Directive 2002/83/EC of the European Parliament and of the Council of 5 November 2002 concerning life assurance
Date: 2002-11-05
Institutions: Council of the European Union, European Parliament
Subjects: freedom to provide services, insurance company, insurance law, life assurance, right of establishment

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I

(Acts whose publication is obligatory)

DIRECTIVE 2002/83/EC OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL

of 5 November 2002

concerning life assurance

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE
EUROPEAN UNION,

Having regard to the Treaty establishing the European Commu-
nity, and in particular Articles 47(2) and Article 55 thereof,

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

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

(3)

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

Whereas:

(1)

First Council Directive 79/267/EEC of 5 March 1979 on
the coordination of laws, regulations and administrative
provisions relating to the taking-up and pursuit of the
business of direct life assurance (4), the second Council
Directive 90/619/EEC of 8 November 1990 on the coor-
dination of laws, regulations and administrative provi-
sions relating to direct life assurance, laying down provi-
sions 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
on the coordination of laws, regulations and administra-
tive 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
it is essential to eliminate
business of

life assurance,

(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 (OJ
C 170 E, 16.7.2002, p. 45) and decision of the European Parliament
of 25 September 2002 (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).

(4)

(5)

(6)

certain divergences which exist between national super-
visory legislation. In order to achieve this objective and
at the same time ensure adequate protection for policy
holders and beneficiaries in all Member States, the provi-
sions relating to the financial guarantees required of life
assurance undertakings should be coordinated.

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
undertakings 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 their head office in the
Community and are established in other Member States.

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.

This Directive therefore represents an important step in
the merging of national markets into an integrated
market and that stage must be supplemented by other
Community instruments with a view to enabling all
policy holders 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.

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

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

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(7)

(8)

(9)

(10)

(11)

(12)

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 to
grant
the
Community and apply the principle of supervision by
the home Member State.

authorisation valid throughout

single

a

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 under-
takings which wish to carry on assurance business there
and which have already been authorised in their home
Member State to seek fresh authorisation.

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.

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.

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.

recognition and of home
The principles of mutual
Member State supervision require that Member States'
competent authorities should not grant or should with-
draw authorisation where factors such as the content of
programmes of operations or the geographical distribu-
tion 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 stricter standards in force in another Member State
within whose territory it carries on or intends to carry
on the greater part of its activities. An assurance under-
taking must be authorised in the Member State in which
it has its registered office. In addition, Member States
must require that an assurance undertaking's head office
always be situated in its home Member State and that it
actually carries on its business there.

(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.
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 determine, in particular, the activities subject to
compulsory authorisation.

(15)

(16)

(17)

(18)

(19)

(20)

(21)

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.

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.

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

The competent authorities of home Member States
should be responsible for monitoring the financial health
state of
of assurance undertakings,
solvency, the establishment of adequate technical provi-
sions and the covering of those provisions by matching
assets.

including their

is appropriate to provide for

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

Certain behaviour, such as fraud and insider offences, is
liable to affect the stability,
including integrity, of the
financial
system, even when involving undertakings
other than assurance undertakings.

It is necessary to specify the conditions under which the
are
abovementioned
authorised.

information

exchanges

of

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(22) Where it is stipulated that information may be disclosed
only with the express agreement of
the competent
authorities, these may, where appropriate, make their
agreement subject to compliance with strict conditions.

be able to introduce appropriate safeguards or impose
sanctions aimed at preventing irregularities and infringe-
ments of the provisions on assurance supervision.

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

(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.

(24)

For the purposes of strengthening the prudential supervi-
sion 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/she becomes aware, while carrying out his/
her tasks, of certain facts which are liable to have a
serious effect on the financial situation or the adminis-
trative and accounting organisation of an assurance
undertaking.

(25) Having regard to the aim in view,

it 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/her tasks in an
undertaking which has close links with an assurance
undertaking.

(26)

(27)

(28)

(29)

The duty of auditors to communicate, where appro-
priate, 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 under-
taking.

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.

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.

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

throughout

(31)

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

(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-
in
guarded and the minimum financial obligations
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 undertaking belongs
to the same financial group as a life undertaking.

(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
under the best possible conditions,
is desirable to
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.

it

(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 coordina-
tion of laws, regulations and administrative provisions
relating to the taking up and pursuit of the business of
direct insurance other than life assurance (1). That possi-
bility may, however, be subject to certain conditions as
regards compliance with accounting rules and rules on
winding-up.

(1) OJ L 228, 16.8.1973, p. 3. Directive as last amended by Directive
2002/13/EC of the European Parliament and of the Council (OJ L
77, 20.3.2002, p. 17).

(35)

(36)

(37)

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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 such provisions is based for the most part on actuarial
principles. Those principles should be coordinated in
order to facilitate mutual recognition of the prudential
rules applicable in the various Member States.

vary according to whether the risks are of investment,
death or management only.
It should accordingly be
determined in terms of mathematical provisions and
capital at
risk underwritten by an undertaking, of
premiums or contributions received, of provisions only
or of the assets of tontines.

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.

(40) Directive 92/96/EEC provided for a provisional defini-
tion 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 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.

The rules governing the calculation of technical provi-
sions and the rules governing the spread,
localisation
and matching of the assets used to cover technical provi-
sions must be coordinated in order to facilitate the
mutual recognition of Member States' rules. That coordi-
nation must take account of the liberalisation 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 liberalisa-
tion of capital movements provided for in Article 56 of
the Treaty.

(39)

It is necessary that, over and above technical provisions,
including mathematical provisions, of sufficient amount
to meet their underwriting liabilities, assurance undertak-
ings 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 adverse
business fluctuations. This requirement is an important
element of prudential supervision for the protection of
insured persons and policy holders. 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 on an equal
footing as regards competition, it is 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

(41)

(42)

(43)

instruments and of

The list of items of which the solvency margin required
by this Directive may be made up takes account of new
financial
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 to decrease the reduction to the solvency
margin requirement in certain circumstances. In order to
improve the quality of the solvency margin, the possibi-
lity of including future profits in the available solvency
margin should be limited and subject to conditions and
should in any case cease after 2009.

that

the undertakings possess

It is necessary to require a guarantee fund, the amount
and composition of which are such as to provide an
assurance
adequate
resources when they are set up and that in the subse-
quent 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.

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 Direc-
tive should lay down minimum standards
the
solvency margin requirements and home Member States
should be able to lay down stricter rules for insurance
undertakings authorised by their own competent autho-
rities.

for

(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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(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 applica-
tion of
law to assurance contracts covering
commitments within their territories is 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 commitment may be
granted in certain cases, in accordance with rules which
take into account specific circumstances.

the State of

their

(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.

to ensure that

the marketing within its territory of all

(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
there is nothing to
the commitment
prevent
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
services, to cover commitments within their territories
comply with such specific legal provisions protecting the
general good as are applicable. The systems of supervi-
sion to be employed must meet the requirements of an
internal market but their employment may not consti-
tute 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.
It is
therefore necessary to provide for other systems better
suited to the requirements of an internal market which
enable every Member State to guarantee policy holders
adequate protection.

(48)

It
is necessary to make provision for cooperation
between the competent authorities of the Member States
and between those authorities and the Commission.

(49)

(50)

(51)

(52)

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 is necessary to provide for measures in cases where
the financial position of the undertaking becomes such
that it is difficult for it to meet its underwriting liabil-
ities. In specific situations where policy holders' rights
are threatened, there is a need for the competent autho-
rities 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 accor-
dance with the principles of sound administration and
the
due process. As long as such a situation exists,
competent authorities should be prevented from certi-
fying that
the insurance undertaking has a sufficient
solvency margin.

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
provisions, with such notification of
technical bases
excluding notification of the general and special policy
conditions and the undertaking's commercial rates.

In an internal market for assurance the consumer will
have a wider and more varied choice of contracts. If he/
she is to profit
fully from this diversity and from
increased competition, he/she must be provided with
whatever information is necessary to enable him/her to
choose the contract best suited to his/her needs. This
information 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/her 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
require compliance with their national rules on the 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.

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(54) Within the framework of

the internal market, no
Member State may continue to prohibit the simulta-
neous carrying on of assurance business within its terri-
tory under the right of establishment and the freedom to
provide services.

(55)

(56)

(57)

Some Member States do not subject assurance transac-
tions to any form of indirect taxation, while the majority
apply special taxes and other forms of contribution. The
structures and rates of such taxes and contributions vary
considerably between the Member States in which they
are applied. It is desirable to prevent existing differences
leading to distortions of 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 contribu-
tions are collected.

It is important to introduce Community coordination on
the winding-up of assurance undertakings. It is hence-
forth essential to provide, in the event of the winding-up
of an assurance undertaking, that the system of protec-
tion in place in each Member State must guarantee
equality of treatment for all assurance creditors, irrespec-
tive of nationality and of the method of entering into
the commitment.

the
The coordinated rules concerning the pursuit of
business of direct
insurance within the Community
should, in principle, apply to all undertakings operating
on the market and, consequently, also to agencies and
branches where the head office of the undertaking is
situated outside the Community. As regards the 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.

(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
than
should not obtain more favourable treatment
Community undertakings.

(59) A provision should be made for a flexible procedure to
make it possible to assess reciprocity with third coun-
tries 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 that end, this Directive provides for
procedures for negotiating with third countries. As a last
resort, the 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).

(60)

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

(61)

(62)

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
provisions concerning the establishment of the 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.

Technical adjustments to the detailed rules laid down in
this Directive may be necessary from time to time to
take account of the future development of the 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 Deci-
sion 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. There-
fore they do not need any longer such special deroga-
tion.

(65)

This Directive should not affect
the obligations of
Member States concerning the deadlines for transposi-
tion and for application of the Directives set out in
Annex V(B),

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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CONTENTS

TITLE I

DEFINITIONS AND SCOPE . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . 10

Article 1

Definitions . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . 10

Article 2

Scope . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . 11

Article 3

Activities and bodies excluded . . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . 11

TITLE II

THE TAKING-UP OF THE BUSINESS OF LIFE ASSURANCE . . . . . . . .. . . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . 12

Article 4

Principle of authorisation . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . 12

Article 5

Scope of authorisation .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . 12

Article 6

Conditions for obtaining authorisation . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . 12

Article 7

Scheme of operations . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . 13

Article 8

Shareholders and members with qualifying holdings . . . . . . . . .. . . . . . . . .. . . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . 14

Article 9

Refusal of authorisation . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . 14

TITLE III

CONDITIONS GOVERNING THE BUSINESS OF ASSURANCE . . . . .. . . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . 14

Chapter 1

Principles and methods of financial supervision .. . . . . . . . .. . . . . . . . .. . . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . 14

Article 10

Competent authorities and object of supervision . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . 14

Article 11

Supervision of branches established in another Member State . . . . . . .. . . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . 14

Article 12

Prohibition on compulsory ceding of part of underwriting .. . . . . . . . .. . . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . 14

Article 13

Accounting, prudential and statistical information: supervisory powers . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . 14

Article 14

Transfer of portfolio . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . 15

Article 15

Qualifying holdings . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . 15

Article 16

Professional secrecy . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . 16

Article 17

Duties of auditors . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . 18

Article 18

Pursuit of life assurance and non-life insurance activities . . . .. . . . . . . . .. . . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . 18

Article 19

Separation of life assurance and non-life insurance management . . .. . . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . 19

Chapter 2

Rules relating to technical provisions and their representation . . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . 19

Article 20

Establishment of technical provisions .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . 19

Article 21

Premiums for new business . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . 21

Article 22

Assets covering technical provisions . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . 21

Article 23

Categories of authorised assets . . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . 21

Article 24

Rules for investment diversification . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . 22

Article 25

Contracts linked to UCITS or share index . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . 23

Article 26

Matching rules .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . 24

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Official Journal of the European Communities

19.12.2002

Chapter 3

Rules relating to the solvency margin and to the guarantee fund . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . 24

Article 27

Available solvency margin . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . 24

Article 28

Required solvency margin . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . 25

Article 29

Guarantee fund . . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . 26

Article 30

Review of the amount of the guarantee fund . . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . 26

Article 31

Assets not used to cover technical provisions . . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . 26

Chapter 4

Contract law and conditions of assurance . . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . 27

Article 32

Law applicable .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . 27

Article 33

General good . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . 27

Article 34

Rules relating to conditions of assurance and scales of premiums . .. . . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . 27

Article 35

Cancellation period . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . 27

Article 36

Information for policy holders . . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . 27

Chapter 5

Assurance undertakings in difficulty or in an irregular situation . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . 28

Article 37

Assurance undertakings in difficulty . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . 28

Article 38

Financial recovery plan . . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . 28

Article 39

Withdrawal of authorisation . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . 29

TITLE IV

PROVISIONS RELATING TO RIGHT OF ESTABLISHMENT AND FREEDOM TO PROVIDE
SERVICES . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . 29

Article 40

Conditions for branch establishment .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . 29

Article 41

Freedom to provide services: prior notification to the home Member State .. . . . . . . . .. . . . . . . . .. . . . . . . . 30

Article 42

Freedom to provide services: notification by the home Member State . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . 30

Article 43

Freedom to provide services: changes in the nature of commitments . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . 30

Article 44

Language . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . 30

Article 45

Rules relating to conditions of assurance and scales of premiums . .. . . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . 30

Article 46

Assurance undertakings not complying with the legal provisions . . .. . . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . 30

Article 47

Advertising . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . 31

Article 48

Winding up . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . 31

Article 49

Statistical information on cross-border activities . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . 31

Article 50

Taxes on premiums . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . 31

TITLE V

RULES APPLICABLE TO AGENCIES OR BRANCHES ESTABLISHED WITHIN THE COMMU-
NITY AND BELONGING TO UNDERTAKINGS WHOSE HEAD OFFICES ARE OUTSIDE THE
COMMUNITY . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . 32

Article 51

Principles and conditions of authorisation . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . 32

Article 52

Rules applicable to branches of third country undertakings .. . . . . . . . .. . . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . 32

Article 53

Transfer of portfolio . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . 33

Article 54

Technical provisions . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . 33

Article 55

Solvency margin and guarantee fund .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . 33

Article 56

Advantages to undertakings authorised in more than one Member State . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . 34

Article 57

Agreements with third countries . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . 34

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TITLE VI

Article 58

Article 59

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 . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . 34

Information from Member States to the Commission . . . . . . . .. . . . . . . . .. . . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . 34

Third-country treatment of Community assurance undertakings . . . .. . . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . 34

TITLE VII

TRANSITIONAL AND OTHER PROVISIONS . . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . 35

Article 60

Article 61

Derogations and abolition of restrictive measures . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . 35

Proof of good repute . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . 35

TITLE VIII

FINAL PROVISIONS . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . 36

Article 62

Article 63

Article 64

Article 65

Article 66

Article 67

Article 68

Article 69

Article 70

Article 71

Article 72

Article 73

Article 74

Annex I

Annex II

Annex III

Annex IV

Annex V

Part A

Part B

Cooperation between the Member States and the Commission . . . . . .. . . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . 36

Reports on the development of the market under the freedom to provide services . . . . . . . . .. . . . . . . . 36

Technical adjustment . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . 36

Committee procedure . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . 36

Rights acquired by existing branches and assurance undertakings . .. . . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . 36

Right to apply to the courts . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . 37

Review of amounts expressed in euro . . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . 37

Implementation of new provisions . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . 37

Information to the Commission . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . 37

Transitional period for Articles 3(6), 27, 28, 29, 30 and 38 . . . . . . . . .. . . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . 37

Repealed directives and their correlation with this Directive . . . . . . . . .. . . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . 37

Entry into force . . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . 38

Addressees . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . 38

Classes of assurance . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . 39

Matching rules .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . 39

Information for policy holders . . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . 40

. .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . 41

. .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . 45

Repealed directives together with their successive amendments (referred to in Article 72) . . . . . . . . 45

Deadlines for implementation (referred to in Article 72) . . . .. . . . . . . . .. . . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . 45

Annex VI

Correlation table . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . 46

L 345/10

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Official Journal of the European Communities

19.12.2002

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;

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

undertaking;

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/her habitual resi-
dence 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 Directive
2001/65/EC of the European Parliament and of the Council (OJ L
283, 27.10.2001, p. 28).

capital or of the voting rights or which makes it possible
to exercise a significant influence over the management of
the undertaking in which a holding subsists;

For the purposes of this definition, in the context of Arti-
cles 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 on information to be
published on those securities (2) shall be taken into consid-
eration;

(k) ‘parent undertaking’ shall mean a parent undertaking as

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

(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 Direc-
tive 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;

(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

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

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(ii) control, which shall mean the relationship between a
parent undertaking and a subsidiary, in all the cases
referred to in Article 1(1) and (2) of Directive 83/349/
EEC, or a similar relationship between any natural or
legal person and an undertaking; any subsidiary under-
taking of a subsidiary undertaking shall also be consid-
ered a subsidiary of the parent undertaking which is at
the head of those undertakings.

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 last day of the preceding
month of October for which euro conversion values are avail-
able in all the relevant Community currencies.

Article 2

Scope

(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;

(c) management of group pension funds,

i.e. operations
consisting, for the undertaking concerned, in 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;

(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;

(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.

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

Article 3

Activities and bodies excluded

This Directive shall not concern:

1. the following kinds of assurance where they are on a

contractual basis:

1. subject to the application of Article 2(1)(c), the classes desig-

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

in particular, assurance on survival

(a) life assurance, that is to say, the class of assurance which
comprises,
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

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

in particular,

(d) the type of insurance existing in Ireland and the United
Kingdom known as permanent health insurance not
subject to cancellation;

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
and subsequently distributing the assets thus accumu-
lated among the survivors or among the beneficiaries of
the deceased;

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;

3. operations carried out by organisations other than undertak-
ings 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
group of trades,
in the event of death or survival or of
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 under-
taken to provide it, and

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

the provisions of

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

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 sepa-
rate legal entities for carrying out these activities;

(b) the Finnish authorities shall allow in a non-discrimina-
tory manner all nationals and companies of Member
States to perform according to Finnish legislation the
activities specified in Article 2 related to this exemption
whether by means of:

— ownership or participation in an existing insurance

company or group,

— creation or participation of new insurance compa-
nies or groups, including pension insurance compa-
nies;

(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;

Article 5

Scope of authorisation

Authorisation shall be valid for the entire Community. It
1.
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.

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

the Kingdom of Belgium:

‘société
anonyme/naamloze vennootschap’, ‘société en comman-
actions/commanditaire
dite par
vennootschap op
‘association d'assurance mutuelle/onderlinge
aandelen’,
verzekeringsvereniging’,
coopérative/coöpera-
tieve vennootschap’,

‘société

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

— in the case of the Federal Republic of Germany: ‘Aktien-
gesellschaft’,
‘Versicherungsverein auf Gegenseitigkeit’,
‘öffentlich-rechtliches Wettbewerbsversicherungsunter-
nehmen’,

— in the case of the French Republic:

‘société anonyme’,
‘société d'assurance mutuelle’, ‘institution de prévoyance
régie par le code de la sécurité sociale’,
‘institution de
prévoyance régie par le code rural’ and ‘mutuelles régies
par le code de la mutualité’,

— in the case of Ireland: ‘incorporated companies limited
by shares or by guarantee or unlimited’, ‘societies regis-
tered under the Industrial and Provident Societies Acts’
and ‘societies registered under the Friendly Societies
Acts,’

— in the case of the Italian Republic: ‘societá per azioni’,

‘societá cooperativa’, ‘mutua di assicurazione’,

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

— in the case of the Grand Duchy of Luxembourg: ‘société
anonyme’, ‘société en commandite par actions’, ‘associa-
tion d'assurances mutuelles’, ‘société coopérative’,

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— in the case of the Kingdom of the Netherlands: ‘naam-
loze vennootschap’, ‘onderlinge waarborgmaatschappij’,

— in the case of

the United Kingdom:

‘incorporated
companies limited by shares or by guarantee or unlim-
ited’, ‘societies registered under the Industrial and Provi-
dent Societies Acts’, ‘societies registered or incorporated
under the Friendly Societies Acts’,
‘the association of
underwriters known as Lloyd's’,

— 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’,
försäkringsförening’,

‘keskinäinen
‘vakuutuso-
‘vakuutusyhdistys/

— in the case of Kingdom of Sweden:
‘ömsesidiga försäkringsbolag’,

bolag’,
ningar’.

‘försäkringsaktie-
‘understödsföre-

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 such
bodies have as their object
insurance operations under
to those under which private-law
conditions equivalent
undertakings operate;

(b) limit its objects to the business provided for in this Direc-
tive and operations directly arising therefrom, to the exclu-
sion 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 autho-
rities 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.

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

An assurance undertaking seeking authorisation to extend
4.
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.

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

that

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 tech-
nical provisions or of
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
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
that requirement constituting a prior condition for an assur-
ance undertaking to carry on its business.

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 supervision.

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

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

Article 7

Scheme of operations

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

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

taking proposes to cover;

(b) the guiding principles as to reassurance;

(c) the items constituting the minimum guarantee fund;

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.

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

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in addition, for the first three financial years:

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

(f) a forecast balance sheet;

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

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
indirect, whether
the shareholders or members, direct or
natural or legal persons, who have qualifying holdings in that
undertaking and of the amounts of those holdings.

The same authorities shall refuse authorisation if, taking into
account the need to ensure the sound and prudent manage-
ment of an assurance undertaking, they are not satisfied as to
the qualifications of the shareholders or members.

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.

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

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.

the Member State of

sole responsibility of the home Member State. If the competent
authorities of
the commitment have
reason to consider that the activities of an assurance under-
taking 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 under-
taking is complying with the prudential principles laid down in
this Directive.

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
them,
in accordance with the rules laid down or practices
followed in the home Member State pursuant to the provisions
adopted at Community level.

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.

Article 11

Supervision of branches established in another Member
State

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 authorities
of the home Member State may, after having first informed the
competent authorities of the Member State of the branch, carry
out themselves, or through the intermediary of persons they
appoint for that purpose, on-the-spot verification of the infor-
mation necessary to ensure the financial supervision of the
undertaking. The authorities of the Member State of the branch
may participate in that verification.

Article 12

TITLE III

Prohibition on compulsory ceding of part of underwriting

CONDITIONS GOVERNING THE

BUSINESS OF

ASSURANCE

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 regula-
tions.

CHAPTER 1

PRINCIPLES AND METHODS OF FINANCIAL SUPERVISION

Article 13

Article 10

Accounting, prudential and statistical information: super-
visory powers

Competent authorities and object of supervision

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

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

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2. Member States shall require assurance undertakings with
head offices within their territories to render periodically the
returns, together with statistical documents, which are neces-
sary for the purposes of supervision. The competent authorities
shall provide each other with any documents and information
that are useful for the purposes of supervision.

Every Member State shall

3.
take all steps necessary to
ensure that the competent authorities have the powers and
means necessary for the supervision of the business of assur-
ance undertakings with head offices within their territories,
including business carried on outside those territories, in accor-
dance with the Council directives governing those activities and
for the purpose of seeing that they are implemented.

These powers and means must, in particular, enable the compe-
tent authorities to:

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

— gathering information or requiring the submission of

documents concerning its assurance business,

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

undertaking's premises;

(b) take any measures, with regard to the assurance under-
its directors or managers or the persons who
taking,
control it, that are appropriate and necessary to ensure 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 irregula-
rities 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

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

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

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

competent

the Member

4.
States
authorities of
consulted shall give their opinion or consent to the competent
authorities of the home Member State of the transferring assur-
ance undertaking within three months of receiving a request;
the absence of any response within that period from the autho-
rities consulted shall be considered equivalent to a favourable
opinion or tacit 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
holding in an assurance undertaking first to inform the compe-
tent 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/she
proposes to increase his/her qualifying holding so that the
proportion of the voting rights or of the capital held by him/
her would reach or exceed 20 %, 33 % or 50 % or so that the
assurance undertaking would become his/her subsidiary.

The competent authorities of the home Member State shall
have a maximum of three months from the date of the notifica-
tion provided for in the first subparagraph to oppose such a
plan if,
in view of the need to ensure sound and prudent
management of the assurance undertaking, they are not satis-
fied 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 implementation.

2. Member States shall require any natural or legal person
who proposes to dispose, directly or indirectly, of a qualifying
holding in an assurance undertaking first to inform the compe-
tent authorities of the home Member State, indicating the size
of his/her intended holding. Such a person must
likewise
inform the competent authorities if he/she proposes to reduce
his/her qualifying holding so that the proportion of the voting
rights or of the capital held by him/her would fall below 20 %,
33 % or 50 % or so that the assurance undertaking would cease
to be his/her subsidiary.

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On becoming aware of

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

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

4. Member States shall require that, if the influence exercised
by the persons referred to in paragraph 1 is likely to operate to
the detriment of the prudent and sound management of the
assurance undertaking, the competent authorities of the home
Member State shall take appropriate measures to put an end to
that situation. Such measures may consist,
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.

for example,

Similar measures shall apply to natural or legal persons failing
to comply with the obligation to provide prior information, as
laid down in paragraph 1. If a holding is acquired despite the
opposition of the competent authorities, the Member States
shall, regardless of any other sanctions to be adopted, provide
either for exercise of the corresponding voting rights to be
suspended, or for the nullity of votes cast or for the possibility
of their annulment.

Article 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 authori-
ties, 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, except in summary or aggre-
gate form, such that individual assurance undertakings cannot
be identified, without prejudice to cases covered by criminal
law.

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.

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 information must be intended for the perfor-
mance of the supervisory task of the authorities or bodies
mentioned.

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.

Competent authorities receiving confidential information
4.
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 undertak-
ings.

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 autho-
rities responsible for the supervision of financial markets,

— bodies involved in the liquidation and bankruptcy of assur-
ance undertakings and in other similar procedures, and

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

2.
Paragraph 1 shall not prevent the competent authorities
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.

in the discharge of their supervisory functions, and the disclo-
sure,
to bodies which administer (compulsory) 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.

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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

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 subpara-
graph.

the possibility of

sector,

— 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
out legal supervision of those undertakings and the bodies
responsible for overseeing such actuaries.

Member States which have recourse to the option provided for
in the first subparagraph shall require at least that the following
conditions are met:

— this information shall be for the purpose of carrying out
the overseeing or legal supervision referred to in the first
subparagraph,

In order to implement the third indent of the second subpara-
graph, the authorities or bodies referred to in the first subpara-
graph shall communicate to the competent authorities which
have disclosed the information, the names and precise responsi-
bilities 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.

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

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

— 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.

— 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,

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.

7.
Notwithstanding paragraphs 1 to 4, Member States may,
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 investi-
gation of breaches of company law.

Member States which have recourse to the option provided for
in the first subparagraph shall require at least that the following
conditions are met:

— the information shall be for the purpose of performing the

task referred to in the 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, solely for the purposes for which those
authorities gave their agreement.

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.

9.
In addition, notwithstanding paragraphs 1 and 4, Member
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 services and assurance undertakings and to inspec-
tors acting on behalf of those departments.

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

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 authorities
which disclosed the information or of the competent authori-
ties of the Member State in which on-the-spot verification was
carried out.

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Article 17

Duties of auditors

1. Member States shall provide at least that:

(a) any person authorised within the meaning 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 83/349/
EEC or Article 31 of Council Directive 85/611/EEC (3) or
any other statutory task, shall have a duty to report
promptly to the competent authorities any fact or decision
concerning that undertaking of which he/she has become
aware while carrying out that task which is liable to:

— constitute a material breach of the laws, regulations or
administrative provisions which lay down the condi-
tions governing authorisation or which specifically
govern pursuit of the activities of assurance undertak-
ings, or

— affect

the continuous functioning of

the assurance

undertaking or

— lead to refusal to certify the accounts or to the expres-

sion of reservations;

(b) that person shall likewise have a duty to report any facts
and decisions of which he/she 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 with
the assurance undertaking within which he/she is carrying
out the abovementioned task.

2.
The disclosure in good faith to the competent authorities,
by persons authorised within the meaning of 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 informa-
tion imposed by contract or by any legislative, regulatory or
administrative provision and shall not involve such persons in
liability of any kind.

Article 18

Pursuit of life assurance and non-life insurance activities

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

(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).

Directive 73/239/EEC for the risks listed in classes 1 and 2
in the Annex to that Directive,

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

Subject to paragraph 6, undertakings referred to in para-

3.
graph 2 and those which on:

— 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,

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.

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
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.

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Article 19

CHAPTER 2

Separation of

life assurance and non-life insurance

management

RULES RELATING TO TECHNICAL PROVISIONS AND THEIR
REPRESENTATION

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 Direc-
tive 73/239/EEC in order that:

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

— 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.

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

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

2.

(a) Accounts shall be drawn up in such a manner as to
show the sources of the results for each of the two activ-
ities, 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 insurance business) shall be broken down
according to origin. Items common to both activities
shall be entered in accordance with methods of appor-
tionment to be accepted by the competent authority.

(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.

If one of the solvency margins is insufficient, the compe-
3.
tent 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.

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 valuation, taking account of all future liabil-
ities as determined by the policy conditions for each
existing contract, including:

— all

guaranteed
surrender values,

benefits,

including

guaranteed

— 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 indivi-
dual calculations. The principle of separate calculation
shall in no way prevent the establishment of additional
provisions for general risks which are not individua-
lised;

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(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 rules of the compe-
tent authority in the home Member State, applying the
following principles:

(a) for all contracts, the competent authority of the assur-
ance undertaking's home Member State shall fix one or
more maximum rates of interest, in particular in accor-
dance with the following rules:

(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
contract
is not
is denominated, provided that
more than 60 % of the rate on bond issues by the
State in whose currency the contract is denomi-
nated.

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,
consult
the Member
the competent authority of
State in whose currency the contract is denomi-
nated;

to set

(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
account
the yield on the corresponding assets
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 para-

graph (a) to the following categories of contracts:

— unit-linked contracts,

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

years,

— without-profits contracts, and annuity contracts with

no surrender value.

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 higher than the yield on assets as calculated in accor-
dance 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 calcula-
tion 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.

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.

3.
The home Member State shall require every assurance
undertaking to cover the technical provisions in respect of its
entire business by matching assets, in accordance with Article
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.

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

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

(i) advances against policies;

Premiums for new business

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 diversi-
fied and adequately spread.

Article 23

Categories of authorised assets

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

A.

i n ve st me nts

(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. de b ts a nd cla i ms

(f) debts owed by reassurers, including reassurers' shares of

technical provisions;

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

(j) tax recoveries;

(k) claims against guarantee funds;

C. oth 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 institu-
tions 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 verifi-
able sums arising out of life assurance policies, to the extent
that they represent funds belonging to members.

3.
The inclusion of any asset or category of assets listed in
paragraph 1 shall not mean that all these assets should automa-
tically be accepted as cover for technical provisions. The home
Member State shall
lay down more detailed rules fixing the
conditions for the use of acceptable assets; in this connection,
it may require valuable security or guarantees, particularly in
the case of debts owed by reassurers.

In determining and applying the rules which it lays down, the
home Member State shall,
the
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 accepted as cover for technical provi-
sions 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;

(h) debts owed by policy holders and intermediaries arising

out of direct and reassurance operations;

(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
investment risks or facilitate efficient portfolio manage-
ment. They must be valued on a prudent basis and may
be taken into account in the valuation of the underlying
assets;

Article 24

Rules for investment diversification

(v) transferable securities which are not dealt in on a regu-
lated market may be accepted as cover 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;

(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
assurance undertaking's investments on its behalf,
the
home Member State must, when applying the rules and
principles laid down in this Article, take into account the
underlying assets held by the subsidiary undertaking; the
home Member State may treat the assets of other subsidi-
aries in the same way;

(ix) deferred acquisition costs may be accepted as cover for
technical provisions only to the extent that this is consis-
tent with the calculation of the mathematical provisions.

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

(a) 10 % of its total gross technical provisions in any one piece
of land or building, or a number of pieces of land or build-
ings 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 tech-
nical 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.

2.
The absence of a limit in paragraph 1 on investment in
any particular category does not imply that assets in that cate-
gory 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:

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.

(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;

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(ii) investment in particular types of asset which show high
levels of risk, whether because of the nature of the asset or
the quality of the issuer, must be restricted to prudent
levels;

(iii) limitations on particular categories of asset must

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

(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
down in this Article, take into account the underlying
assets held by the subsidiary undertaking;
the home
Member State may treat the assets of other subsidiaries in
the same way;

(v) the percentage of assets covering technical provisions
which are the subject of non-liquid investments must be
kept to a prudent level;

(vi) where the assets held include loans to or debt securities
issued by certain credit institutions, the home Member
rules and principles
State may, when applying the
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 Member State, is entirely owned by that Member
State and/or that State's local authorities and its business,
according to its memorandum and articles of association,
consists of extending, through its intermediaries, loans to,
or guaranteed by, States or local authorities or of loans to
bodies closely linked to the State or to local authorities.

3.
In the context of the detailed rules laying down the condi-
tions 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 accompa-
nied by such collateral,

— UCITS not coordinated within the meaning of Directive 85/
611/EEC and other investment funds, as compared with
UCITS coordinated within the meaning of that Directive,

— 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 authori-
ties or undertakings belonging to zone A as defined in
Directive 2000/12/EC or the issuers of which are interna-
tional organisations not numbering at least one Community
Member State among their members, as compared with the
same financial instruments issued by such bodies.

4. Member States may raise the limit laid down in paragraph
1(b) to 40 % in the case of certain debt securities when these
are issued by a credit institution which has its head office in a
Member State and is subject by law to special official supervi-
sion designed to protect the holders of those debt securities. In
particular, sums deriving from the issue of such debt securities
must be invested in accordance with the law in assets which,
during the whole period of validity of the debt securities, are
capable of covering claims attaching to debt securities and
which, in the event of failure of the issuer, would be used on a
the principal and
priority basis for the reimbursement of
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.

Articles 22 and 24 shall not apply to assets held to match
3.
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. Where the benefits referred to in paragraphs 1 and 2
include a guarantee of investment performance or some other
technical
the corresponding additional
guaranteed benefit,
provisions shall be subject to Articles 22, 23, and 24.

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Article 26

Matching rules

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

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.

CHAPTER 3

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 busi-
ness at all times which is at least equal to the requirements in
this Directive.

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

(a) the paid-up share capital or, in the case of a mutual assur-
fund plus any

ance undertaking,
members' accounts which meet all the following criteria:

the effective initial

(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 termina-
tion 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 arti-
cles 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 divi-

dends to be paid;

(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.

3.

The available solvency margin may also consist of:

(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 other
to be repaid until all other debts
creditors and is not
outstanding at the time have been settled.

Subordinated loan capital must also fulfil the following
conditions:

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

(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 fixed must be repay-
able only subject to five years' notice unless the loans
are no longer considered as a component of the avail-
able solvency margin or unless the prior consent of the
competent authorities is specifically required for early
repayment.
In the latter event the assurance under-
taking 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 undertaking's available
solvency margin will not fall below the required level;

(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
competent authorities have declared that they have no
objection to the amendment;

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(b) securities with no specified maturity date and other instru-
ments, including cumulative preferential 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
the prior consent of

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
rank entirely after those of all non-subordinated cred-
itors;

(iv) 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;

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

4.
Upon application, with supporting evidence, by the
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 six. 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).

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

(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 Zillmerising 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-Zillmerised or
partially Zillmerised mathematical provision and a mathe-
matical provision Zillmerised 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 differ-

ences between the relevant capital sums of life assurance
activities and the mathematical provisions for all policies
for which Zillmerising is possible. The difference shall be
reduced by the amount of any undepreciated 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.

5.
Amendments to paragraphs 2, 3 and 4 to take into
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

Subject to Article 29, the required solvency margin shall
1.
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:

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 cessions to the gross total mathematical provi-
sions. That ratio may in no case be less than 85 %;

(b) 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 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 %.

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For the supplementary insurance referred to in Article
3.
2(1)(c)
to the
the required solvency margin shall be equal
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.

Article 29

Guarantee fund

4.
For permanent health insurance not subject to cancella-
tion referred to in Article 2(1)(d), the required solvency 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 the mathematical provisions calculated in compli-
ance with paragraph 2(a) of this Article.

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:

One third of the required solvency margin as specified in
1.
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.

(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;

Article 31

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

Assets not used to cover technical provisions

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

(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;

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

(d) in so far as the assurance undertaking covers a death risk, a
0,3 % fraction of the capital at risk calculated in compliance
with paragraph 2(b) of this Article.

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.

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CHAPTER 4

CONTRACT LAW AND CONDITIONS OF ASSURANCE

cular for calculating scales of premiums and technical provi-
sions or forms and other printed documents which an assur-
ance undertaking intends to use in its dealings with policy
holders.

Article 32

Law applicable

The law applicable to contracts relating to the activities
1.
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/
her habitual residence in a Member State other than that of
which he/she is a national, the parties may choose the law of
the Member State of which he/she is a national.

3. Where a State includes several territorial units, each of
which has its own rules of law concerning contractual obliga-
tions, 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.

Article 33

General good

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

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

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

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/
she 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/her 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
informing the policy holder
the contract has been
concluded.

the arrangements

regards
that

2.
The Member States need not apply paragraph 1 to
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.

Article 36

Information for policy holders

Article 34

Rules relating to conditions of assurance and scales of
premiums

1.
Before the assurance contract is concluded, at least the
information listed in Annex III(A) shall be communicated to
the policy holder.

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 parti-

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

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The Member State of the commitment may require assur-
3.
ance undertakings to furnish information in addition to that
listed in Annex III only if it is necessary for a proper under-
standing by the policy holder of the essential elements of the
commitment.

Each Member State shall take the measures necessary to
5.
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 assur-
ance undertaking's home Member State, which shall designate
the assets to be covered by such measures.

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

CHAPTER 5

ASSURANCE UNDERTAKINGS IN DIFFICULTY OR IN AN
IRREGULAR SITUATION

Article 37

Assurance undertakings in difficulty

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

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.

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.

It may also restrict or prohibit the free disposal of the assur-
ance undertaking's assets.
inform the authorities of
It shall
other Member States within the territories of which the assur-
ance undertaking carries on business accordingly and the latter
shall, at the request of the former, take the same 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:

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

in particular current

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

(c) a forecast balance sheet;

(d) estimates of

the financial

resources intended to cover

underwriting liabilities and the required solvency margin;

(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
required solvency margin, in order to ensure that the insurance
undertaking is able to fulfil the solvency requirements in the
near future. The level of this higher required solvency margin
shall be based on a financial recovery plan referred to in para-
graph 1.

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

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

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

significantly since the last financial year;

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.

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

surance contracts.

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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 subpara-
graph, 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

Authorisation granted to an assurance undertaking by the
1.
competent authority of its home Member State may be with-
drawn by that authority if that undertaking:

(a) does not make use of the authorisation within 12 months,
expressly renounces it or ceases to carry on business for
more than six 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.

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
and they shall take appropriate measures to prevent the assur-
ance undertaking from commencing new operations within
their territories, under either the freedom of establishment or
the freedom to provide services. The home Member State's
competent authority shall, in conjunction with those authori-
ties, take all necessary measures to safeguard the interests of
the assured persons and shall restrict,
in particular, the free
disposal of the assets of the assurance undertaking in accor-
dance with Article 37(1), (2), second subparagraph, and (3),
second subparagraph.

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

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;

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

(c) the address in the Member State of the branch from which
documents may be obtained and to which they may be
delivered, it being understood that that address shall be the
one to which 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 litiga-
tion 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
brought against businesses of a conventional
type. The
authorised agent must, therefore, possess sufficient powers
for proceedings to be taken against him and must in that
capacity be
to bind the Lloyd's underwriters
concerned.

able

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 the business planned, they shall, within three
months of receiving all the information referred to in para-
graph 2, communicate that
information to the competent
authorities of the Member State of the branch and shall inform
the undertaking concerned accordingly.

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

TITLE IV

PROVISIONS RELATING TO RIGHT OF ESTABLISH-
MENT AND FREEDOM TO PROVIDE SERVICES

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.

Where the competent authorities of the home Member State
refuse to communicate the information referred to in para-
graph 2 to the competent authorities of the Member 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.

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

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

6.
In the event of a change in any of the particulars commu-
nicated under paragraph 2(b), (c) or (d), an assurance under-
taking 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.

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
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

authorised to offer;

(c) the nature of the commitments which the assurance under-
taking proposes to cover in the Member State of the provi-
sion 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 para-
graph 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

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.

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 noti-
fication of those policy conditions and other printed documents
without that requirement constituting a prior condition for an
assurance undertaking to carry on its business.

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.

2.
If the competent authorities of a Member State establish
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
the assurance undertaking
that State,
concerned to remedy that irregular situation.

they shall

require

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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 ensure
that the assurance undertaking concerned remedies that irre-
gular situation. The nature of those measures shall be commu-
nicated 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
conclude new assurance contracts within its territory. Member
States shall ensure that in their territories it is possible to serve
the legal documents necessary for such measures on assurance
undertakings.

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

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
Member State concerned,
the
latter may, in accordance with national law, apply the adminis-
trative penalties prescribed for that infringement by way of
enforcement against that establishment or property.

the competent authorities of

8.
Any measure adopted under paragraphs 3 to 7 involving
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
of services, subject to any rules governing the form and 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.

Article 49

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
the
information to the competent authorities of each of
Member States concerned which so requests.

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 in
the Member State of the commitment, and also, with regard to
Spain, to the surcharges legally established in favour of the
Spanish ‘Consorcio de Compensación de Seguros’
the
performance of its functions relating to the compensation of
losses arising from extraordinary events occurring in that
Member State.

for

The law applicable to the contract pursuant to Article 32

2.
shall not affect the fiscal arrangements applicable.

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

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TITLE V

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

RULES APPLICABLE TO AGENCIES OR BRANCHES
ESTABLISHED 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 authorisation.

(e) a plan setting out detailed estimates of income and expendi-
ture 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.

A Member State may grant an authorisation if the under-

2.
taking fulfils at least the following conditions:

Article 52

(a) it is entitled to undertake insurance activities covered by

Article 2 under its national law;

Rules applicable to branches of third-country undertakings

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

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
activity assets of an amount equal in value to at least one
half of the minimum amount prescribed in Article 29(2),
first subparagraph,
in respect of the guarantee fund and
deposits one quarter of the minimum amount as security;

(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 parti-
culars or evidence of:

(a) the nature of

the commitments which the undertaking

proposes to cover;

(b) the guiding principles as to reinsurance;

(c) the state of the undertaking's solvency margin and guar-

antee fund referred to in Article 55;

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

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
simultaneous pursuit of the activities in which they 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 activ-
ities 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 Direc-
tive may continue their activity there. If the undertaking
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 agen-

2.
cies 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 shall be treated in the same way as the competent
authority of the head-office Member State.

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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 calcu-
lated in accordance with Article 56(1)(a), the competent autho-
rities 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.

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 53

Transfer of portfolio

Article 54

Technical provisions

Under the conditions laid down by national

law, each
1.
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 estab-
lished in the same Member State if the competent authorities of
that Member State or, if appropriate, those of the 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 into account the accepting office possesses the neces-
sary solvency margin.

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 competent authorities of the
Member State of the accepting office or, if appropriate, of 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.

4.
In the circumstances referred to in paragraphs 1, 2 and 3
the Member State in which the transferring agency or branch is
situated shall authorise the transfer after obtaining the agree-
ment 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

competent

the Member

States
authorities of
5.
consulted shall give their opinion or consent to the competent
authorities of the home Member State of the transferring assur-
ance 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 favour-
able opinion or tacit consent.

Member States shall require undertakings to establish provi-
sions, referred to in Article 20, adequate to cover the under-
writing liabilities assumed in their territories. Member States
shall see that the agency or branch covers such provisions by
means of assets which are equivalent to such provisions and
matching assets in accordance with Annex II.

The law of the Member States shall be applicable to the calcula-
tion 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
for the
calculated in accordance with Article 28. However,
purpose of calculating this margin, account shall be taken only
of the operations effected by the agency or branch concerned.

One third of the minimum solvency margin shall consti-

2.
tute the guarantee fund.

However, the amount of this fund may not be less than one
half of the minimum required under Article 29(2) first subpara-
graph. The initial deposit lodged in accordance with Article
51(2)(e) shall be counted towards such guarantee fund.

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

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.

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Article 56

TITLE VI

Advantages to undertakings authorised in more than one
Member State

1.
Any undertaking which has requested or obtained author-
isation 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 calcu-
lated in relation to the entire business which it carries on
within the Community; in such case, account shall be taken
the agencies or
only of
the
branches
purposes of this calculation;

established within the Community for

the operations effected by all

(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.

3.
The advantages provided for in paragraph 1 may only be
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.

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.

Article 57

Agreements with third countries

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.

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

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

(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;

(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.

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

Article 59

Third-country

treatment

of Community

assurance

undertakings

The Member States shall inform the Commission of any
1.
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
undertakings in third countries, in the terms referred to in para-
graphs 3 and 4, as regards establishment and the carrying-on
of insurance activities, and the acquisition of holdings in third-
country insurance undertakings. The Commission shall submit
those reports to the Council, together with any appropriate
proposals.

3. 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 a third country is not granting
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
for negotiation with a view to obtaining comparable competi-
tive opportunities for Community assurance undertakings. The
Council shall decide by a qualified majority.

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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.

In the circumstances described in the first subparagraph, it may
also be decided at any time, and in addition to initiating nego-
tiations, 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:

— 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 third

parent undertakings governed by the laws of
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;

(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 para-
graph 3 or 4 when the measures referred to in the second and
third subparagraphs of paragraph 4 cease to apply.

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.

2.
The societies registered in the United Kingdom under the
Friendly Societies Acts may continue the activities of life assur-
ance and savings operations which, in accordance with their
objects, they were carrying on on 15 March 1979.

Article 61

Proof of good repute

1. Where a Member State requires of its own nationals 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 adminis-
trative 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 adminis-
trative authority or, where appropriate, a notary in the home
Member State or the Member State from which that person
comes;
issue a certificate
attesting the authenticity of the declaration on oath or solemn
declaration. The declaration in respect of no previous bank-
ruptcy may also be made before a competent professional or
trade body in the said country.

such authority or notary shall

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

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.

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.

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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 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
insurance and the operations
supervision of
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
to 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

The following technical adjustments to be made to this Direc-
tive 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,

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

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

— amendments, to take account of the creation of new finan-
cial 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.

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.

3.

The Committee shall adopt its Rules of Procedure.

Article 66

Rights acquired by existing branches and assurance
undertakings

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 proce-
dure laid down in Article 40(1) to (5).

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

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Articles 41 and 42 shall not affect rights acquired by
2.
assurance undertakings carrying on business under the freedom
to provide services before 1 July 1994.

Article 67

Right to apply to the courts

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.

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 occa-
sion of their official publication. Member States shall determine
how such reference is to be made.

5.
Not later than 1 January 2007 the Commission shall
submit to the European Parliament and to 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 possibi-
lities under those articles and, in particular, whether the discre-
tionary powers afforded to the national supervisory authorities
have resulted in major supervisory differences in the single
market.

Article 68

Article 70

Review of amounts expressed in euro

Information to the Commission

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.

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.

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 19 June 2004. They shall
immediately inform the Commission thereof.

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. 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).

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 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
provided that such undertakings have,
in accordance with
Article 37, submitted for the approval of the competent autho-
rities,
the measures which they propose to take for such
purpose.

Repealed directives

Article 72

and their
Directive

correlation with this

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.

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Article 73

Entry into force

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

Article 74

Addressees

This Directive is addressed to the Member States.

Done at Brussels, 5 November 2002.

For the Europan Parliament

The President

P. COX

For the Council

The President

T. PEDERSEN

19.12.2002

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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.

IV.

V.

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

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

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)

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 mathe-
matical 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 commit-
ments 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
office and, where appropriate, the agency or branch
concluding the contract is situated

(a)5 Term of the contract

(a)6 Means of terminating the contract

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

priate, of
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

for

handling

arrangements

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

(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, the policy-holder must receive the following informa-
tion throughout the term of the contract.

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 condi-
tions 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 infor-
mation, 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. S ol v e nc y ma r g i n

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;

(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 authori-
ties may authorise the early repayment of such loans provided application is made by the issuing assur-
ance undertaking and its solvency margin will not fall below the required level;

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(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 repay-
ment 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 deter-
mined 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 Zillmerising 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-Zillmerised or partially Zillmerised mathematical
provision and a mathematical provision Zillmerised 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 poli-
cies for which Zillmerising is possible; the difference shall be reduced by the amount of any undepreciated
acquisition costs entered as an asset;

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

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B. M i n i mu m solv e nc y ma rg i n

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 acceptances shall be multiplied by the ratio, for the last financial year, of the total mathe-
matical 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 under-
written 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 deduc-
tion 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.

(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 opera-

tions 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.

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C. G u a r a n t e e fu n d

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(1) and
(2).

2.

(a) (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 progres-
sively 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(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 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 Directive 92/96/EEC).

Directive 2000/64/EC of the European Parliament and of the Council (Article 2, as regards the references made to Direc-
tive 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

18 July 1996

1 July 1994

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(a)

Article 1(1)(b)

Article 3

Article 1(b)

Article 1(1)(c)

Article 2(c)

Article 1(1)(d)

Article 1(1)(e)

Article 1(1)(f)

Article 1(c)

Article 1(d)

Article 1(e)

Article 1(1)(g)

Article 2(e)

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

Article 1(f) to (j)

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 4

Article 3(8)

Article 4

Article 6

New

Article 1(l)

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

Article 5

Article 7

Article 6(1)

Article 8(1)

Article 6(2)

Article 8(1) last
three subparagraphs

Article 6(3)

Article 8(1)a

Article 6(4)

Article 8(2)

Article 6(5)

Article 8(3)

Article 6(6)

Article 8(4)

Article 7

Article 9

Article 8

Article 7

Article 9

Article 12

Article 10

Article 15

Article 11

Article 16

Article 12

Article 22(1)

Article 13

Article 23

Article 14(1) to (5)

Article 11(2) to (6)

Article 15

Article 14

Article 16(1) to (5)

Article 15(1) to (5)

Article 16(6)

Article 16(7)

Article 16(8)

Article 16(9)

Article 17

Article 18(1) and (2)

Article 13(1) and
(2)

Article 18(3)

Article 15(5)(a)

Article 15(5)(b)

Article 15(5)(c)

Article 15(6)

Article 15(a)

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 18(4) to (7)

Article13(3) to (7)

Article 19

Article 14

Article 20

Article 17

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 18

Article 28

Article 19

Article 29

Article 20

Article 30

Article 20a

Article 31

Article 21

Article 32

Article 33

Article 34

Article 35

Article 36

Article 37

Article 24

Article 38

Article 24a

Article 39

Article 26

Article 40

Article 10

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 41

Article 42

Article 43

Article 44

Article 45

Article 11

Article 14

Article 17

Article 38

Article 39(2)

Article 46(1) to (9)

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

New

New

Article 47

Article 48

Article 49

Article 50(1)

Article 50(2)

Article 50(3)

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

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

Article 51(2)(g)

Article 51(3)and (4)

Article 52

Article 31

Article 53

Article 31a

Article 54

Article 28

Article 55

Article 29

Article 56

Article 30

Article 57

Article 32

Article 58

Article 32a

Article 59(1)

Article 32b(1)

Article 59(2)

Article 32b(2)

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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 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 60(2)

Article 61

Article 37

Article 62, first
subparagraph

Article 38

Article 28, first
subparagraph

Article 28, second
to fourth subpara-
graphs

Article 29

Article 47

Article 47

Article 48(1)

Article 48(2)

Article 50

Article 62, second to
fourth subparagraphs

Article 63

Article 64

Article 65

Article 66(1), first
subparagraph

Article 66(1) second
subparagraph

Article 66(2)

Article 67

Article 68(1)

Article 39(1)

Article 68(2)

Article 39(3)

Article 69(1)

Article 69(2)

New

New

New

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

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Official Journal of the European Communities

L 345/51

This Directive

Directive 79/267/EEC

Directive 90/619/EEC

Directive 92/96/EEC

Directive 95/26/EC

Other Acts

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 subpara-
graph, 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

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