of direct
insurance carried on by under-
takings which are established in a Member State or wish to
become established there in the form of the activities defined
below:

1) The following kinds of assurance where they are on a

contractual basis:

(a)

that

is to say,

the class of assurance
life assurance,
which comprises,
in particular, assurance on survival
to a stipulated age only, assurance on death only,
assurance on survival to a stipulated age or on earlier
death, life assurance with return of premiums, marriage
assurance, birth assurance;

(b) annuities;

that
personal

(c) supplementary insurance carried on by life assurance
insurance
is to say,
undertakings,
against
for
injury
employment, insurance against death resulting from an
accident and insurance against disability resulting from
an accident or sickness, where these various kinds of
insurance are underwritten in addition to life assurance;

in particular,

incapacity

including

(e) the operations carried out by assurance undertakings
such as those referred to in Chapter 1, Title 4 of
Book IV of the French ‘Code des assurances’.

3) Operations relating to the length of human life which are
prescribed by or provided for in social insurance legislation,
when they are effected or managed at their own risk by
assurance undertakings in accordance with the laws of a
Member State.

Article 3

Activities and bodies excluded

This Directive shall not concern:

1) subject

to the application of Article 2(1)(c),

the classes

designated in the Annex to Directive 73/239/EEC;

2) operations of provident and mutual-benefit

institutions
whose benefits vary according to the resources available
and which require each of their members to contribute at
the appropriate flat rate;

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3) operations carried out by organisations other than under-
takings referred to in Article 2, whose object is to provide
benefits for employed or self-employed persons belonging
to an undertaking or group of undertakings, or a trade or
in the event of death or survival or of
group of trades,
discontinuance or curtailment of activity, whether or not
the commitments arising from such operations are fully
covered at all times by mathematical provisions;

4) subject to the application of Article 2(3), insurance forming

part of a statutory system of social security;

5) organisations which undertake to provide benefits solely in
the event of death, where the amount of such benefits does
not exceed the average funeral costs for a single death or
where the benefits are provided in kind;

6) mutual associations, where:

— the articles of association contain provisions for calling
up additional contributions or reducing their benefits or
claiming assistance from other persons who have
undertaken to provide it; and

— the

annual

contribution income

activities
covered by this Directive does not exceed EUR 5
million for three consecutive years. If this amount is
exceeded for
this Directive
three consecutive years
shall apply with effect from the fourth year.

the

for

— ownership or participation in an existing insurance

company or group;

— creation

or
companies or groups,
companies;

participation

of

new insurance
including pension insurance

(c) the Finnish authorities will submit to the Commission
for approval a report within three months from the date
of accession, stating which measures have been taken to
separate TEL activities from normal insurance activities
carried out by Finnish insurance companies in order to
conform to all the requirements of this Directive.

TITLE II

THE TAKING UP OF THE BUSINESS OF LIFE ASSURANCE

Article 4

Principle of authorisation

The taking up of the activities covered by this Directive shall be
subject to prior official authorisation.

Such authorisation shall be sought from the authorities of the
home Member State by:

(a) any undertaking which establishes its head office in the

territory of that State;

the provisions of

Nevertheless,
this paragraph shall not
prevent a mutual assurance undertaking from applying, or
continuing, to be licensed under this Directive.

(b) any undertaking which, having received the authorisation
required in the first subparagraph, extends its business to
an entire class or to other classes.

7) the

‘Versorgungsverband deutscher Wirtschaftsorganisa-
in Germany unless its statutes are amended as

tionen’
regards the scope of its activities;

8) the pension activities of pension insurance undertakings
prescribed in the Employees' Pension Act (TEL) and other
related Finnish legislation provided that:

(a) pension insurance companies which already under
Finnish law are obliged to have separate accounting
and management systems for their pension activities
will furthermore, as from the date of accession, set up
separate legal entities for carrying out these activities;

(b) the Finnish authorities shall allow in a non-discrimi-
natory manner all nationals and companies of Member
States to perform according to Finnish legislation the
activities
to this
exemption whether by means of:

in Article 2 related

specified

Article 5

Scope of authorisation

1.
Authorisation shall be valid for the entire Community. It
shall permit an assurance undertaking to carry on business
there, under either the right of establishment or freedom to
provide services.

2.
Authorisation shall be granted for a particular class of
assurance as listed in Annex I. It shall cover the entire class,
unless the applicant wishes to cover only some of the risks
pertaining to that class.

The competent authorities may restrict authorisation requested
for one of the classes to the operations set out in the scheme of
operations referred to in Article 7.

Each Member State may grant authorisation for two or more of
the classes, where its national laws permit such classes to be
carried on simultaneously.

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Article 6

Conditions for obtaining authorisation

The home Member State shall require every assurance

1.
undertaking for which authorisation is sought to:

(a) adopt one of the following forms:

— in the case of

vennootschap’,

the Kingdom of Belgium:

‘société
anonyme’/‘naamloze
en
commandite par actions’/‘commanditaire vennootschap
‘association d'assurance mutuelle’/‘onder-
op aandelen’,
linge
coopéra-
verzekeringsvereniging’,
tive’/‘coöperatieve vennootschap’,

‘société

‘société

— in the case of the Kingdom of Denmark: ‘aktieselskaber’,
‘gensidige selskaber’, ‘pensionskasser omfattet af lov om
forsikringsvirksomhed (tværgående pensionskasser)’,

— in the case of

‘Aktiengesellschaft’,
seitigkeit’,
rungsunternehmen’,

the Federal Republic of Germany:
‘Versicherungsverein auf Gegen-
‘öffentlich-rechtliches Wettbewerbsversiche-

— in the case of the French Republic:

‘société anonyme’,
‘société d'assurance mutuelle’, ‘institution de prévoyance
‘institution de
régie par le code de la sécurité sociale’,
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,
societies
registered under the Industrial and Provident Societies
Acts and societies registered under the Friendly Societies
Acts,

— 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
actions’,
‘société coopéra-

anonyme’,
‘association d'assurances mutuelles’,
tive’,

en commandite par

‘société

— in the case of

the Kingdom of

the Netherlands:
‘onderlinge waarborgmaat-

‘naamloze vennootschap’,
schappij’,

the United Kingdom:

incorporated
— in the case of
companies
limited by shares or by guarantee or
unlimited, societies registered under the Industrial and
Provident Societies Acts, societies registered or incor-
the
Friendly
porated
association of underwriters known as Lloyd's,

Societies Acts,

under

the

— in the case of the Hellenic Republic:

‘ανώνυµη εταιρία’,

— in the case of

the Kingdom of Spain:

‘sociedad

anónima’, ‘sociedad mutua’, ‘sociedad cooperativa’,

— in the case of

the Portuguese Republic:

‘sociedade

anónima’, ‘mútua de seguros’,

— in the case of

the Republic of Austria:

‘Aktienge-

sellschaft’, ‘Versicherungsverein auf Gegenseitigkeit’,

— in the case of the Republic of Finland:
vakuutusyhtiö/ömsesidigt försäkringsbolag’,
sakeyhtiö/försäkringsaktiebolag’,
säkringsförening’,

‘keskinäinen
‘vakuutuso-
‘vakuutusyhdistys/för-

— in the case of Kingdom of Sweden:

‘försäkringsak-
tiebolag’, ‘ömsesidiga försäkringsbolag’, ‘understödsföre-
ningar’.

An assurance undertaking may also adopt the form of a
European company when that has been established.

Furthermore, Member States may, where appropriate, set
up undertakings in any public-law form provided that
insurance operations
such bodies have as their object
under
to those under which
private-law undertakings operate;

conditions

equivalent

(b) limit

its objects to the business provided for

in this
Directive and operations directly arising therefrom, to the
exclusion of all other commercial business;

(c) submit a scheme of operations in accordance with Article 7;

(d) possess the minimum guarantee fund provided for in

Article 29(2);

(e) be effectively run by persons of good repute with appro-

priate professional qualifications or experience.

2. Where close links exist between the assurance under-
taking and other natural or legal persons, the competent auth-
orities shall grant authorisation only if
those links do not
prevent the effective exercise of their supervisory functions.

The competent authorities shall also refuse authorisation if the
laws, regulations or administrative provisions of a non-member
country governing one or more natural or legal persons with
which the assurance undertaking has close links, or difficulties
involved in their enforcement, prevent the effective exercise of
their supervisory functions.

The competent authorities shall require assurance undertakings
to provide them with the information they require to monitor
compliance with the conditions referred to in this paragraph
on a continuous basis.

3. Member States shall require that
the head offices of
insurance undertakings be situated in the same Member State
as their registered offices.

4.
An assurance undertaking seeking authorisation to extend
its business to other classes or to extend an authorisation
covering only some of the risks pertaining to one class shall
be required to submit a scheme of operations in accordance
with Article 7.

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it
furthermore, be required to show proof
It shall,
possesses the solvency margin provided for in Article 28 and
the guarantee fund referred to in Article 29(1) and (2).

that

(g) estimates relating to the financial resources intended to
cover underwriting liabilities and the solvency margin.

5. Member States shall not adopt provisions requiring the
prior approval or systematic notification of general and special
policy conditions, of scales of premiums, of the technical bases,
used in particular for calculating scales of premiums and
printed
technical
documents which an assurance undertaking intends to use in
its dealings with policy-holders.

provisions

forms

other

and

or

of

Notwithstanding the first subparagraph, for the sole purpose of
verifying compliance with national provisions concerning
actuarial principles,
the home Member State may require
systematic notification of the technical bases used for calcu-
lating scales of premiums and technical provisions, without
an
constituting a prior
that
assurance undertaking to carry on its business.

condition for

requirement

Article 8

Shareholders and members with qualifying holdings

The competent authorities of the home Member State shall not
grant an undertaking authorisation to take up the business of
assurance 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 need to ensure

The same authorities shall refuse authorisation if, taking into
sound and prudent
account
they are not
management of an assurance undertaking,
satisfied as
the shareholders or
members.

to the qualifications of

the

Nothing in this Directive shall prevent Member States from
maintaining in force or introducing laws, regulations or admin-
istrative provisions requiring approval of the memorandum
and articles of association and the communication of any
other documents necessary for the normal exercise of super-
vision.

Not later than 1 July 1999, the Commission shall submit a
report to the Council on the implementation of this paragraph.

Article 9

Refusal of authorisation

Any decision to refuse an authorisation shall be accompanied
by the precise grounds for doing so and notified to the under-
taking in question.

The provisions referred to in paragraphs 1 to 5 may not
6.
require that any application for authorisation be considered in
the light of the economic requirements of the market.

Each Member State shall make provision for a right to apply to
the courts should there be any refusal.

Article 7

Scheme of operations

The scheme of operations referred to in Article 6(1)(c) and (4)
shall include particulars or evidence of:

Such provision shall also be made with regard to cases where
the competent authorities have not dealt with an application
for an authorisation upon the expiry of a period of six months
from the date of its receipt.

(a) the nature of the commitments which the assurance under-

taking proposes to cover;

TITLE III

CONDITIONS GOVERNING THE BUSINESS OF ASSURANCE

(b) the guiding principles as to reassurance;

C h a p t e r 1

(c) the items constituting the minimum guarantee fund;

(d) estimates relating to the costs of setting up the adminis-
trative services and the organisation for securing business
and the financial resources intended to meet those costs;

in addition, for the first three financial years:

(e) a plan setting out detailed estimates of income and expen-
diture in respect of direct business, reassurance acceptances
and reassurance cessions;

(f) a forecast balance sheet;

Principles and methods of financial supervision

Article 10

Competent authorities and object of supervision

the home Member State.

1.
The financial supervision of an assurance 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
competent authorities of the Member State of the commitment
have reason to consider that the activities of an assurance
undertaking might affect
its financial soundness, they shall
inform the competent authorities of the undertaking's home
Member State. The latter authorities shall determine whether
the undertaking is complying with the prudential principles
laid down in this Directive.

If

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That financial supervision shall include verification, with
2.
respect to the assurance undertaking's entire business, of its
state of solvency, the establishment of technical provisions,
including mathematical provisions, and of the assets covering
in accordance with the rules laid down or practices
them,
followed in the home Member State pursuant to the provisions
adopted at Community level.

the supervision of

the business of
means necessary for
assurance undertakings with head offices within their terri-
tories, including business carried on outside those territories,
in accordance with the Council directives governing those
activities and for the purpose of seeing that they are imple-
mented.

3.
The competent authorities of the home Member State
shall require every assurance undertaking to have sound admin-
istrative and accounting procedures and adequate internal
control mechanisms.

These powers and means must,
competent authorities to:

in particular, enable the

(a) make detailed enquiries regarding the assurance under-
taking's situation and the whole of its business, inter alia
by:

Article 11

Supervision of branches established in another Member
State

— gathering information or requiring the submission of

documents concerning its assurance business,

The Member State of the branch shall provide that, where an
assurance undertaking authorised in another Member State
carries on business through a branch, the competent auth-
orities of
the home Member State may, after having first
informed the competent authorities of the Member State of
the branch, carry out themselves, or through the intermediary
of persons they appoint for that purpose, on-the-spot verifi-
cation of the information necessary to ensure the financial
supervision of
the
Member State of the branch may participate in that verifi-
cation.

the undertaking. The

authorities of

Article 12

Prohibition on compulsory ceding of part of underwriting

Member States may not require assurance undertakings to cede
part of their underwriting of activities listed in Article 2 to an
organisation or organisations designated by national regu-
lations.

Article 13

Accounting, prudential and statistical information: super-
visory powers

1.
Each Member State shall require every assurance under-
taking whose head office is situated in its territory to produce
its
an annual account, covering all
financial situation and solvency.

types of operation, of

2. Member States shall require assurance 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 auth-
orities shall provide each other with any documents and
information that are useful for the purposes of supervision.

Every Member State shall

3.
take all steps necessary to
ensure that the competent authorities have the powers and

— carrying out on-the-spot investigations at the assurance

undertaking's premises;

(b) take any measures, with regard to the assurance under-
taking,
its directors or managers or the persons who
it, that are appropriate and necessary to ensure
control
that the 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 in
so far as it remains mandatory, and to prevent or remedy
any irregularities prejudicial to the interests of the assured
persons;

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

Article 14

Transfer of portfolio

Under the conditions laid down by national

law, each
1.
Member State shall authorise assurance undertakings with
head offices within its territory to transfer all or part of their
portfolios of contracts, concluded under either the right of
to an
establishment or
the freedom to provide services,
the
if
accepting office established within the Community,
the
the home Member State of
competent authorities of
accepting office certify that after
into
taking the transfer
account the latter possesses the necessary solvency margin.

2. Where a branch proposes to transfer all or part of its
portfolio of contracts, concluded under either the right of
establishment or
the
freedom to provide
Member State of the branch shall be consulted.

services,

the

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In the circumstances referred to in paragraphs 1 and 2,
3.
the authorities of the home Member State of the transferring
assurance undertaking shall
after
obtaining the agreement of the competent authorities of the
Member States of the commitment.

authorise

transfer

the

The

the Member

authorities of
their opinion or

States
4.
competent
to the
consulted shall give
competent authorities of the home Member State of the trans-
ferring assurance 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.

consent

5.
A transfer authorised in accordance with this Article shall
be published as laid down by national law in the Member State
of the commitment. Such transfers shall automatically be valid
the assured persons and any other
against policy-holders,
person 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 15

Qualifying holdings

1. Member States shall require any natural or legal person
who proposes to hold, directly or indirectly, a qualifying
to inform the
holding in an assurance undertaking first
competent authorities of the home Member State,
indicating
the size of the intended holding. Such a person must likewise
inform the competent authorities of the home Member State if
he proposes to increase his qualifying holding so that
the
proportion of the voting rights or of the capital held by him
would reach or exceed 20 %, 33 % or 50 % or so that the
assurance undertaking would become his subsidiary.

The competent authorities of the home Member State shall
have a maximum of three months from the date of the notifi-
cation provided for in the first subparagraph to oppose such a
in view of the need to ensure sound and prudent
plan if,
management of
they are not
the assurance undertaking,
satisfied as to the qualifications 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 implemen-
tation.

or of the capital held by him would fall below 20 %, 33 % or
50 % or so that the assurance undertaking would cease to be
his subsidiary.

On becoming aware of
competent
inform the

them, assurance undertakings
3.
shall
their home
Member States of any acquisitions or disposals of holdings in
their capital that cause holdings to exceed or fall below one of
the thresholds referred to in paragraphs 1 and 2.

authorities of

They shall also, at least once a year, inform them of the names
of shareholders and members possessing qualifying holdings
and the sizes of such holdings as shown, for example, by the
information received at the annual general meetings of share-
holders and members or as a result of compliance with the
regulations relating to companies listed on stock exchanges.

if

the

that,

shall

require

4. Member States
influence
exercised by the persons referred to in paragraph 1 is likely
the prudent and sound
to operate to the detriment of
management of
the competent
the assurance undertaking,
authorities of the home Member State shall take appropriate
measures to put an end to that situation. Such measures may
consist, for example, in injunctions, sanctions against directors
and managers, or the suspension of the exercise of the voting
rights attaching to the shares held by the shareholders or
members in question.

Similar measures shall apply to natural or legal persons failing
to comply with the obligation to provide prior information, as
laid down in paragraph 1. If a holding is acquired despite the
opposition of the competent authorities, the Member States
shall,
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.

regardless of any other

sanctions

Article 16

Professional secrecy

1. Member States shall provide that all persons working or
who have worked for the competent authorities, as well as
auditors or experts acting on behalf of the competent auth-
orities, shall be bound by the obligation of professional secrecy.
This means that no confidential information which they may
receive in the course of their duties may be divulged to any
person or authority whatsoever,
in summary or
aggregate form, such that individual assurance undertakings
cannot be identified, without prejudice to cases covered by
criminal law.

except

2. Member States shall require any natural or legal person
who proposes to dispose, directly or indirectly, of a qualifying
to inform the
holding in an assurance undertaking first
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

Nevertheless, where
an assurance undertaking has been
declared bankrupt or is being compulsorily wound up, confi-
dential
information which does not concern third parties
involved in attempts to rescue that undertaking may be
divulged in civil or commercial proceedings.

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Paragraph 1 shall not prevent the competent authorities
2.
of the different Member States from exchanging information in
accordance with the directives applicable to assurance under-
takings. That information shall be subject to the conditions of
professional secrecy indicated in paragraph 1.

3. Member States may conclude cooperation agreements
providing for exchange of
information with the competent
authorities of third countries or with authorities or bodies of
third countries as defined in paragraphs 5 and 6 only if the
information disclosed is subject to guarantees of professional
secrecy at least equivalent to those referred to in this Article.
Such exchange of
the
the authorities or
performance of
bodies mentioned.

information must be intended for

the supervisory task of

Where the information originates in another Member State, it
may not be disclosed without the express agreement of the
competent authorities which have disclosed it and, where
appropriate, solely for the purposes for which those authorities
gave their agreement.

4.
Competent authorities receiving confidential information
under paragraphs 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 assurance are met and to facilitate monitoring
of the conduct of such business, especially with regard to
the monitoring of technical provisions, solvency margins,
administrative and accounting procedures and internal
control mechanisms, or

— to impose sanctions, or

— in administrative appeals against decisions of the competent

authority, or

— in court proceedings initiated pursuant to Article 67 or
under special provisions provided for in this Directive
and other directives adopted in the field of assurance under-
takings.

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 organisations and the auth-
orities responsible for the supervision of financial markets,

— bodies

involved in the liquidation and bankruptcy of
assurance undertakings and in other similar procedures, and

— persons responsible for carrying out statutory audits of the
accounts of assurance undertakings and other financial
institutions,

to

supervisory functions, and the
their
in the discharge of
(compulsory)
disclosure,
bodies which
winding-up proceedings or guarantee funds, of
information
necessary to the performance of their duties. The information
received by these authorities, bodies and persons shall be
subject to the obligation of professional secrecy laid down in
paragraph 1.

administer

Notwithstanding paragraphs 1 to 4, Member States may
information between the competent

6.
authorise exchanges of
authorities and:

— the authorities

for overseeing the bodies
involved in the liquidation and bankruptcy of assurance
undertakings and other similar procedures, or

responsible

— the authorities

responsible for overseeing the persons
charged with carrying out statutory audits of the accounts
of
investment
firms and other financial institutions, or

insurance undertakings, credit

institutions,

— independent actuaries of insurance undertakings carrying
those undertakings and the

out
bodies responsible for overseeing such actuaries.

supervision of

legal

Member States which have recourse to the option provided for
in the first
the
following conditions are met:

subparagraph shall

require at

least

that

— this information shall be for the purpose of carrying out
legal supervision referred to in the

the overseeing or
first subparagraph;

— information received in this context shall be subject to the
conditions of professional secrecy imposed in paragraph 1;

— where the information originates in another Member State,
it may not be disclosed without the express agreement of
the competent authorities which have disclosed it and,
where appropriate,
the purposes for which
those authorities gave their agreement.

solely for

Member States shall communicate to the Commission and to
the other Member States the names of the authorities, persons
and bodies which may receive information pursuant to this
paragraph.

Notwithstanding paragraphs 1 to 4, Member States may,
7.
with the aim of strengthening the stability, including integrity,
of the financial system, authorise the exchange of information
between the competent authorities and the authorities or
bodies responsible under the law for the detection and inves-
tigation of breaches of company law.

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Member States which have recourse to the option provided for
in the first
the
following conditions are met:

subparagraph shall

require at

least

that

— the information shall be for the purpose of performing the

task referred to in the first subparagraph;

In addition, notwithstanding paragraphs 1 and 4, Member
9.
States may, under provisions laid down by law, authorise 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
and to
inspectors acting on behalf of those departments.

and assurance undertakings

services

— information received in this context shall be subject to the
conditions of professional secrecy imposed in paragraph 1;

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

— where the information originates in another Member State,
it may not be disclosed without the express agreement of
the competent authorities which have disclosed it and,
where appropriate, solely for
the purposes for which
those authorities gave their agreement.

Where, in a Member State, the authorities or bodies referred to
in the first subparagraph perform their task of detection or
investigation with the aid, in view of their specific competence,
of persons appointed for that purpose and not employed in the
public
exchanging information
provided for in the first subparagraph may be extended to
such persons under the conditions stipulated in the second
subparagraph.

the possibility of

sector,

to implement

the third indent of

In order
the second
subparagraph, the authorities or bodies referred to in the first
subparagraph shall communicate to the competent authorities
which have disclosed the information, the names and precise
responsibilities of the persons to whom it is to be sent.

Member States shall communicate to the Commission and to
the other Member States the names of the authorities or bodies
which may receive information pursuant to this paragraph.

Before 31 December 2000, the Commission shall draw up a
report on the application of this paragraph.

8. Member States may authorise the competent authorities
to transmit:

— to central banks and other bodies with a similar function in

their capacity as monetary authorities,

— where appropriate, to other public authorities responsible

for overseeing payment systems,

that

shall provide

However, Member States
information
received under paragraphs 2 and 5 and that obtained by
means of the on-the-spot verification referred to in Article
11 may never be disclosed in the cases referred to in this
paragraph except with the express consent of the competent
the
authorities which disclosed the
competent
in which
authorities of
on-the-spot verification was carried out.

information or of
State

the Member

Article 17

Duties of auditors

1. Member States shall provide at least that:

(a) any

person

the meaning

authorised within

of
Council Directive 84/253/EEC (1), performing
in an
assurance undertaking the task described in Article 51
of Council Directive 78/660/EEC (2), Article 37 of
Directive
Council
Directive 85/611/EEC (3) or any other statutory task, shall
have a duty to report promptly to the competent auth-
orities any fact or decision concerning that undertaking
of which he has become aware while carrying out that
task which is liable to:

83/349/EEC

or Article

31

of

— constitute a material breach of the laws, regulations or
administrative
the
provisions which
conditions governing authorisation or which specifically
the activities of assurance under-
govern pursuit of
takings, or

down

lay

— affect

the continuous functioning of

the assurance

undertaking, or

— lead to refusal

to certify the accounts or

to the

expression of reservations;

(b) that person shall likewise have a duty to report any facts
and decisions of which he becomes aware in the course of
carrying out a task as described in (a) in an undertaking
having close links resulting from a control relationship
is
with the assurance undertaking within which he
carrying out the abovementioned task.

information intended for the performance of their task and
may authorise such authorities or bodies to communicate to
the competent authorities such information as they may need
for the purposes of paragraph 4. Information received in this
context shall be subject
to the conditions of professional
secrecy imposed in this Article.

(1) OJ L 126, 12.5.1984, p. 20.
(2) OJ L 222, 14.8.1978, p. 11. Directive as last amended by Directive
2001/65/EC of the European Parliament and of the Council (OJ L
283, 27.10.2001, p. 28).

(3) OJ L 375, 31.12.1985, p. 3. Directive as last amended by Directive
2001/108/EC of the European Parliament and of the Council (OJ L
41, 13.2.2002, p. 35).

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authorised

The disclosure in good faith to the competent authorities,
2.
by
of
within
persons
Directive 84/253/EEC, of any fact or decision referred to in
paragraph 1 shall not constitute a breach of any restriction on
disclosure of information imposed by contract or by any legis-
lative, regulatory or administrative provision and shall not
involve such persons in liability of any kind.

the meaning

Article 18

Pursuit of life assurance and non-life insurance activities

1. Without prejudice to paragraphs 3 and 7, no undertaking
to this Directive and
may be authorised both pursuant
pursuant to Directive 73/239/EEC.

By way of derogation from paragraph 1, Member States

2.
may provide that:

— undertakings authorised pursuant to this Directive may also
in accordance with Article 6 of
obtain authorisation,
Directive 73/239/EEC for the risks listed in classes 1 and
2 in the Annex to that Directive,

— undertakings

authorised

of
Directive 73/239/EEC solely for the risks listed in classes
1 and 2 in the Annex to that Directive may obtain auth-
orisation pursuant to this Directive.

to Article

pursuant

6

Subject

3.
paragraph 2 and those which on:

to paragraph 6, undertakings

referred to in

— 1 January 1981 for undertakings authorised in Greece,

— 1 January 1986 for undertakings authorised in Spain and

Portugal,

— 1 January 1995 for undertakings authorised in Austria,

Finland and Sweden, and

— 15 March 1979 for all other undertakings,

classes 1 and 2 in the Annex to Directive 73/239/EEC carried
on by the undertakings referred to in paragraph 2 shall be
governed by the rules applicable to life assurance activities.

5. Where an undertaking carrying on the activities referred
to in the Annex to Directive 73/239/EEC has
financial,
commercial or administrative links with an assurance under-
taking carrying on the activities covered by this Directive, the
competent authorities of the Member States within whose terri-
tories the head offices of those undertakings are situated shall
ensure that the accounts of the undertakings in question are
not distorted by agreements between these undertakings or by
the apportionment of
any arrangement which could affect
expenses and income.

Any Member State may require assurance undertakings
6.
whose head offices are situated in its territory to cease, within a
period to be determined by the Member State concerned, the
simultaneous pursuit of activities in which they were engaged
on the dates referred to in paragraph 3.

7.
The provisions of this Article shall be reviewed on the
basis of a report from the Commission to the Council in the
light of future harmonisation of the rules on winding-up, and
in any case before 31 December 1999.

Article 19

Separation of

life assurance and non-life

insurance

management

1.
The separate management referred to in Article 18(3)
must be organised in such a way that the activities covered
by this Directive are distinct from the activities covered by
Directive 73/239/EEC in order that:

— the respective interests of life policy-holders and non-life
policy-holders are not prejudiced and,
in particular, that
profits from life assurance benefit life policy-holders as if
the assurance undertaking only carried on the activity of
life assurance,

carried on simultaneously both the activities covered by this
Directive and those covered by Directive 73/239/EEC may
continue to carry on those activities simultaneously, provided
that each activity is separately managed in accordance with
Article 19 of this Directive.

— the minimum financial obligations, in particular solvency
margins, in respect of one or other of the two activities,
namely an activity under this Directive and an activity
under Directive 73/239/EEC, are not borne by the other
activity.

that

the undertakings
4. Member States may provide
referred to in paragraph 2 shall comply with the accounting
rules governing assurance undertakings authorised pursuant to
this Directive for all of their activities. Pending coordination in
this respect, Member States may also provide that, with regard
to rules on winding-up, activities relating to the risks listed in

the

However, as long as the minimum financial obligations are
fulfilled under the conditions laid down in the second indent
of
competent
authority is informed, the undertaking may use those explicit
items of the solvency margin which are still available for one
or other activity.

subparagraph and, provided the

first

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The competent authorities shall analyse the results in both
activities
this
to ensure
so as
paragraph are complied with.

the provisions of

that

2.

(a) Accounts shall be drawn up in such a manner as to
show the sources of the results for each of the two
activities, life assurance and non-life insurance. To this
end all income (in particular premiums, payments by
re-insurers and investment income) and expenditure (in
particular insurance settlements, additions to technical
provisions, reinsurance premiums, operating expenses
in respect of
shall be broken
Items common to both
down according to origin.
activities shall be entered in accordance with methods
of apportionment
to be accepted by the competent
authority.

insurance business)

(b) Assurance undertakings must, on the basis of

the
accounts, prepare a statement clearly identifying the
items making up each solvency margin, in accordance
with Article 27 of this Directive and Article 16(1) of
Directive 73/239/EEC.

is

If one of

insufficient,

the solvency margins

the
3.
competent authorities shall apply to the deficient activity the
measures provided for in the relevant Directive, whatever the
results in the other activity. By way of derogation from the
second indent of the first subparagraph of paragraph 1, these
measures may involve the authorisation of a transfer from one
activity to the other.

C h a p t e r 2

Rules relating to technical provisions and their representation

Article 20

Establishment of technical provisions

The home Member State shall require every assurance
technical provisions,
its entire

1.
undertaking
including mathematical provisions,
business.

to establish sufficient

in respect of

The amount of such technical provisions shall be determined
according to the following principles:

A.

(i) The amount of the technical life-assurance provisions
shall be calculated by a sufficiently prudent prospective
actuarial
future
liabilities as determined by the policy conditions for
each existing contract, including:

taking account of

valuation,

all

— bonuses to which policy-holders are already either
collectively or individually entitled, however those
bonuses are described — vested, declared or
allotted,

— all options available to the policy-holder under the

terms of the contract,

— expenses, including commissions;

taking credit for future premiums due;

(ii) the use of a retrospective method is allowed, if it can
be shown that the resulting technical provisions are not
lower than would be required under a sufficiently
prudent prospective calculation or if a prospective
method cannot be used for
the type of contract
involved;

(iii) a prudent valuation is not a ‘best estimate’ valuation,
include an appropriate margin for adverse

but shall
deviation of the relevant factors;

(iv) the method of valuation for the technical provisions
must not only be prudent in itself, but must also be
so having regard to the method of valuation for the
assets covering those provisions;

(v) technical provisions shall be calculated separately for
each contract. The use of appropriate approximations
or generalisations is allowed, however, where they are
likely to give approximately the same result as indi-
vidual calculations. The principle of separate calcu-
lation shall
in no way prevent the establishment of
additional provisions for general risks which are not
individualised;

(vi) where the surrender value of a contract is guaranteed,
the amount of
the mathematical provisions for the
contract at any time shall be at least as great as the
value guaranteed at that time.

B. The rate of interest used shall be chosen prudently. It shall
be determined in accordance with the
the
competent authority in the home Member State, applying
the following principles:

rules of

— all

guaranteed
surrender values,

benefits,

including

guaranteed

(a)

the competent authority of

for all contracts,
the
assurance undertaking's home Member State shall fix
one or more maximum rates of interest, in particular
in accordance with the following rules:

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(i) when contracts contain an interest rate guarantee,
the competent authority in the home Member State
shall set a single maximum rate of interest. It may
differ according to the currency in which the
is not
is denominated, provided that
contract
more than 60 % of the rate on bond issues by the
State
is
currency
denominated.

in whose

contract

the

it

the

first

subparagraph,

If a Member State decides, pursuant to the second
sentence of
a
maximum rate of interest for contracts denominated
it shall first
in another Member State's currency,
the Member
the competent authority of
consult
State
is
contract
in whose
denominated;

currency

to set

the

(ii) however, when the assets of the assurance under-
taking are not valued at
their purchase price, a
Member State may stipulate that one or more
maximum rates may be calculated taking into
the yield on the corresponding assets
account
currently held, minus a prudential margin and, in
particular for contracts with periodic premiums,
furthermore taking into account
the anticipated
yield on future assets. The prudential margin and
the maximum rate or rates of interest applied to
the anticipated yield on future assets shall be fixed
by the competent authority of the home Member
State;

(b) the establishment of a maximum rate of interest shall
not imply that the assurance undertaking is bound to
use a rate as high as that;

(c) the home Member State may decide not to apply (a) to

the following categories of contracts:

— unit-linked contracts,

accordance with the accounting rules in the home
Member State, less an appropriate deduction;

(d) the Member State shall require an assurance under-
taking to set aside in its accounts a provision to meet
interest-rate commitments vis-à-vis policy-holders if the
present or foreseeable yield on the undertaking's assets
is insufficient to cover those commitments;

(e) the Commission and the competent authorities of the
Member States which so request shall be notified of the
maximum rates of interest set under (a).

C. The statistical elements of the valuation and the allowance
for expenses used shall be chosen prudently, having regard
to the State of the commitment, the type of policy and the
administrative costs and commissions expected to be
incurred.

D. In the case of participating contracts, the method of calcu-
lation for technical provisions may take into account, either
implicitly or explicitly, future bonuses of all kinds,
in a
manner consistent with the other assumptions on future
experience and with the current method of distribution of
bonuses.

E. Allowance for future expenses may be made implicitly, for
instance by the use of future premiums net of management
charges. However, the overall allowance, implicit or explicit,
shall be not less than a prudent estimate of the relevant
future expenses.

F. The method of calculation of technical provisions shall not
be subject to discontinuities from year to year arising from
arbitrary changes to the method or the bases of calculation
and shall be such as to recognise the distribution of profits
in an appropriate way over the duration of each policy.

— single-premium contracts for a period of up to eight

years,

Assurance undertakings shall make available to the public
2.
the bases and methods used in the calculation of the technical
provisions, including provisions for bonuses.

— without-profits contracts, and annuity contracts with

no surrender value.

In the cases referred to in the second and third indents
of the first subparagraph, in choosing a prudent rate of
interest, account may be taken of the currency in which
the contract is denominated and corresponding assets
currently held and where the undertaking's assets are
valued at their current value, the anticipated yield on
future assets.

Under no circumstances may the rate of interest used be
than the yield on assets as calculated in
higher

The home Member State shall require every assurance
3.
undertaking to cover the technical provisions in respect of its
entire business by matching assets, in accordance with Article
26. In respect of business written in the Community, these
assets must be localised within the Community. Member
States shall not require assurance undertakings to localise
their assets in a particular Member State. The home Member
State may, however, permit relaxations in the rules on the
localisation of assets.

If the home Member State allows any technical provisions
it shall fix the
it may not require the

4.
to be covered by claims against reassurers,
percentage so allowed. In such case,
localisation of the assets representing such claims.

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Article 21

(j)

tax recoveries;

Premiums for new business

(k) claims against guarantee funds.

Premiums for new business shall be sufficient, on reasonable
to enable assurance undertakings to
actuarial assumptions,
meet all their commitments and,
to establish
in particular,
adequate technical provisions.

For this purpose, all aspects of the financial situation of an
assurance undertaking may be taken into account, without
the input from resources other than premiums and income
earned thereon being systematic and permanent
in such a
way that it may jeopardise the undertaking's solvency in the
long term.

Article 22

Assets covering technical provisions

The assets covering the technical provisions shall take account
of the type of business carried on by an assurance undertaking
in such a way as to secure the safety, yield and marketability of
its investments, which the undertaking shall ensure are diver-
sified and adequately spread.

Article 23

Categories of authorised assets

1.
The home Member State may not authorise assurance
undertakings to cover their technical provisions with any but
the following categories of assets:

A. I n v e s t m e n t s

(a) debt securities, bonds and other money- and capital-

market instruments;

(b) loans;

(c) shares and other variable-yield participations;

(d) units in undertakings for collective investment in trans-
ferable securities (UCITS) and other investment funds;

(e)

land, buildings and immovable-property rights.

B. D e b t s a n d c l a i m s

(f) debts owed by reassurers, including reassurers' 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 reassurance operations;

C. O t h e r s

(l)

tangible fixed assets, other than land and buildings,
valued on the basis of prudent amortisation;

(m) cash at bank and in hand, deposits with credit insti-
tutions and any other body authorised to receive
deposits;

(n) deferred acquisition costs;

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

prepayments;

(p)

reversionary interests.

2.
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 2000/12/EC of the European Parliament and of the
Council (1) or by assurance 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
3.
paragraph (1) shall not mean that all these assets should auto-
matically be accepted as cover for technical provisions. The
home Member State shall lay down more detailed rules fixing
the use of acceptable assets;
the conditions
in this
it may require valuable security or guarantees,
connection,
particularly in the case of debts owed by reassurers.

for

In determining and applying the rules which it lays down, the
the
home Member State shall,
following principles are complied with:

in particular, ensure that

(i) assets covering technical provisions shall 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 realisable. 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 amortisation;

(iii) loans, whether to undertakings, to a State or international
organisation, to local or regional authorities or to natural
persons, may be
technical
accepted as
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 assurance undertakings or other forms of
security;

cover

for

(i) advances against policies;

(1) OJ L 126, 26.5.2000, p. 1. Directive as amended by Directive

2000/28/EC (OJ L 275, 27.10.2000, p. 37).

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(iv) derivative instruments such as options, futures and swaps
in connection with assets covering technical provisions
may be used in so far as they contribute to a reduction
of
efficient portfolio
management. They must be valued on a prudent basis
and may be taken into account in the valuation of the
underlying assets;

investment

risks or

facilitate

(v) transferable securities which are not dealt

in on a
regulated market may be
for
technical provisions only if they can be realised in the
short term or if they are holdings in credit institutions, in
assurance undertakings, within the limits permitted by
Article 6, or in investment undertakings established in a
Member State;

accepted as

cover

(vi) debts owed by and claims against a third party may be
accepted as cover for the 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 realisable. In particular, debts owed by policy-
holders and intermediaries arising out of assurance and
reassurance operations may be accepted only in so far as
they have been outstanding for not more than three
months;

(viii) where the assets held include an investment

in a
subsidiary undertaking which manages all or part of the
the
assurance undertaking's investments on its behalf,
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;

(ix) deferred acquisition costs may be accepted as cover for
is
the mathematical

technical provisions only to the extent
consistent with the calculation of
provisions.

that

this

Notwithstanding paragraphs 1, 2 and 3,

4.
in exceptional
circumstances and at an assurance 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 22.

Article 24

Rules for investment diversification

(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 considered
effectively as one investment;

(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 organisation of which one or more Member
States are members. This limit may be raised to 10 % if an
undertaking invests not 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, assurance under-
takings — in so far as Article 6 allows it — and investment
undertakings established in a Member State. The limits may
be raised to 8 % and 2 % respectively by a decision taken
on a case-by-case basis by the competent authority of the
home 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.

The absence of a limit in paragraph 1 on investment in
2.
imply that assets in that
any particular category does not
category should be accepted as cover for technical provisions
without limit. The home Member State shall lay down more
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;

1.
As regards the assets covering technical provisions, the
home Member State shall require every assurance undertaking
to invest no more than:

(iii) limitations on particular categories of asset must

take
account of the treatment of reassurance in the calculation
of technical provisions;

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(iv) where the assets held include an investment in a subsidiary
undertaking which manages all or part of the assurance
undertaking's investments on its behalf, the home Member
State must, when applying the rules and principles laid
take into account the underlying
down in this Article,
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;

(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 contained 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
is entirely owned by that Member State
Member State,
and/or
local authorities and its business,
according to its memorandum and articles of association,
consists of extending, through its intermediaries, loans to,
or guaranteed by, States or local authorities or of loans to
bodies closely linked to the State or to local authorities.

that State's

In the context of

3.
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 assurance undertaking, a mortgage or any
other form of security, as compared with loans accom-
panied by such collateral,

— UCITS not coordinated within the meaning of Directive
funds, as compared
that

85/611/EEC and other
with UCITS coordinated within the meaning of
Directive,

investment

— securities which are not dealt in on a regulated market, as

compared with those which are,

— bonds, debt securities and other money- and capital-market
instruments not issued by States,
local or regional auth-
orities or undertakings belonging to Zone A as defined in
Directive 2000/12/EC (1) or the issuers of which are inter-
least one
national organisations not numbering
Community Member State among their members, as
compared with the same financial
instruments issued by
such bodies.

at

the holders of

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
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 debt
securities and which,
failure of the issuer,
in the event of
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 assurance undertakings
to invest in particular categories of assets.

Notwithstanding paragraph 1,

in exceptional circum-
6.
stances and at the assurance 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 22.

Article 25

Contracts linked to UCITS or share index

1. Where the benefits provided by a contract are directly
linked to the value of units in an UCITS or to the value of
fund held by the insurance
assets contained in an internal
undertaking, usually divided into units, the technical provisions
in respect of those benefits must be represented as closely as
possible by those units or,
in the case where units are not
established, by those assets.

2. Where the benefits provided by a contract are directly
linked to a share index or some other reference value other
than those referred to in paragraph 1, the technical provisions
in respect of those benefits must be represented as closely as
possible either by the units deemed to represent the reference
value or, in the case where units are not established, by assets
of appropriate security and marketability which correspond as
closely as possible with those on which the particular reference
value is based.

3.
Articles 22 and 24 shall not apply to assets held to match
liabilities which are directly linked to the benefits referred to in
paragraphs 1 and 2. References to the technical provisions in
Article 24 shall be to the technical provisions excluding those
in respect of such liabilities.

4. Member States may raise
laid down in
paragraph 1(b) to 40 % in the case of certain debt securities

limit

the

(1) OJ L 126, 26.5.2000, p. 1.

4. Where the benefits referred to in paragraphs 1 and 2
some
include a guarantee of
other
additional
the
guaranteed
technical provisions shall be subject to Articles 22, 23, and 24.

investment performance or

corresponding

benefit,

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Article 26

Matching rules

For the purposes of Articles 20(3) and 54, Member States

1.
shall comply with Annex II as regards the matching rules.

This Article shall not apply to the commitments referred

2.
to in Article 25.

(d) in so far as authorised under national law, profit reserves
appearing in the balance sheet where they may be used to
cover any losses which may arise and where they have not
been made available for distribution to policy-holders.

The available solvency margin shall be reduced by the amount
of own shares directly held by the assurance undertaking.

C h a p t e r 3

3.

The available solvency margin may also consist of:

Rules relating to the solvency margin and to the Guarantee
Fund

Article 27

Available solvency margin

Each Member State shall

1.
require of every assurance
undertaking whose head office is situated in its territory an
adequate available solvency margin in respect of
its entire
business at all times which is at least equal to the requirements
in this Directive.

(a) cumulative preferential share capital and subordinated loan
capital up to 50 % of the lesser of the available solvency
margin and the required solvency margin, no more than
25 % of which shall consist of subordinated loans with a
fixed maturity, or fixed-term cumulative preferential share
capital, provided that binding agreements exist under
which,
in the event of the bankruptcy or liquidation of
the assurance undertaking, the subordinated loan capital
or preferential share capital ranks after the claims of all
to be repaid until all other
other creditors and is not
debts outstanding at the time have been settled.

2.
The available solvency margin shall consist of the assets
of the assurance undertaking free of any foreseeable liabilities,
less any intangible items, including:

Subordinated loan capital must also fulfil the following
conditions:

(a) the paid-up share capital or,

in the case of a mutual
assurance undertaking, the effective initial fund plus any
members' accounts which meet all the following criteria:

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

(i) the memorandum and articles of association must
stipulate that payments may be made from these
accounts to members only in so far as this does not
cause the available solvency margin to fall below the
required level, or, after the dissolution of the under-
taking, if all the undertaking's other debts have been
settled;

(ii) the memorandum and articles of association must
stipulate, with respect to any payments referred to in
point (i) for reasons other than the individual termi-
nation of membership, that the competent authorities
must be notified at least one month in advance and
can prohibit the payment within that period;

(iii) 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 points (i) and (ii);

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

writing liabilities;

(c) the profit or loss brought

forward after deduction of

dividends to be paid;

(ii) 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 assurance undertaking
must submit to the competent authorities for their
approval a plan showing how the available 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 available solvency margin
is gradually reduced during at least the last five years
before the repayment date. The competent authorities
may authorise the early repayment of such loans
provided application is made by the issuing assurance
undertaking and its available solvency margin will not
fall below the required level;

(iii) loans the maturity of which is not

In the latter event

fixed must be
repayable only subject to five years' notice unless the
loans are no longer considered as a component of the
available solvency margin or unless the prior consent
of the competent authorities is specifically required for
early repayment.
the assurance
undertaking must notify the competent authorities at
least six months before the date of
the proposed
repayment, specifying the available solvency margin
and the required solvency margin both before and
after that repayment. The competent authorities shall
authorise repayment only if
the assurance under-
taking's available solvency margin will not fall below
the required level;

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(iv) the loan agreement must not

include any clause
providing that in specified circumstances, other than
the winding-up of the assurance undertaking, the debt
will become repayable before the agreed repayment
dates;

(v) the loan agreement may be amended only after the
they have

competent authorities have declared that
no objection to the amendment;

including

cumulative preferential

(b) securities with no specified maturity date and other
instruments,
shares
other than those mentioned in point (a), up to 50 % of
the lesser of
the available solvency margin and the
required solvency margin for the total of such securities
and the subordinated loan capital referred to in point (a)
provided they fulfil the following:

(i) they may not be repaid on the initiative of the bearer
the competent

consent of

the prior

or without
authority;

(ii) the contract of issue must enable the assurance under-
taking to defer the payment of interest on the loan;

(iii) the lender's claims on the assurance undertaking must
those of all non-subordinated

rank entirely after
creditors;

(iv) the documents governing the issue of the securities
must provide for the loss-absorption capacity of the
debt
the
assurance undertaking to continue its business;

interest, while

enabling

unpaid

and

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

Upon application, with supporting evidence, by the
4.
undertaking to the competent authority of the home Member
State and with the agreement of that competent authority, the
available solvency margin may also consist of:

(a) until 31 December 2009 an amount equal to 50 % of the
undertaking's future profits, but not exceeding 25 % of the
lesser of the available solvency margin and the required
solvency margin. The amount of the future profits shall
be obtained by multiplying the estimated annual profit by
a factor which represents the average period left to run on
policies. The factor used may not exceed 6. The estimated
annual profit shall not exceed the arithmetical average of
the profits made over the last five financial years in the
activities listed in Article 2(1).

(ii) in so far as that part of future profits emerging from
hidden net reserves referred to in point (c) has not
already been taken into account;

(b) where Zillmerizing is not practised or where, if practised, it
is less than the loading for acquisition costs included in the
premium,
the difference between a non-Zillmerized or
partially Zillmerized mathematical provision and a math-
ematical provision Zillmerized at a rate equal
to the
loading for acquisition costs included in the premium.
This figure may not, however, exceed 3,5 % of the sum
of the differences between the relevant capital sums of
life assurance activities and the mathematical provisions
for all policies for which Zillmerizing is possible. The
difference shall be reduced by the amount of any unde-
preciated acquisition costs entered as an asset;

(c) any hidden net reserves arising out of the valuation of
assets, in so far as such hidden net reserves are not of an
exceptional nature;

(d) one half of the unpaid share capital or initial fund, once the
paid-up part amounts to 25 % of that share capital or fund,
up to 50 % of the lesser of the available and required
solvency margin.

Amendments to paragraphs 2, 3 and 4 to take into
5.
account developments that justify a technical adjustment of
the elements eligible for the available solvency margin shall
be adopted in accordance with the procedure laid down in
Article 65(2).

Article 28

Required solvency margin

1.
Subject to Article 29, the required solvency margin shall
be determined as laid down in paragraphs 2 to 7 according to
the classes of assurance underwritten.

2.
For the kinds of assurance referred to in Article 2(1)(a)
and (b) other than assurances linked to investment funds and
for the operations referred to in Article 2(3), the required
solvency margin shall be equal to the sum of the following
two results:

(a) First result:

Competent authorities may only agree to include such an
amount for the available solvency margin:

(i) when an actuarial report is submitted to the competent
authorities substantiating the likelihood of emergence
of these profits in the future; and

a 4 % fraction of the mathematical provisions relating to
direct business and reinsurance acceptances gross of rein-
surance cessions shall be multiplied by the ratio, for the last
financial year, of the total mathematical provisions net of
reinsurance
total mathematical
to the gross
provisions. That ratio may in no case be less than 85 %.

cessions

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(b) Second result:

provisions, calculated in compliance with paragraph 2(a) of
this Article;

for policies on which the capital at risk is not a negative
figure, a 0,3 % fraction of such capital underwritten by the
assurance undertaking shall be multiplied by the ratio, for
the last financial year, of the total capital at risk retained as
the undertaking's liability after reinsurance cessions and
retrocessions to the total capital at risk gross of rein-
surance; that ratio may in no case be less than 50 %.

For temporary assurance on death of a maximum term of
three years the fraction shall be 0,1 %. For such assurance
of a term of more than three years but not more than five
years the above fraction shall be 0,15 %.

3.
For the supplementary insurance referred to in Article
to the
the required solvency margin shall be equal
2(1)(c)
required solvency margin for insurance undertakings as laid
down in Article 16a of Directive 73/239/EEC, excluding the
provisions of Article 17 of that Directive.

For permanent health insurance not subject to cancel-
the required solvency

4.
lation referred to in Article 2(1)(d),
margin shall be equal to:

(a) a 4 % fraction of the mathematical provisions, calculated in

compliance with paragraph 2(a) of this Article; plus

(b) the required solvency margin for insurance undertakings as
laid down in Article 16a of Directive 73/239/EEC,
excluding the provisions of Article 17 of that Directive.
However, the condition contained in Article 16a(6)(b) of
that Directive that a provision be set up for increasing age
may be replaced by a requirement that the business be
conducted on a group basis.

5.
For capital redemption operations referred to in Article
2(2)(b), the required solvency margin shall be equal to a 4 %
fraction of
in
the mathematical
compliance with paragraph 2(a) of this Article.

provisions

calculated

For tontines, referred to in Article 2(2)(a), the required

6.
solvency margin shall be equal to 1 % of their assets.

7.
For assurances covered by Article 2(1)(a) and (b) linked to
investment funds and for the operations referred to in Article
2(2)(c), (d) and (e), the required solvency margin shall be equal
to the sum of the following:

(a)

in so far as the assurance undertaking bears an investment
risk, a 4 % fraction of the technical provisions, calculated in
compliance with paragraph 2(a) of this Article;

(c)

in so far as the undertaking bears no investment risk and
the allocation to cover management expenses is not fixed
for a period exceeding five years, an amount equivalent to
25 % of the last financial year's net administrative expenses
pertaining to such business;

(d) in so far as the assurance undertaking covers a death risk, a
risk calculated in

0,3 % fraction of
the
compliance with paragraph 2(b) of this Article.

capital

at

Article 29

Guarantee fund

1.
One third of the required solvency margin as specified in
Article 28 shall constitute the guarantee fund. This fund shall
consist of the items listed in Article 27(2), (3) and, with the
agreement of the competent authority of the home Member
State, (4)(c).

The guarantee fund may not be less than a minimum of

2.
EUR 3 million.

Any Member State may provide for a one-fourth reduction of
the minimum guarantee fund in the case of mutual associations
and mutual-type associations and tontines.

Article 30

Review of the amount of the guarantee fund

1.
The amount in euro as laid down in Article 29(2) shall be
reviewed annually starting on 20 September 2003, in order to
take account of changes in the European Index of Consumer
Prices comprising all Member States as published by Eurostat.

The amount shall be adapted automatically, by increasing the
base amount in euro by the percentage change in that Index
over the period between 20 March 2002 and the review date
and rounded up to a multiple of EUR 100 000.

If the percentage change since the last adaptation is less than
5 %, no adaptation shall take place.

The Commission shall

2.
inform annually the European
Parliament and the Council of the review and the adapted
amount referred to in paragraph 1.

Article 31

Assets not used to cover technical provisions

(b) in so far as the undertaking bears no investment risk but
the allocation to cover management expenses is fixed for a
period exceeding five years, a 1 % fraction of the technical

1. Member States shall not prescribe any rules as to the
choice of the assets that need not be used as cover for the
technical provisions referred to in Article 20.

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Subject to Article 20(3), Article 37(1), (2), (3) and (5), and
2.
the second subparagraph of Article 39(1), Member States shall
not restrain the free disposal of those assets, whether movable
or immovable,
the assets of authorised
assurance undertakings.

form part of

that

3.
Paragraphs 1 and 2 shall not preclude any measures
which Member States, while safeguarding the interests of the
lives assured, are entitled to take as owners or members of or
partners in the assurance undertakings in question.

C h a p t e r 4

Contract law and conditions of assurance

Article 32

Law applicable

1.
The law applicable to contracts relating to the activities
referred to in this Directive shall be the law of the Member
State of the commitment. However, where the law of that State
so allows, the parties may choose the law of another country.

2. Where the policy-holder is a natural person and has his
habitual residence in a Member State other than that of which
he is a national, the parties may choose the law of the Member
State of which he is a national.

3. Where a State includes several territorial units, each of
which has its own rules of law concerning contractual obli-
gations, each unit shall be considered a country for the
purposes of identifying the law applicable under this Directive.

A Member State in which various territorial units have their
own rules of law concerning contractual obligations shall not
be bound to apply the provisions of this Directive to conflicts
which arise between the laws of those units.

4.
Nothing in this Article shall restrict the application of the
rules of the law of the forum in a situation where they are
mandatory, irrespective of the law otherwise applicable to the
contract.

If the law of a Member State so stipulates, the mandatory rules
of the law of the Member State of the commitment may be
applied if and in so far as, under the law of that Member State,
those rules must be applied whatever the law applicable to the
contract.

5.
Subject to paragraphs 1 to 4, the Member States shall
apply to the assurance contracts referred to in this Directive
their general rules of private international
law concerning
contractual obligations.

undertaking authorised under the conditions of Article 4 as
long as that does not conflict with legal provisions protecting
the general good in the Member State of the commitment.

Article 34

Rules relating to conditions of assurance and scales of
premiums

Member States shall not adopt provisions requiring the prior
approval or systematic notification of general and special
policy conditions, scales of premiums, technical bases used in
particular for calculating scales of premiums and technical
provisions or forms and other printed documents which an
assurance undertaking intends to use in its dealings with
policy-holders.

Notwithstanding the first subparagraph, for the sole purpose of
verifying compliance with national provisions concerning
the home Member State may require
actuarial principles,
the technical bases used in
systematic communication of
particular for calculating scales of premiums and technical
provisions, without
requirement constituting a prior
condition for an assurance undertaking to carry on its business.

that

Not later than 1 July 1999 the Commission shall submit a
report
those
to the Council on the implementation of
provisions.

Article 35

Cancellation period

1.
Each Member State shall prescribe that a policy-holder
who concludes an individual life-assurance contract shall have
a period of between 14 and 30 days from the time when he
was informed that the contract had been concluded within
which to cancel the contract.

The giving of notice of cancellation by the policy-holder shall
have the effect of releasing him from any future obligation
arising from the contract.

The other legal effects and the conditions of cancellation shall
be determined by the law applicable to the contract as defined
in Article 32, notably as
for
contract has been
informing the policy-holder
concluded.

the arrangements

regards
that

the

Article 33

General good

The Member State of the commitment shall not prevent a
policy-holder from concluding a contract with an assurance

The Member States need not apply paragraph 1 to
2.
contracts of six months' duration or less, nor where, because
of the status of the policy-holder or the circumstances in which
the contract is concluded, the policy-holder does not need this
special protection. Member States shall specify in their rules
where paragraph 1 is not applied.

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Article 36

Information for policy-holders

Before the assurance contract is concluded, at least the
shall be

1.
information listed in point A of Annex III
communicated to the policy-holder.

The policy-holder shall be kept informed throughout the
2.
term of the contract of any change concerning the information
listed in point B of Annex III.

The Member State of

3.
the commitment may require
assurance undertakings to furnish information in addition to
that listed in Annex III only if it is necessary for a proper
understanding by the policy-holder of the essential elements
of the commitment.

4.
The detailed rules for implementing this Article and
Annex III shall be laid down by the Member State of the
commitment.

C h a p t e r 5

Assurance undertakings in difficulty or in an irregular
situation

the free disposal of

the
It may also restrict or prohibit
assurance undertaking's assets. It shall inform the authorities
of other Member States within the territories of which the
assurance 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 the assured 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
assurance undertaking's home Member State, which shall
designate the assets to be covered by such measures.

Article 38

Financial recovery plan

1. Member States shall ensure that the competent authorities
have the power to require a financial recovery plan for those
insurance undertakings where competent authorities consider
that policy-holders' rights are threatened. The financial recovery
plan must as a minimum include particulars or proof
concerning for the next three financial years:

Article 37

Assurance undertakings in difficulty

(a) estimates of management expenses,
general expenses and commissions;

in particular current

1.
If an assurance undertaking does not comply with Article
20, the competent authority of its home Member State may
prohibit
after having
communicated its intention to the competent authorities of
the Member States of commitment.

disposal of

assets

free

the

its

2.
For the purposes of restoring the financial situation of an
assurance undertaking the solvency margin of which has fallen
below the minimum required under Article 28, the competent
authority of the home Member State shall require that a plan
for the restoration of a sound financial position be submitted
for its approval.

In exceptional circumstances, if the competent authority is of
the opinion that the financial situation of the assurance under-
taking will further deteriorate, it may also restrict or prohibit
the free disposal of the assurance undertaking's assets. It shall
inform the authorities of other Member States within the terri-
tories of which the assurance undertaking carries on business
of any measures it has taken and the latter shall, at the request
of the former, take the same measures.

(b) a plan setting out detailed estimates of income and expen-
diture in respect of direct business, reinsurance acceptances
and reinsurance cessions;

(c) a forecast balance sheet;

(d) estimates of

resources intended to cover
underwriting liabilities and the required solvency margin;

the financial

(e)

the overall reinsurance policy.

2. Where policy-holders' rights are threatened because the
financial position of the undertaking is deteriorating, Member
States shall ensure that the competent authorities have the
power to oblige insurance undertakings to have a higher
that
required solvency margin,
the
solvency
is
insurance
requirements in the near future. The level of
this higher
required solvency margin shall be based on a financial
recovery plan referred to in paragraph 1.

to ensure
the
fulfil

in order
to
able

undertaking

3.
If the solvency margin falls below the guarantee fund as
defined in Article 29, the competent authority of the home
Member State shall
require the assurance undertaking to
submit a short-term finance scheme for its approval.

3. Member States shall ensure that the competent authorities
have the power to revalue downwards all elements eligible for
the available solvency margin,
in particular, where there has
been a significant change in the market value of these elements
since the end of the last financial year.

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4. Member States shall ensure that the competent authorities
have the powers to decrease the reduction, based on rein-
surance, to the solvency margin as determined in accordance
with Article 28 where:

TITLE IV

PROVISIONS RELATING TO RIGHT OF ESTABLISHMENT AND
FREEDOM TO PROVIDE SERVICES

(a) the nature or quality of reinsurance contracts has changed

significantly since the last financial year;

(b) there is no or an insignificant risk transfer under the rein-

surance contracts.

If the competent authorities have required a financial
5.
recovery plan for the insurance undertaking in accordance
with paragraph 1, they shall refrain from issuing a certificate
in accordance with Article 14(1), Article 40(3),
second
subparagraph, and Article 42(1)(a), as long as they consider
that policy-holders' rights are threatened within the meaning
of paragraph 1.

Article 39

Withdrawal of authorisation

Article 40

Conditions for branch establishment

1.
An assurance undertaking that proposes to establish a
branch within the territory of another Member State shall
notify the competent authorities of its home Member State.

The Member States shall require every assurance under-
2.
taking that proposes 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:

(a) the Member State within the territory of which it proposes

to establish a branch;

Authorisation granted to an assurance undertaking by the
its home Member State may be

1.
competent authority of
withdrawn by that authority if that undertaking:

(b) a scheme of operations setting out inter alia the types of
business envisaged and the structural organisation of the
branch;

(a) does not make use of the authorisation within 12 months,
expressly renounces it or ceases to carry on business for
more than 6 months, unless the Member State concerned
has made provision for authorisation to lapse in such cases;

(b) no longer fulfils the conditions for admission;

(c) has been unable, within the time allowed,

measures
scheme referred to in Article 37;

specified in the restoration plan or

to take the
finance

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

which it is subject.

take appropriate measures to prevent

In the event of the withdrawal or lapse of the authorisation, the
competent authority of the home Member State shall notify the
competent authorities of the other Member States accordingly
the
and they shall
assurance undertaking from commencing new operations
within their territories, under either the freedom of estab-
the freedom to provide services. The home
lishment or
in conjunction
Member State's competent authority shall,
all necessary measures
with those
to
safeguard the interests of
the assured persons and shall
restrict,
in particular, the free disposal of the assets of the
assurance undertaking in accordance with Article 37(1), (2),
second subparagraph, and (3), second subparagraph.

authorities,

take

2.
Any decision to withdraw an authorisation shall be
supported by precise reasons and notified to the assurance
undertaking in question.

(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 all communications to the authorised
agent are sent;

(d) the name of

the branch's authorised agent, who must
possess sufficient powers to bind the assurance 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 liti-
gation in the Member State of the branch arising out of
underwritten commitments, the assured persons must not
be treated less favourably than if the litigation had been
type. The
brought against businesses of a conventional
authorised
sufficient
possess
powers for proceedings to be taken against him and
must in that capacity be able to bind the Lloyd's under-
writers concerned.

agent must,

therefore,

Unless the competent authorities of the home Member
3.
State have reason to doubt the adequacy of the administrative
structure or the financial situation of the assurance undertaking
or the good repute and professional qualification or experience
of the directors or managers or the authorised agent, taking
into account
they shall within three
months of
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 business planned,
receiving all

the

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that

The competent authorities of the home Member State shall also
attest
the minimum
solvency margin calculated in accordance with Articles 28
and 29.

the assurance undertaking has

the

to communicate

Where the competent authorities of the home Member State
information referred to in
refuse
the Member
paragraph 2 to the competent authorities of
State of
the branch they shall give the reasons for their
refusal to the assurance undertaking concerned within three
months of receiving all
the information in question. That
refusal or failure to act shall be subject to a right to apply
to the courts in the home Member State.

4.
Before the branch of an assurance undertaking starts
business, the competent authorities of the Member State of
receiving the
the branch shall, within two months of
information referred
inform the
3,
competent authority of the home Member State, if appropriate,
of the conditions under which, in the interest of the general
good, that business must be carried on in the Member State of
the branch.

paragraph

to

in

On receiving a communication from the competent auth-
5.
orities of the Member State of the branch or, if no communi-
cation is received from them, on expiry of the period provided
for in paragraph 4, the branch may be established and start
business.

In the event of a change in any of

6.
the particulars
communicated under paragraph 2(b), (c) or (d), an assurance
undertaking shall give written notice of the change to the
competent authorities of the home Member State and 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 41

Freedom to provide services: Prior notification to the
home Member State

Any assurance 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 commitments it proposes to cover.

State shall communicate to the Member State or Member
States within the territory of which the assurance undertaking
intends to carry on business by way of the freedom to provide
services:

(a) a certificate attesting that the assurance undertaking has the
minimum solvency margin calculated in accordance with
Articles 28 and 29;

(b) the classes which the assurance undertaking has been auth-

orised to offer;

(c)

the nature of the commitments which the assurance under-
taking proposes to cover in the Member State of
the
provision of services.

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

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 assurance undertaking within
that same period. The refusal shall be subject to a right to
apply to the courts in the home Member State.

3.
The assurance 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 43

Freedom to provide services: Changes in the nature of
commitments

Any change which an assurance undertaking intends to make
to the information referred to in Article 41 shall be subject to
the procedure provided for in Articles 41 and 42.

Article 44

Language

Article 42

Freedom to provide services: Notification by the home
Member State

1. Within one month of the notification provided for in
Article 41 the competent authorities of the home Member

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 authorised under this
Directive to request with regard to the business of assurance
undertakings operating in the territory of that State shall be
supplied to them in the official language or languages of that
State.

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Article 45

Rules relating to conditions of assurance and scales of
premiums

The Member State of the branch or of the provision of services
shall not lay down provisions requiring the prior approval or
systematic notification of general and special policy conditions,
scales of premiums, technical bases used in particular for calcu-
lating scales of premiums and technical provisions, forms and
other printed documents which an assurance undertaking
intends to use in its dealings with policy-holders. For the
purpose of verifying compliance with national provisions
concerning assurance contracts,
it may require an assurance
undertaking that proposes to carry on assurance business
within its territory, under the right of establishment or the
freedom to provide services,
to effect only non-systematic
those policy conditions and other printed
notification of
documents without
requirement constituting a prior
condition for an assurance undertaking to carry on its business.

that

Article 46

Assurance undertakings not complying with the legal
provisions

1.
Any assurance 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 of the Member State of the provision of
services all documents requested of it for the purposes of this
Article in so far as assurance undertakings the head office of
which is in those Member States are also obliged to do so.

If the competent authorities of a Member State establish
2.
that an assurance undertaking with a branch or carrying on
business under the freedom to provide services in its territory
is not complying with the legal provisions applicable to it in
that State,
the assurance undertaking
concerned to remedy that irregular situation.

they shall

require

If the assurance undertaking in question fails to take the
3.
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
the assurance undertaking concerned remedies
ensure that
that irregular situation. The nature of those measures shall be
communicated to the competent authorities of the Member
State concerned.

4.
If, despite the measures taken by the home Member State
or because those measures prove inadequate or are lacking in
that State, the assurance undertaking persists in violating the
legal provisions in force in the Member State concerned, the
latter may, after informing the competent authorities of the
home Member State, take appropriate measures to prevent or
penalise further irregularities, including, in so far as is strictly
necessary, preventing that undertaking from continuing to

territory.
conclude new assurance
Member States shall ensure that
is
it
possible to serve the legal documents necessary for such
measures on assurance undertakings.

contracts within its
in their

territories

5.
Paragraphs 2, 3 and 4 shall not affect the emergency
power of the Member States concerned to take appropriate
measures
committed
to prevent or penalise irregularities
include the possibility of
within their territories. This shall
preventing
to
from continuing
assurance
conclude new assurance contracts within their territories.

undertakings

6.
Paragraphs 2, 3 and 4 shall not affect the power of the
Member States to penalise infringements within their terri-
tories.

7.
If an assurance undertaking which has committed an
infringement has an establishment or possesses property in
the competent authorities of
the Member State concerned,
law, apply the
the latter may,
administrative penalties prescribed for that
infringement by
way of enforcement against that establishment or property.

in accordance with national

Any measure adopted under paragraphs 3 to 7 involving
8.
penalties or restrictions on the conduct of assurance business
must be properly reasoned and communicated to the assurance
undertaking concerned.

9.
Every two years, the Commission shall submit to the
Insurance Committee a report summarising the number and
type of cases in which,
in each Member State, authorisation
has been refused pursuant to Articles 40 or 42 or measures
have been taken under paragraph 4 of this Article. Member
States shall cooperate with the Commission by providing it
with the information required for that report.

Article 47

Advertising

Nothing in this Directive shall prevent assurance undertakings
with head offices in other Member States from advertising their
services through all available means of communication in the
Member State of the branch or Member State of the provision
to any rules governing the form and
of services, subject
content of such advertising adopted in the interest of
the
general good.

Article 48

Winding up

Should an assurance undertaking be 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
assurance contracts, without distinction as to nationality as
far as the lives assured and the beneficiaries are concerned.

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Article 49

(b) it establishes an agency or branch in the territory of such

Statistical information on cross-border activities

Every assurance undertaking shall
inform the competent
authority of its home Member State, separately in respect of
transactions carried out under the right of establishment and
those carried out under the freedom to provide services, of the
amount of the premiums, without deduction of reassurance, by
Member State and by each of classes I to IX, as defined in
Annex I.

The competent authority of the home Member State shall,
within a reasonable time and on an aggregate basis forward
this information to the competent authorities of each of the
Member States concerned which so request.

Article 50

Taxes on premiums

1. Without prejudice to any subsequent harmonisation,
every assurance contract shall be subject exclusively to the
indirect taxes and parafiscal charges on assurance premiums
the commitment, and also, with
in the Member State of
regard to Spain,
legally established in
favour of
the Spanish ‘Consorcio de Compensación de
Seguros’ for the performance of its functions relating to the
compensation of
losses arising from extraordinary events
occurring in that Member State.

to the surcharges

Member State;

(c)

it undertakes to establish at the place of management of the
agency or branch accounts specific to the activity which it
carries on there and to keep there all the records relating to
the business transacted;

(d) it designates a general representative, to be approved by the

competent authorities;

(e)

it possesses in the Member State where it carries on an
in value to at least
activity assets of an amount equal
in
one half of
Article 29(2)
the
guarantee fund and deposits one fourth of the minimum
amount as security;

the minimum amount prescribed
subparagraph in respect of
first

(f)

it undertakes to keep a solvency margin complying with
Article 55;

(g)

it submits a scheme of operations in accordance with the
provisions of paragraph 3.

The scheme of operations of

the agency or branch
3.
referred to in paragraph 2(g) shall contain the following
particulars or evidence of:

The law applicable to the contract pursuant to Article 32

2.
shall not affect the fiscal arrangements applicable.

(a) the nature of

the commitments which the undertaking

proposes to cover;

to

those

Pending future harmonisation, each Member State shall
3.
apply
cover
commitments situated within its territory its own national
provisions for measures to ensure the collection of indirect
taxes and parafiscal charges due under paragraph 1.

undertakings which

assurance

(b) the guiding principles as to reinsurance;

(c)

state of

the
guarantee fund referred to in Article 55;

the undertaking's

solvency margin and

TITLE V

RULES APPLICABLE TO AGENCIES OR BRANCHES ESTAB-
LISHED WITHIN THE COMMUNITY AND BELONGING TO
UNDERTAKINGS WHOSE HEAD OFFICES ARE OUTSIDE THE
COMMUNITY

Article 51

Principles and conditions of authorisation

1.
Each Member State shall make access to the activities
referred to in Article 2 by any undertaking whose head
office is outside the Community subject to an official author-
isation.

A Member State may grant an authorisation if the under-

2.
taking fulfils at least the following conditions:

(a)

it is entitled to undertake insurance activities covered by
Article 2 under its national law;

(d) estimates relating to the cost of setting up the adminis-
trative services and the organisation for securing business
and the financial resources intended to meet those costs;

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

(e) a plan setting out detailed estimates of income and expen-
diture in respect of direct business, reinsurance acceptances
and reinsurance cessions;

(f) a forecast balance sheet;

(g) estimates relating to the financial resources intended to
cover underwriting liabilities and the solvency margin.

4.
A Member State may require systematic notification of
the technical bases used for calculating scales of premiums and
technical provisions, without that requirement constituting a
prior condition for an assurance undertaking to carry on its
business.

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Article 52

Article 53

Rules applicable to branches of third-country undertakings

Transfer of portfolio

1. (a) Subject to point (b), agencies and branches referred to in
this Title may not simultaneously carry on in a Member
State the activities referred to in the Annex to Directive
73/239/EEC and those covered by this Directive.

(b) Subject to point (c), Member States may provide that
agencies and branches referred to in this Title which
on the relevant date referred to in Article 18(3)
carried on both activities simultaneously in a Member
State may continue to do so there provided that each
activity is
separately managed in accordance with
Article 19.

(c) Any Member State which under Article 18(6) requires
undertakings established in its territory to cease the
the activities in which they
simultaneous pursuit of
were engaged on the relevant date referred to in
Article 18(3) must also impose this requirement on
agencies and branches referred to in this Title which
are established in its territory and simultaneously carry
on both activities there.

(d) Member States may provide that agencies and branches
referred to in this Title whose head office simultaneously
carries on both activities and which on the dates
referred to in Article 18(3) carried on in the territory
of a Member State solely the activity covered by this
Directive may continue their activity there. If the under-
taking wishes to carry on the activity referred to in
Directive 73/239/EEC in that
territory it may only
carry on the activity covered by this Directive through
a subsidiary.

Articles 13 and 37 shall apply mutatis mutandis to

2.
agencies and branches referred to in this title.

the purposes of applying Article 37,

For
the competent
authority which supervises the overall solvency of agencies
or branches
the
competent authority of the head-office Member State.

shall be treated in the same way as

Under the conditions laid down by national

1.
law, each
Member State shall authorise 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 auth-
if appropriate, those of the
orities of that Member State or,
Member State referred to in Article 56 certify that after taking
the transfer into account the accepting office possesses the
necessary solvency margin.

Under the conditions laid down by national

2.
law, each
Member State shall authorise 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 assurance undertaking
with a head office in another Member State if the competent
authorities of that Member State certify that after taking the
transfer
the
necessary solvency margin.

the accepting office possesses

into account

3.
law a
If under the conditions laid down by national
Member State authorises 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
if appropriate, of
Member State of the accepting office or,
the Member State referred to in Article 56 certify that after
taking the transfer into account the accepting office possesses
the necessary solvency margin, that the law of the Member
State of the accepting office permits such a transfer and that
the State has agreed to the transfer.

the competent authorities of

In the circumstances referred to in paragraphs 1, 2 and 3
4.
the Member State in which the transferring agency or branch is
situated shall authorise
transfer after obtaining the
agreement of the competent authorities of the Member State
of the commitment, where different from the Member State in
which the transferring agency or branch is situated.

the

The

the Member

authorities of
their opinion or

5.
competent
States
to the
consulted shall give
competent authorities of the home Member State of the trans-
ferring assurance 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.

consent

In the case of a withdrawal of authorisation by the
3.
authority referred to in Article 56(2),
this authority shall
notify the competent authorities of the other Member States
where the undertaking operates and the latter authorities shall
take the appropriate measures. If the reason for the withdrawal
of authorisation is the inadequacy of
the solvency margin
calculated in accordance with Article 56(1)(a), the competent
authorities of the other Member States concerned shall also
withdraw their authorisations.

A transfer authorised in accordance with this Article shall
6.
be published as laid down by national law in the Member State
of the commitment. Such transfers shall automatically be valid
against policy-holders, assured persons and any other persons
having rights or obligations arising out of the contracts trans-
ferred.

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This provision shall not affect the Member States' right to give
policy-holders the option of cancelling contracts within a fixed
period after a transfer.

Article 54

Technical provisions

shall

States

require

undertakings

to establish
Member
provisions, referred to in Article 20, adequate to cover the
underwriting liabilities assumed in their territories. Member
States
such
provisions by means of assets which are equivalent to such
provisions and matching assets in accordance with Annex II.

the agency or branch covers

see that

shall

The law of the Member States shall be applicable to the calcu-
lation of such provisions, the determination of categories of
investment and the valuation of assets, and, where appropriate,
the determination of the extent to which these assets may be
used for the purpose of covering such provisions.

The Member State in question shall require that the assets
covering these provisions, shall be localised in its territory.
Article 20(4) shall, however, apply.

Article 55

Solvency margin and guarantee fund

1.
Each Member State shall require of agencies or branches
set up in its territory a solvency margin consisting of the items
listed in Article 27. The minimum solvency margin shall be
calculated in accordance with Article 28. However,
for the
purpose of calculating this margin, account shall be taken
only of
the operations effected by the agency or branch
concerned.

One third of

2.
constitute the guarantee fund.

the minimum solvency margin shall

Article 56

Advantages to undertakings authorised in more than one
Member State

Any undertaking which has requested or obtained auth-
1.
orisation from more than one Member State may apply for the
following advantages which may be granted only jointly:

(a) the solvency margin referred to in Article 55 shall be
calculated in relation to the entire business which it
carries on within the Community;
in such case, account
shall be taken only of the operations effected by all the
agencies or branches established within the Community for
the purposes of this calculation;

(b) the deposit required under Article 51(2)(e) shall be lodged

in only one of those Member States;

(c)

the assets representing the guarantee fund shall be localised
in any one of the Member States in which it carries on its
activities.

2.
Application to benefit from the advantages provided for
in paragraph 1 shall be made to the competent authorities of
the Member States concerned. The application must state the
authority of the Member State which in future is to supervise
the solvency of the entire business of the agencies or branches
established within the Community. Reasons must be given for
the choice of authority made by the undertaking. The deposit
shall be lodged with that Member State.

The advantages provided for in paragraph 1 may only be
3.
granted if the competent authorities of all Member States in
which an application has been made agree to them. They shall
take effect
from the time when the selected competent
authority informs the other competent authorities that it will
supervise the state of solvency of the entire business of the
agencies or branches within the Community.

The competent authority selected shall obtain from the other
Member States the information necessary for the supervision of
the overall solvency of the agencies and branches established in
their territory.

However, the amount of this fund may not be less than one
first
half of
subparagraph. The initial deposit lodged in accordance with
Article 51(2)(e) shall be counted towards such guarantee fund.

the minimum required under Article 29(2)

4.
At the request of one or more of the Member States
concerned, the advantages granted under this Article shall be
withdrawn simultaneously by all Member States concerned.

The guarantee fund and the minimum of such fund shall be
constituted in accordance with Article 29.

Article 57

Agreements with third countries

3.
The assets representing the minimum solvency margin
must be kept within the Member State where activities are
carried on up to the amount of the guarantee fund and the
excess within the Community.

The Community may, by means of agreements concluded
pursuant
to the Treaty with one or more third countries,
agree to the application of provisions different from those
provided for in this Title, for the purpose of ensuring, under
conditions of
reciprocity, adequate protection for policy-
holders in the Member States.

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TITLE VI

RULES APPLICABLE TO SUBSIDIARIES OF PARENT UNDER-
TAKINGS GOVERNED BY THE
LAWS OF A THIRD
COUNTRY AND TO THE ACQUISITIONS OF HOLDINGS BY
SUCH PARENT UNDERTAKINGS

Article 58

Information from Member States to the Commission

The competent authorities of the Member States shall inform
the Commission:

competitive opportunities for Community assurance under-
takings. The Council shall decide by a qualified majority.

4. Whenever it appears to the Commission, either on the
basis of the reports referred to in paragraph 2 or on the basis
of other information, that Community assurance undertakings
in a third country are not receiving national treatment offering
the same competitive opportunities as are available to domestic
the conditions of effective
insurance undertakings and that
market access are not being fulfilled, the Commission may
initiate negotiations in order to remedy the situation.

(a) of any authorisation of a direct or indirect subsidiary one
or more parent undertakings of which are governed by the
laws of a third country. The Commission shall inform the
Committee referred to in Article 65(1) accordingly;

In the circumstances described in the first subparagraph, it may
also be decided at any time, and in addition to initiating
negotiations, in accordance with the procedure laid down in
Article 65(2), that the competent authorities of the Member
States must limit or suspend their decisions:

(b) whenever such a parent undertaking acquires a holding in a
Community assurance undertaking which would turn the
latter into its subsidiary. The Commission shall inform the
Committee referred to in Article 65(1) accordingly.

When authorisation is granted to the direct or
indirect
subsidiary of one or more parent undertakings governed by
the law of third countries, the structure of the group shall be
specified in the notification which the competent authorities
shall address to the Commission.

Article 59

Third-country treatment of Community assurance under-
takings

1.
The Member States shall inform the Commission of any
general difficulties encountered by their assurance undertakings
in establishing themselves or carrying on their activities in a
third country.

Periodically,

2.
the Commission shall draw up a report
examining the treatment accorded to Community assurance
in the terms referred to in
undertakings in third countries,
paragraphs 3 and 4, as
establishment and the
insurance activities, and the acquisition of
carrying on of
holdings
The
Commission shall
to the Council,
together with any appropriate proposals.

insurance
those reports

third-country
submit

undertakings.

regards

in

— regarding requests pending at the moment of the decision

or future requests for authorisations, and

— regarding the acquisition of holdings by direct or indirect
the

governed by

laws of

the

parent undertakings
third country in question.

The duration of the measures referred to may not exceed three
months.

Before the end of that three-month period, and in the light of
the results of the negotiations, the Council may, acting on a
proposal from the Commission, decide by a qualified majority
whether the measures shall be continued.

Such limitations or suspension may not apply to the setting up
of subsidiaries by assurance undertakings or their subsidiaries
duly authorised in the Community, or to the acquisition of
holdings in Community assurance undertakings by such under-
takings or subsidiaries.

5. Whenever it appears to the Commission that one of the
situations described in paragraphs 3 and 4 has arisen,
the
Member States shall inform it at its request:

(a) of any request for the authorisation of a direct or indirect
subsidiary one or more parent undertakings of which are
governed by the laws of the third country in question;

3. Whenever it appears to the Commission, either on the
basis of the reports referred to in paragraph 2 or on the basis
that a third country is not granting
of other information,
Community assurance undertakings effective market access
comparable to that granted by the Community to insurance
undertakings from that third country, the Commission may
submit proposals to the Council for the appropriate mandate
comparable
for negotiation with a

view to obtaining

(b) of any plans for such an undertaking to acquire a holding
in a Community assurance undertaking such that the latter
would become the subsidiary of the former.

This obligation to provide information shall lapse whenever an
agreement is reached with the third country referred to in
paragraph 3 or 4 when the measures referred to in the
second and third subparagraphs of paragraph 4 cease to apply.

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6. Measures taken under this Article shall comply with the
Community's obligations under any international agreements,
bilateral or multilateral, governing the taking up and pursuit of
the business of insurance undertakings.

Each Member State shall also inform the other Member States
and the Commission of the authorities or bodies to which the
documents referred to in this Article are to be submitted in
support of an application to carry on in the territory of this
Member State the activities referred to in Article 2.

TITLE VII

TRANSITIONAL AND OTHER PROVISIONS

Article 60

Derogations and abolition of restrictive measures

1.
Undertakings set up in the United Kingdom by Royal
Charter or by private Act or by special Public Act may carry
on their activity in the legal
form in which they were
constituted on 15 March 1979 for an unlimited period.

The United Kingdom shall draw up a list of such undertakings
and communicate it
to the other Member States and the
Commission.

The societies registered in the United Kingdom under the
life
in accordance with

2.
Friendly Societies Acts may continue the activities of
assurance and savings operations which,
their objects, they were carrying on on 15 March 1979.

Article 61

Proof of good repute

its own nationals
1. Where a Member State requires of
proof of good repute and proof of no previous bankruptcy,
or proof of either of these, that State shall accept as sufficient
evidence in respect of nationals of other Member States the
production of an extract from the ‘judicial record’ or, failing
this, of an equivalent document issued by a competent judicial
or administrative authority in the home Member State or the
Member State from which the foreign national comes showing
that these requirements have been met.

2. Where the home Member State or the Member State
from which the foreign national concerned comes does not
issue the document referred to in paragraph 1,
it may be
replaced by a declaration on oath — or in States where
there is no provision for declaration on oath by a solemn
declaration — made by the person concerned before a
competent judicial or administrative authority or, where appro-
priate, a notary in the home Member State or the Member
such authority or
State from which that person comes;
notary shall issue a certificate attesting the authenticity of the
declaration on oath or solemn declaration. The declaration in
respect of no previous bankruptcy may also be made before a
competent professional or trade body in the said country.

3.
Documents issued in accordance with paragraphs 1 and 2
must not be produced more than three months after their date
of issue.

TITLE VIII

FINAL PROVISIONS

Article 62

Cooperation between the Member States

and the

Commission

The Commission and the competent authorities of the Member
States shall collaborate closely with a view to facilitating the
supervision of
insurance and the operations
referred to in this Directive within the Community.

the kinds of

Each Member State shall inform the Commission of any major
difficulties to which application of this Directive gives rise,
inter alia any arising if a Member State becomes aware of an
abnormal transfer of business referred to in this Directive to
the detriment of undertakings established in its territory and to
the advantage of agencies and branches located just beyond its
borders.

The Commission and the competent authorities of the Member
States concerned shall examine such difficulties as quickly as
possible in order to find an appropriate solution.

Where necessary,
proposals to the Council.

the Commission shall submit appropriate

Article 63

Reports on the development of the market under the
freedom to provide services

The Commission shall forward to the European Parliament and
the Council regular reports, the first on 20 November 1995,
on the development of the market in assurance and operations
transacted under conditions of freedom to provide services.

Article 64

Technical adjustment

to be made to this
The following technical adjustments
Directive shall be adopted in accordance with the procedure
laid down in Article 65(2):

— extension of the legal forms provided for in Article 6(1)(a),

— amendments to the list set out in Annex I, or adaptation of
the terminology used in that list to take account of the
development of assurance markets,

4. Member States shall designate the authorities and bodies
competent to issue the documents referred to in paragraphs 1
and 2 and shall forthwith inform the other Member States and
the Commission thereof.

— clarification of the items constituting the solvency margin
listed in Article 27 to take account of the creation of new
financial instruments,

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— alteration of the minimum guarantee fund provided for in
Article 29(2) to take account of economic and financial
developments,

Article 67

Right to apply to the courts

to take account of

the creation of new
— amendments,
financial
instruments, to the list of assets acceptable as
cover for technical provisions set out in Article 23 and
to the rules on the spreading of investments laid down in
Article 24,

— changes in the relaxations in the matching rules laid down
in Annex II, to take account of the development of new
in
instruments
currency-hedging
economic and monetary union,

progress made

or

— clarification of the definitions in order to ensure uniform
application of this Directive throughout the Community,

— the technical adjustments necessary to the rules for setting
the maxima applicable to interest rates, pursuant to Article
20,
in particular to take account of progress made in
economic and monetary union.

Article 65

Committee procedure

The Commission shall be assisted by the Insurance

1.
Committee instituted by Directive 91/675/EEC.

Member States shall ensure that decisions taken in respect of
an assurance undertaking under laws, regulations and adminis-
trative provisions adopted in accordance with this Directive
may be subject to the right to apply to the courts.

Article 68

Review of amounts expressed in euro

The Commission shall submit to the Council before 15
1.
March 1985 a report dealing with the effects of the financial
requirements imposed by this Directive on the situation in the
insurance markets of the Member States.

2.
The Council, acting on a proposal from the Commission,
shall every two years examine and, where appropriate, revise
the amounts expressed in euro in this Directive, in the light of
how the Community's economic and monetary situation has
evolved.

Article 69

Implementation of new provisions

1. Member States shall bring into force the laws, regulations
and administrative provisions necessary to comply with Article
1(1)(m), Article 18(3), Article 51(2)(g), (3) and (4), Article 60(2)
and Article 66(1) not later than . . . (*). They shall immediately
inform the Commission thereof.

2. Where reference is made to this paragraph, Articles 5 and
7 of Decision 1999/468/EC shall apply, having regard to the
provisions of Article 8 thereof.

The period laid down in Article 5(6) of Decision 1999/468/EC
shall be set at three months.

2. Member States shall bring into force the laws, regulations
and administrative provisions necessary for them to comply
with Article 16(3) not later than 17 November 2002. They
shall
forthwith inform the Commission thereof. Before this
date, Member States shall apply the provision referred to in
Annex IV(1).

3.

The Committee shall adopt its rules of procedure.

Article 66

Rights acquired by existing branches and assurance under-
takings

1.
Branches which started business, in accordance with the
provisions in force in the Member State of the branch, before 1
July 1994 shall be presumed to have been subject
to the
procedure laid down in Article 40(1) to (5).

They shall be governed, from that date by Articles 13, 20, 37,
39 and 46.

Articles 41 and 42 shall not affect rights acquired by
the

2.
assurance undertakings
freedom to provide services before 1 July 1994.

carrying on business under

3. Member States shall adopt by 20 September 2003 the
laws, regulations and administrative provisions necessary to
comply with Articles 3(6), 27, 28, 29, 30 and 38. They shall
forthwith inform the Commission thereof.

Member States shall provide that the provisions referred to in
the first subparagraph shall first apply to the supervision of
accounts for financial years beginning on 1 January 2004 or
during that calendar year. Before this date, Member States shall
apply the provisions referred to in Annex IV(2) and (3).

4. When Member States adopt the measures mentioned in
paragraphs (1), (2) and (3), they shall contain a reference to this
Directive or be accompanied by such a reference on the
occasion of
their official publication. Member States shall
determine how such reference is to be made.

(*) 18 months after the date of entry into force of this Directive.

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Not later than 1 January 2007 the Commission shall
5.
submit to the European Parliament and the Council a report
on the application of Articles 3(6), 27, 28, 29, 30 and 38 and,
if necessary, on the need for further harmonisation. The report
shall indicate how Member States have made use of the possi-
bilities under those articles and,
in particular, whether the
discretionary powers afforded to the national supervisory auth-
orities have resulted in major supervisory differences in the
single market.

Article 70

Information to the Commission

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.

Article 71

Transitional period for Articles 3(6), 27, 28, 29, 30 and 38

1. Member States may allow assurance undertakings which
at 20 March 2002 provided assurance in their territories in one
or more of classes referred to in the Annex I a period of five
years, commencing on that same date, in order to comply with
the requirements set out in Articles 3(6), 27, 28, 29, 30 and
38.

2. Member States may allow any undertakings referred to in
paragraph 1, which upon the expiry of the five-year period
have not
fully established the required solvency margin, a
further period not exceeding two years in which to do so
in accordance with
provided that such undertakings have,
Article 37, submitted for the approval of the competent auth-

the measures which they propose to take for such

orities,
purpose.

Article 72

Repealed Directives and their correlation with this
Directive

1.
The Directives listed in Annex V, Part A, are hereby
repealed, without prejudice to the obligations of the Member
States concerning the time-limits for transposition and for
application of the said Directives listed in Annex V, Part B.

2.
References to the repealed Directives shall be construed
as references to this Directive and shall be read in accordance
with the correlation table in Annex VI.

Article 73

Entry into force

This Directive shall enter into force on the day of its publi-
cation in the Official Journal of the European Communities.

Article 74

Addressees

This Directive is addressed to the Member States.

Done at . . .

For the European Parliament

The President

For the Council

The President

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ANNEX I

CLASSES OF ASSURANCE

I. The assurance referred to in Article 2(1)(a), (b) and (c) excluding those referred to in II and III

II. Marriage assurance, birth assurance

III. The assurance referred to in Article 2(1)(a) and (b), which are linked to investment funds

IV. Permanent health insurance, referred to in Article 2(1)(d)

V. Tontines, referred to in Article 2(2)(a)

VI. Capital redemption operations, referred to in Article 2(2)(b)

VII. Management of group pension funds, referred to in Article 2(2)(c) and (d)

VIII. The operations referred to in Article 2(2)(e)

IX. The operations referred to in Article 2(3)

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ANNEX II

MATCHING RULES

The currency in which the assurer's commitments are payable shall be determined in accordance with the following
rules:

1. Where the cover provided by a contract is expressed in terms of a particular currency, the assurer's commitments are

considered to be payable in that currency.

2. Member States may authorise assurance undertakings not to cover their technical provisions, including their math-
ematical provisions, by matching assets if application of the above procedures would result in the undertaking being
obliged, in order to comply with the matching principle, to hold assets in a currency amounting to not more than
7 % of the assets existing in other currencies.

3. Member States may choose not

to require assurance undertakings to apply the matching principle where
commitments are payable in a currency other than the currency of one of the Member States, if investments in
that currency are regulated, if the currency is subject to transfer restrictions or if, for similar reasons, it is not suitable
for covering technical provisions.

4. Assurance undertakings are authorised not to hold matching assets to cover an amount not exceeding 20 % of their

commitments in a particular currency.

However, total assets in all currencies combined must be at least equal to total commitments in all currencies
combined.

5. Each Member State may provide that, whenever under the preceding procedures a commitment has to be covered by
assets expressed in the currency of a Member State, this requirement shall also be considered to be satisfied when the
assets are expressed in euro.

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ANNEX III

INFORMATION FOR POLICY-HOLDERS

The following information, which is to be communicated to the policy-holder before the contract is concluded (A) or
during the term of the contract (B), must be provided in a clear and accurate manner, in writing, in an official language
of the Member State of the commitment.

However, such information may be in another language if the policy-holder so requests and the law of the Member State
so permits or the policy-holder is free to choose the law applicable.

A. Before concluding the contract

Information about the assurance undertaking

Information about the commitment

(a) 1. The name of the undertaking and its legal form

(a) 4. Definition of each benefit and each option

(a) 2. The name of the Member State in which the head
the agency or

office and, where appropriate,
branch concluding the contract is situated

(a) 3. The address of the head office and, where appro-
priate, of the agency or branch concluding the
contract

(a) 5. Term of the contract

(a) 6. Means of terminating the contract

(a) 7. Means of payment of premiums and duration of

payments

(a) 8. Means of calculation and distribution of bonuses

(a) 9.

Indication of surrender and paid-up values and
the extent to which they are guaranteed

(a) 10. Information on the premiums for each benefit,
both main benefits and supplementary benefits,
where appropriate

(a) 11. For unit-linked policies, definition of the units

to which the benefits are linked

(a) 12. Indication of the nature of the underlying assets

for unit-linked policies

(a) 13. Arrangements for application of the cooling-off

period

(a) 14. General

information on the tax arrangements

applicable to the type of policy

(a) 15. The

arrangements

for handling complaints
lives
concerning contracts by policy-holders,
assured
contracts
beneficiaries
including, where appropriate, the existence of
a complaints body, without prejudice to the
right to take legal proceedings

under

or

(a) 16. Law applicable to the contract where the parties
do not have a free choice or, where the parties
are free to choose the law applicable, the law
the assurer proposes to choose

B. During the term of the contract

In addition to the policy conditions, both general and special,
information throughout the term of the contract.

the policy-holder must receive the following

Information about the assurance undertaking

Information about the commitment

(b) 1. Any change in the name of the undertaking, its
legal form or the address of its head office and,
where appropriate, of the agency or branch which
concluded the contract

(b) 2. All the information listed in points (a) (4) to (a)
(12) of A in the event of a change in the policy
conditions or amendment of the law applicable
to the contract

(b) 3. Every year, information on the state of bonuses

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1. PROFESSIONAL SECRECY

ANNEX IV

Until 17 November 2002, Member States may conclude cooperation 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 referred to
in Article 16 of this Directive.

2. ACTIVITIES AND BODIES EXCLUDED FROM THIS DIRECTIVE

Until 1 January 2004, this Directive shall not concern mutual associations, where:

— the articles of association contain provisions for calling up additional contributions or reducing their benefits or claiming assistance from other

persons who have undertaken to provide it, and

— the annual contribution income for the activities covered by this Directive does not exceed EUR 500 000 for three consecutive years. If this

amount is exceeded for three consecutive years this Directive shall apply with effect from the fourth year.

3. UNTIL 1 JANUARY 2004, MEMBER STATES SHALL APPLY THE FOLLOWING PROVISIONS

A. Solvency margin

Each Member State shall require of every assurance undertaking whose head office is situated in its territory an adequate solvency margin in
respect of its entire business.

The solvency margin shall consist of:

1. the assets of the assurance 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 assurance 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 in so
far as this does not cause the solvency margin to fall below the required level, or, after the dissolution of the undertaking, if all 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;

(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,

— cumulative preferential share capital and subordinated loan capital may be included but, if so, only 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 assurance 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 also fulfil the following conditions:

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

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(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 assurance 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 authorise
the early repayment of such loans provided application is made by the issuing assurance undertaking and its solvency margin will
not fall below the required level;

(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 as 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 assurance undertaking must notify the competent authorities at least six
months before the date of the proposed repayment, specifying the actual and required solvency margin both before and after
that repayment. The competent authorities shall authorise repayment only if the assurance 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
assurance undertaking, the debt will become repayable before the agreed repayment dates;

(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 fifth indent, up to 50 % of the margin for the total of such securities and the subordinated
loan capital referred to in the fifth 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 assurance undertaking to defer the payment of interest on the loan;

(c) the lender's claims on the assurance 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 assurance undertaking to continue its business;

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

2.

in so far as authorised under national law, profit reserves appearing in the balance sheet where they may be used to cover any losses which
may arise and where they have not been made available for distribution to policy-holders;

3. upon application, with supporting evidence, by the undertaking to the competent authority of the Member State in the territory of which its

head office is situated and with the agreement of that authority:

(a) an amount equal to 50 % of the undertaking's future profits; the amount of the future profits shall be obtained by multiplying the
estimated annual profit by a factor which represents the average period left to run on policies; the factor used may not exceed 10; the
estimated annual profit shall be the arithmetical average of the profits made over the last five years in the activities listed in Article 2 of
this Directive.

The bases for calculating the factor by which the estimated annual profit is to be multiplied and the items comprising the profits made
shall be defined by common agreement by the competent authorities of the Member States in collaboration with the Commission.
Pending such agreement, those items shall be determined in accordance with the laws of the home Member State.

When the competent authorities have defined the concept of profits made, the Commission shall submit proposals for the harmonisation
of this concept by means of a Directive on the harmonisation of the annual accounts of insurance undertakings and providing for the
coordination set out in Article 1(2) of Directive 78/660/EEC;

(b) where Zillmerizing is not practised or where, if practised, it is less than the loading for acquisition costs included in the premium, the
difference between a non-Zillmerized or partially Zillmerized mathematical provision and a mathematical provision Zillmerized at a rate
equal to the loading for acquisition costs included in the premium; this figure may not, however, exceed 3,5 % of the sum of the
differences between the relevant capital sums of life assurance activities and the mathematical provisions for all policies for which
Zillmerizing is possible; the difference shall be reduced by the amount of any undepreciated acquisition costs entered as an asset;

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(c) where approval is given by the competent authorities of the Member States concerned in which the assurance undertaking is carrying on
its activities any hidden reserves resulting from the under-estimation of assets and over-estimation of liabilities other than mathematical
provisions in so far as such hidden reserves are not of an exceptional nature.

B. Minimum solvency margin

Subject to Section C, the minimum solvency margin shall be determined as shown below according to the classes of assurance underwritten:

(a) For the kinds of assurance referred to in Article 2(1)(a) and (b) of this Directive other than assurance linked to investment funds and for the

operations referred to in Article 2(3) of this Directive, it must be equal to the sum of the following two results:

— first result:

— a 4 % fraction of the mathematical provisions relating to direct business gross of reinsurance cessions and to reinsurance accep-
tances shall be multiplied by the ratio, for the last financial year, of the total mathematical provisions net of reinsurance cessions to
the gross total mathematical provisions as specified above; that ratio may in no case be less than 85 %;

— second result:

for policies on which the capital at risk is not a negative figure, a 0,3 % fraction of such capital underwritten by the assurance
undertaking shall be multiplied by the ratio, for the last financial year, of the total capital at risk retained as the undertaking's liability
after reinsurance cessions and retrocessions to the total capital at risk gross of reinsurance; that ratio may in no case be less than 50 %.

For temporary assurance on death of a maximum term of three years the above fraction shall be 0,1 %; for such assurance of a term of
more than three years but not more than five years the above fraction shall be 0,15 %.

(b) For the supplementary insurance referred to in Article 2(1)(c) of this Directive, it shall be equal to the result of the following calculation:

— the premiums or contributions (inclusive of charges ancillary to premiums or contributions) due in respect of direct business in the last

financial year in respect of all financial years shall be aggregated;

— to this aggregate there shall be added the amount of premiums accepted for all reinsurance in the last financial year;

— from this sum shall then be deducted the total amount of premiums or contributions cancelled in the last financial year as well as the

total amount of taxes and levies pertaining to the premiums or contributions entering into the aggregate.

The amount so obtained shall be divided into two portions, the first extending up to EUR 10 million and the second comprising the
excess; 18 % and 16 % of these portions respectively shall be calculated and added together.

The result shall be obtained by multiplying the sum so calculated by the ratio existing in respect of the last financial year between the
amount of claims remaining to be borne by the assurance undertaking after deduction of transfers for reinsurance and the gross amount of
claims; this ratio may in no case be less than 50 %.

In the case of the association of underwriters known as Lloyd's, the calculation of the solvency margin shall be made on the basis of net
premiums, which shall be multiplied by flat-rate percentage fixed annually by the competent authority of the head-office Member State. This
flat-rate percentage must be calculated on the basis of the most recent statistical data on commissions paid. The details together with the
relevant calculations shall be sent to the competent authorities of the countries in whose territory Lloyd's is established.

(c) For permanent health insurance not subject to cancellation referred to in Article 2(1)(d) of this Directive, and for capital redemption
operations referred to in Article 2(2)(b) thereof, it shall be equal to a 4 % fraction of the mathematical provisions calculated in compliance
with the conditions set out in the first result in (a) of this Section.

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(d) For tontines, referred to in Article 2(2)(a) of this Directive, it shall be equal to 1 % of their assets.

(e) For assurance covered by Article 2(1)(a) and (b) of this Directive linked to investment funds and for the operations referred to in Article

2(2)(c), (d) and (e) of this Directive it shall be equal to:

— a 4 % fraction of the mathematical provisions, calculated in compliance with the conditions set out in the first result in (a) of this
Section in so far as the assurance undertaking bears an investment risk, and a 1 % fraction of the provisions calculated in the same way,
in so far as the undertaking bears no investment risk provided that the term of the contract exceeds five years and the allocation to
cover management expenses set out in the contract is fixed for a period exceeding five years,

plus

— a 0,3 % fraction of the capital at risk calculated in compliance with the conditions set out in the first subparagraph of the second result

of (a) of this Section in so far as the assurance undertaking covers a death risk.

C. Guarantee fund

1. One third of the required solvency margin as specified in Section B shall constitute the guarantee fund. Subject to paragraph 2 of this

Section, at least 50 % of this fund shall consist of the items listed in Section A, points (1) and (2).

2. (a) The guarantee fund may not, however, be less than a minimum of EUR 800 000.

(b) Any Member State may provide for the minimum of the guarantee fund to be reduced to EUR 600 000 in the case of mutual

associations and mutual-type associations and tontines.

(c) For mutual associations referred to in the second sentence of the second indent of Article 3(6) of this Directive, as soon as they come
within the scope of this Directive, and for tontines, any Member State may permit the establishment of a minimum of the guarantee fund
of EUR 100 000 to be increased progressively to the amount fixed in (b) of this Section by successive tranches of EUR 100 000
whenever the contributions increase by EUR 500 000.

(d) The minimum of the guarantee fund referred to in (a), (b) and (c) of this Section must consist of the items listed in Section A, points (1)

and (2).

3. Mutual associations wishing to extend their business within the meaning of Article 6(4) or Article 40 of this Directive may not do so unless

they comply immediately with the requirements of paragraph 2(a) and (b) of this Section.

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ANNEX V

PART A

Repealed Directives together with their successive amendments (referred to in Article 72)

Council Directive 79/267/EEC

Council Directive 90/619/EEC

Council Directive 92/96/EEC

Directive 95/26/EEC of the European Parliament and of the Council

(only Article 1, second indent, Article 2(2) fourth indent, and Article 3(1) as regards the references made to the Directive
79/267/EEC),

Directive 2002/12/EC of the European Parliament and of the Council

Second Council Directive 90/619/EEC

Third Council Directive 92/96/EEC

Third Council Directive 92/96/EEC

Directive 95/26/EEC of the European Parliament and of the Council

(only Article 1, second indent, Article 2(1), third indent, Article 4(1), (3), (5) and Article 5, third indent, as regards the
references made to the Directive 92/96/EEC).

Directive 2000/64/EC of the European Parliament and of the Council,

(Article 2, as regards the references made to the Directive 92/96/EEC).

Directive 2002/12/EC of the European Parliament and of the Council (Article 2)

PART B

Deadlines for implementation

(Referred to in Article 72)

Directive

Time-limits for transposition

Time-limits for application

79/267/EEC
(OJ L 63, 13. 3.1979, p. 1)

90/619/EEC
(OJ L 330, 29.11.1990, p. 50)

92/96/EEC
(OJ L 360, 9.12.1992, p. 1)

95/26/EC
(OJ L 168, 18.7.1995, p. 7)

2000/64/EC
(OJ L 290, 17.11.2000, p. 27)

2002/12/EC
(OJ L 77, 20.3.2002, p. 11)

15 September 1980

15 September 1981

20 November 1992

20 May 1993

31 December 1993

1 July 1994

18 July 1996

18 July 1996

17 November 2002

17 November 2002

20 September 2003

1 January 2004

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ANNEX VI

Correlation table

This Directive

Directive 79/267/EEC

Directive 90/619/EEC

Directive 92/96/EEC

Directive 95/26/EC

Other Acts

Article 1(1)(a)

Article 1(1)(b)

Article 1(1)(c)

Article 1(1)(d)

Article 1(1)(e)

Article 1(1)(f)

Article 1(1)(g)

Article 1(1)(h) to (l)

Article 1(1)(m)

Article 1(1)(n)

Article 1(1)(o), (p),
(q)

Article 5(b), (c) and
(d)

Article 1(1)(r)

Article 1(2)

Article 5(a), second
sentence

Article 2

Article 1

Article 3(1) to (4)

Article 2

Article 3(5) and (6)

Article 3

Article 3(7)

Article 3(8)

Article 4

Article 4

Article 5

Article 6(1)

Article 6(2)

Article 6(3)

Article 6(4)

Article 6(5)

Article 6(6)

Article 7

Article 8

Article 9

Article 6

Article 7

Article 8(1)

Article 8(1) last
three
subparagraphs

Article 8(1)a

Article 8(2)

Article 8(3)

Article 8(4)

Article 9

Article 12

Article 3

Article 2(c)

Article 2(e)

Article 1(a)

Article 1(b)

Article 1(c)

Article 1(d)

Article 1(e)

Article 1(f) to (j)

Article 1(l)

Article 7

New

Article 2(1)

Act of Accession of
Austria, Finland
and Sweden,
adapted by
Decision 95/1/EC,
Euratom, ECSC

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This Directive

Directive 79/267/EEC

Directive 90/619/EEC

Directive 92/96/EEC

Directive 95/26/EC

Other Acts

New

Article 15

Article 16

Article 22(1)

Article 23

Article 10

Article 11

Article 12

Article 13

Article 14(1) to (5)

Article 15

Article 16(1) to (5)

Article 16(6)

Article 16(7)

Article 16(8)

Article 16(9)

Article 17

Article 18(1) to (2)

Article 13(1) to (2)

Article 18(3)

Article 18(4) to (7)

Article13(3) to (7)

Article 14

Article 17

Article 19

Article 20

Article 21

Article 22

Article 23(1)

Article 23(2)

Article 23(3) first
subparagraph

Article 23(3) second
subparagraph

Article 23(4)

Article 24

Article 25

Article 26

Article 27

Article 28

Article 29

Article 30

Article 31

Article 32

Article 33

Article 34

Article 35

Article 36

Article 37

Article 18

Article 19

Article 20

Article 20(a)

Article 21

Article 24

Article 11(2) to (6)

Article 14

Article 15(1) to (5)

Article 15(5a)

Article 15(5b)

Article 15(5c)

Article 15(6)

Article 15a

Article 19

Article 20

Article 21(1) first
subparagraph

Article 21(1)
second
subparagraph

Article 21(1) third
subparagraph

Article 21(1) fourth
subparagraph

Article 21(2)

Article 22

Article 23

Article 24

Article 4

Article 15

Article 28

Article 29

Article 31

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This Directive

Directive 79/267/EEC

Directive 90/619/EEC

Directive 92/96/EEC

Directive 95/26/EC

Other Acts

Article 24(a)

Article 26

Article 10

Article 11

Article 14

Article 17

Article 38

Article 39

Article 40

Article 41

Article 42

Article 43

Article 44

Article 45

Article 46(1) to (9)

Article 47

Article 48

Article 49

Article 50(1)

Article 50(2)

Article 50(3)

Article 38

Article 39(2)

Article 40(2) to
(10)

Article 41

Article 42(2)

Article 43(2)

Article 44(2) first
subparagraph

Article 44 (2)
second
subparagraph

Article 44(2) third
subparagraph

Article 51(1) to (2)(f) Article 27(1) to

(2)(f)

Article 51(2)(g)

Article 51(3) and (4)

Article 52

Article 53

Article 54

Article 55

Article 56

Article 57

Article 58

Article 31

Article 31a

Article 28

Article 29

Article 30

Article 32

Article 32a

Article 59(1)

Article 32b(1)

Article 59(2)

Article 32b(2)

Article 59(3)

Article 32b(3)

Article 59(4)

Article 32b(4)

Article 59(5)

Article 32b(5)

Article 59(6)

Article 32b(7)

Article 60 (1)

Article 33(4)

Article 37

Article 38

Article 60(2)

Article 61

Article 62 first
subparagraph

Article 62 second to
fourth subparagraph

Article 63

Article 28 first
subparagraph

Article 28 second
to fourth
subparagraph

Article 29

New

New

New

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This Directive

Directive 79/267/EEC

Directive 90/619/EEC

Directive 92/96/EEC

Directive 95/26/EC

Other Acts

Article 47

Article 47

Article 48(1)

Article 48(2)

Article 50

Article 39(1)

Article 39(3)

Article 64

Article 65

Article 66(1), first
subparagraph

Article 66(1) second
subparagraph

Article 66(2)

Article 67

Article 68(1)

Article 68(2)

Article 69(1)

Article 69(2)

Article 69(3)

Article 69(4)

Article 69(5)

Article 70

Article 41

Article 31

Article 51(2)

Article 6(2)

Article 71

Article 72

Article 73

Article 74

Annex I

Annex II

Annex III

Annex IV

Annex V

Annex VI

Annex

Annex I

Annex II

New

New

Directive
2000/64/EC Article
3(1), first
subparagraph

Directive
2002/12/EC Article
3(1), first
subparagraph and
Directive
2000/64/EC Article
3(2)

Directive
2000/64/EC Article
3(1) second
subparagraph and
Directive
2002/12/EC Article
3(1), second
subparagraph

Directive
2002/12/EC Article
3(4)

Directive
2000/64/EC Article
3(2) and Directive
2002/12/EC Article
3(3)

Directive
2002/12/EC Article
2

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STATEMENT OF THE COUNCIL'S REASONS

I. INTRODUCTION

1. On 28 June 2000 the Commission submitted to the Council, on the basis of Articles 47(2) and 55 of
the Treaty a proposal for a Directive of the European Parliament and of the Council concerning life
assurance (recast version) (1).

The proposed recast incorporated in a single text codified provisions of the life assurance directives
and substantive amendments by the Commission. The modifications were subject to the normal
procedure. The codified part of the text should only be changed according to technical adaptation of
the Directive on the solvency margin concerning life assurance undertakings, where adoption was to
be awaited.

2. Acting in accordance with Article 251 of the Treaty the European Parliament has delivered its
It approved the Commission's proposal without

opinion at first reading on 15 March 2001.
proposing any amendment (2).

The Economic and Social Committee delivered its opinion on 24 January 2001 (3).

3. On 30/31 May 2001 the Council reached a political agreement on the text, however, subject to the
modifications that will follow the adoption of the Directive on the solvency margin for life assurance
undertakings at first reading. On 14 February 2002, the Council adopted the Directive on the
solvency margin for life assurance undertakings at first reading (4). After that the necessary modifi-
cations were incorporated into the text of the life assurance (recast) Directive.

4. On 27 May 2002 the Council adopted its Common Position as set out in doc. 7328/1/02.

II. OBJECTIVE

There existed three generations of insurance Directives which have been adopted at different stages of
integration from the 1970s to 1992, when the third insurance Directives were adopted. Among those,
there were three Directives for life assurance (79/267/EEC, 90/619/EEC, 92/96/EEC). The Community
proposal for life assurance (recast) had the objective to simplify Community legislation.

In addition to codification of the provisions of the life assurance Directives, the Commission's proposal
introduced the following amendments to the above Directives in order to make the legal framework
more coherent and complete without exceeding the limits of a recast exercise:

— The definition of ‘regulated markets’ (Article 1(1) (m)).

— The reference dates on composite activities (Article 18(30)).

— Some provisions relating to the calculation of future profits (Articles 27 and 28, in the meantime

changed according to the Solvency Directive).

— Some provisions concerning the scheme of operations (Article 51(3) and (4)).

— The derogations and abolition of restrictive measures (Article 60(2)).

— The rights acquired by existing branches (Article 66(1) and (2)).

(1) OJ C 365 E, 19.12.2000, p. 1.
(2) OJ C 343, 5.12.2001, p. 257.
(3) OJ C 123, 25.4.2001, p. 24.
(4) Not yet published in OJ.

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These amendments were necessary for different reasons, either to fill gaps in the existing legal
structures (Article 1(m); Article 51(3) and (4)), to give clarification about the provisions applicable
to new Member States (Article 18(3)), or to improve on ‘technical’ clarity (Articles 27 and 28; Article
60(2); Article 66(1) and (2)).

III. ANALYSIS OF THE COMMON POSITION AS SET OUT IN DOC. 6446/02

1. General

The Council accepted the amendments of the Directives as contained in the Commission's proposal.
The main change to the Commission's proposal introduced by the Council concerned Article 51,
paragraphs 3 and 4. This adaptation referred to the scheme of operation for third country branches
and aimed at bringing the wording in line with parallel provisions applied to Community under-
takings in the insurance sector.

The Common Position also includes the new provisions resulting from the new Directive on the
solvency margin (2002/. . ./EC) which have amended the relevant solvency margin provisions
contained in the existing life assurance Directive. These provisions (Articles 3(6), 27, 28, 29, 30,
38, 69 (3) (5) and 71) as well as the corresponding recitals have been introduced into the text.

2. European Parliament

The European Parliament did not adopt any amendment to the Commission's proposal.

3. Conclusion

Given that the European Parliament did not adopt any amendment and the Council introduced only
one main change to the Commission's proposal, it is clear that the Common Position, which has
been unanimously adopted by the Council, reflects and supports fully the objective of the original
proposal with regard to the codification and clarification of the legal framework. The incorporation
of the modifications introduced by the new Directive on solvency margin in the codified part of the
Common Position ensures that the text of the recast is updated and complete.