Opinion of the European Central Bank of 23 April 2010 on private insurance supervision, the establishment of a private life insurance guarantee fund and other provisions (CON/2010/33)
Date: 2010-04-23
Institutions: European Central Bank
Subjects: Greece, financial stability, financial supervision, life assurance, national law, private insurance, public institution

EN 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 23 April 2010 

on private insurance supervision, the establishment of a private life insurance guarantee fund and 

other provisions 

(CON/2010/33) 

Introduction and legal basis 

On  1  March  2010  the  European  Central  Bank  (ECB)  received  a  request  from  the  Greek  Ministry  of 

Finance for an opinion on a draft law on private insurance supervision, the establishment of a private life 

insurance guarantee fund and other provisions (hereinafter the ‘draft law’).  

The ECB’s competence to deliver an opinion is based on Articles 127(4) and 282(5) of the Treaty on the 

Functioning  of  the  European  Union  and  the  third  and  sixth  indents  of  Article 2(1)  of  Council  Decision 

98/415/EC  of  29 June  1998  on  the  consultation  of  the  European  Central  Bank  by  national  authorities 
regarding draft legislative provisions1, as the draft law relates to the Bank of Greece and rules applicable 

to  financial  institutions  insofar  as  they  materially  influence  the  stability  of  financial  institutions  and 

markets. In accordance with the first sentence of Article 17.5 of the Rules of Procedure of the European 

Central Bank, the Governing Council has adopted this opinion. 

1. 

Purpose of the draft law 

1.1  The  draft  law  abolishes  the  Insurance  Supervision  Commission  for  Private  Insurance  (HPISC), 
established  as  an  entity  supervised  by  the  Ministry of  Finance2,  and  transfers  its  competences3  to 

the Bank of Greece, thus placing the insurance sector under the supervision of the Bank of Greece. 

Following  the  adoption  of  the  draft  law,  the  Bank  of  Greece  will  supervise  credit  and  financial 

institutions and insurance companies, and the Hellenic Capital Market Commission (HCMC) will 

supervise investment firms. 

1.2  The draft law also establishes the Private Life Insurance Guarantee Fund (PLIGF) as a legal entity 

governed by private law and subject to the supervision and control of the Minister for Finance. The 

PLIGF  will  preserve  and  transfer  all  or  part  of  the  life  insurance  portfolios  of  insurance 

undertakings  in  liquidation  to  other  insurance  undertakings  and,  should  this  not  be  feasible,  the 

PLIGF will terminate the insurance policies and pay compensation for the value of the said policies 

1  
2  

3  

OJ L 189, 3.7.1998, p. 42.  
Under  Law  No  3229/2004  on  the  supervision  of  private  insurance,  supervision  and  control  of  games  of  chance,  the 
application of international accounting standards and other provisions, FEK A 38/10.2.2004. 
Article 1 of the draft law. 

 
 
 
 
                                                 
and  outstanding  claims  and  payable  benefits4.  Moreover,  the  PLIGF  will  provide  cover  for 

insurance  payments  deriving  from  any  life  insurance  policies  entered  into  and  operations  carried 

out in Greece or other Member States or European Economic Area countries through a branch or 
through the free (cross-border) provision of services5. Finally, from the date of declaring bankrupt 

or  revoking  the  authorisation  of  an  insurance  undertaking,  the  PLIGF  will  be  automatically 

subrogated to such insurance undertaking in respect of all the rights and obligations deriving from 
such life insurance policies6. 

1.3  Article 14 of the draft law establishes a Systemic Stability Council (SSC) at the Ministry of Finance 

to  monitor 

the  systemic  stability  of 

the  economy7.  More  specifically, 

the  SSC  will:  

(a) monitor the relationships and dynamics between financial systems, with an emphasis on capital 

markets, the banking and insurance systems, liquidity, public debt and State guarantees, as well as 

on  prudential  action  in  extreme  situations,  instability  and  crises;  (b)  monitor  and  coordinate  the 

Ministry  of  Finance’s  financial  policy  on  issues  arising  in  the  context  of  the  operation  of  the 

European supervisory institutions; and (c) monitor and ensure the exchange of information between 

the Ministry of Finance and the financial sector’s supervisory authorities for the coordination of the 

Ministry’s  financial  policy.  The  SSC’s  members  will  comprise  the  Minister  and  the  Deputy 

Minister for Finance, the Governor and one Deputy Governor of the Bank of Greece, the HCMC’s 

Chair and two persons of recognised standing with special knowledge of the financial sector, to be 

designated by the Minister for Finance. The Minister for Finance will chair the SSC. 

1.4  Finally,  the  draft  law  streamlines  the  legal  framework  governing  credit  cooperatives  operating  as 

credit institutions, while taking into account their special features8.  

2.  General observations 

Article  127(5)  of  the  Treaty  provides  that  the  European  System  of  Central  Banks  (ESCB) 

contributes to the smooth conduct of policies pursued by the competent authorities relating to the 

prudential supervision of credit institutions and the stability of the financial system. In this context, 

the  ECB  has  stressed  the  importance  of  the  national  central  banks’  (NCBs)  close  involvement  in 
prudential supervision9, which may support their contribution to the macro-prudential oversight of 

the  financial  sector.  The  financial  crisis  demonstrates  the  need  to  strengthen  supervision  and 

regulation  of  the  financial  system  as  a  whole.  With  respect  to  the  insurance  sector  in  particular, 

experience  has  shown  that  insurance  companies  are  important  for  systemic  financial  stability 

because of their size, their interconnectedness with the financial sector and the economic function 

4  
5  
6  
7  
8  

9 

Article 5(1) of the draft law. 
Article 5(2) of the draft law. 
Article 5(3) of the draft law. 
See also Article 14 in Chapter C of the explanatory memorandum to the draft law. 
See Article 16 of the draft law. According to the explanatory memorandum to the draft law, the amendments are intended 
to enable such cooperatives to raise increased amounts of capital and to finance their members. 
See  ‘The  role  of  central  banks  in  prudential  supervision’,  ECB,  22.3.2001,  available  on  the  ECB’s  website  at 
www.ecb.europa.eu. 

2 

 
                                                 
of  insurance.  In  view  of  the  systemic  relevance  of  the  insurance  sector  for  financial  stability, 

insurance  is  part  of  the  macro-prudential  oversight  to  be  exercised  by  the  proposed  European 

Systemic Risk Board (ESRB). Against this background, the ECB welcomes the Bank of Greece’s 

future  supervisory  role  for  the  insurance  sector,  as  the  new  tasks  will  enhance  its  contribution  to 

safeguarding financial stability and preventing or mitigating systemic risks, also in the context of 

ESCB and ECB support to the ESRB which will be responsible for macroprudential supervision of 

the EU financial system as a whole.  

3. 

Transfer  of  insurance  sector  supervisory  competences  to  the  Bank  of  Greece  and  related 

arrangements 

3.1  The  ECB  notes  that  the  proposed  transfer  of  insurance  sector  supervisory  competences  is  in  line 

with Article 55A of the Statute of the Bank of Greece which provides, inter alia, that categories of 

enterprises  and  organisations  other  than  those  currently provided  for  therein may  also  be brought 

under the Bank of Greece’s prudential supervision.  

3.2  Safeguards for central bank independence and compliance with the monetary financing prohibition 

The  principle  of  central  bank  independence  requires  Member  States  to  ensure  that  NCBs  have 

sufficient  financial  resources  to  perform  ESCB  or  Eurosystem-related  tasks  as  well  as  their  own 
national tasks10. In this respect, the new functions to be performed by the Bank of Greece should be 

conducted in a manner that is fully compatible with the Bank of Greece institutional and financial 

independence  and  consequently  should  not  impede  the  proper  performance  of  its  ESCB-related 

tasks.  Also,  Article  5A  of  the  Statute  of  the  Bank  of  Greece  guarantees  the  independence  of  the 

Bank and of the members of its decision-making bodies in respect of all tasks carried out by them, 

i.e.  both  ESCB-related  and  other  tasks,  which  would  include  the  supervision  of  insurance 

undertakings. To ensure that the proposed reform guarantees the Bank of Greece’s institutional and 

financial  independence  and  compliance  with  the  monetary  financing  prohibition  and  that  the 

solution is balanced, the ECB comments as follows.  

3.2.1  Transfer of the HPISC’s competences to the Bank of Greece 

Under Article 1(1) of the draft law, all the HPISC’s competences, which are listed non-exhaustively 

in  Article  3(1)  of  Law  3229/2004,  are  transferred  to  the  Bank  of  Greece,  with  the  exceptions 

explicitly  referred  to  in  Article  1(1)  of  the  draft  law.  To  ensure  legal  certainty  in  relation  to  the 

transfer of competences to the Bank of Greece, the ECB recommends that Article 1(1) of the draft 

law should state that, in addition to the transfer of the HPISC’s competences to the Bank of Greece 

specified  in  the  draft  law,  all  other  concurrent  competences  of  other  authorities  relating  to  the 

supervision  of  the  insurance  sector  under  other  national  legislation  are  transferred.  This  would 

enable the Bank of Greece to carry out its new tasks without interference.  

10  

See ECB Convergence Report May 2008, p. 20. 

3 

 
 
                                                 
3.2.2  Devolution of the HPISC’s assets to the Greek State  

In  order  for  the  Bank  of  Greece  to  be  able  to  perform  its  new  supervisory  tasks  without  being 

adversely  affected  in  the  performance  of  all  its  existing  tasks,  sufficient  resources  should  be 

available to it. The draft law provides that the capital created through the contributions made by the 

insurance undertakings, as well as the HPISC’s remaining property in terms of assets and liabilities, 
will devolve to the State11. The ECB therefore understands that, while the function of the insurance 

sector  supervision  previously  entrusted  to  the  HPISC  will  be  transferred  to  the  Bank  of  Greece, 

assets that belonged to the HPISC will not be transferred. In this respect, it should be ensured that 

the Bank of Greece will not bear any financial costs or liability related to any HPISC supervisory 

activities undertaken prior to the effective date of transfer of responsibilities to the Bank of Greece. 

3.2.3  Pending legal proceedings 

Any  provisions  under  which  an  NCB  becomes  the  legal  successor  to  any  liabilities  of  a  distinct 

supervisory authority raise issues of compliance with the monetary financing prohibition provided 
for  in  Article  123  of  the  Treaty12.  The  draft  law  provides  in  this  respect  that  pending  legal 

proceedings relating to disputes or matters involving the abolished HPISC will be continued by the 

Bank of Greece without interruption. Any financial consequences resulting from judicial decisions 

will ultimately be borne by the Greek State, which may, where appropriate, intervene and assume 
the  legal  proceedings13.The  ECB  understands  that  the  draft  law  does  not  provide  for  any 

compensation  for  legal  proceedings  or  disputes  which  may  occur  after  the  transfer  of 

responsibilities  to  the  Bank  of  Greece  but  originate  in  events  occurring  prior  to  this  transfer. 

Moreover,  the  ECB  understands  that  any  judgment  rendered  by  the  Greek  courts  granting 

compensation to a holder of an insurance policy will imply that the compensation will be borne by 

Bank of Greece, which will only have subsequent recourse to the Greek State for reimbursement. 

Accordingly, the Bank of Greece would acquire a claim against the Greek State. This arrangement 

would be incompatible with Article 123 of the Treaty. The ECB therefore recommends specifying 

in the draft law that the Greek State will meet in advance any financial obligations incurred by the 

Bank of Greece as a result of it being a legal successor to a supervisory authority and that the State 
will not have any recourse to the Bank of Greece in relation to its liability in this respect14. 

In addition, as regards the principle of central bank independence, as previously mentioned by the 
ECB15,  in  order  to  ensure  an  NCB’s  financial  independence,  ‘Member  States  may  not  put  their 

NCBs  in  a  position  where  they  have  insufficient  …  resources  to  carry  out  their  ESCB  or 

Eurosystem-related  tasks’.  In  this  vein,  the  proposed  taking  on  of  legal  proceedings  should  be 

preceded by an assessment of the direct or indirect effect this may have on the Bank of Greece’s 

11  
12  

13  
14  
15 

Article 1(6) of the draft law. 
See paragraph 4.2(d) of Opinion CON/2008/16 and paragraphs 8 to 12 of Opinion CON/2005/24. All ECB opinions are 
published on the ECB’s website at www.ecb.europa.eu. 
Article 1(8) of the draft law. 
See paragraph 4.2(d) of Opinion CON/2008/16. 
See e.g. ECB Convergence Report May 2008, p. 20. 

4 

                                                 
ability (both operationally in terms of manpower, and financially in terms of financial resources) to 

fulfil its mandate.  

3.2.4  Staff  

Special scientific staff employed by the HPISC under private law contracts of indefinite duration16 

may request their integration into the permanent staff of the Bank of Greece following submission 

of an application and a relevant assessment, accepting, as appropriate, the terms and conditions for 

their grade and salary adjustment to be notified by an act of the Governor of the Bank of Greece 
within  two  months  of  publication  of  the  draft  law17.  In  accordance  with  what  has  been  stated  on 
previous occasions18, the ECB understands that the Bank of Greece’s autonomy in staff matters is 

respected by such an arrangement and that it is the exclusive and independent decision of the Bank 

of  Greece  whether  to  employ  the  HPISC’s  staff.  At  the  same  time,  it  should  be  ensured  that  the 

Bank of Greece is able to recruit specialised staff where appropriate for the proper implementation 

of the new responsibilities in the same way as for its current responsibilities. 

In line with paragraph 3.2.2 above, it should be ensured, however, that the Bank of Greece does not 

bear any financial obligations deriving from the employment relations that new staff may have had 

with the HPISC.  

3.2.5  Contributions of supervised insurance undertakings 

The ECB notes that the contributions of the supervised insurance undertakings will be defined and 
any relevant detail addressed by a decision of the Minister for Finance19. For reasons of financial 

independence  of  the  Bank  of  Greece  it  should  be  ensured  that  the  performance  of  the  new 

supervisory functions by the Bank of Greece will be adequately financed by the contributions to be 

received from supervised entities and will not result in any loss for the Bank of Greece.  

In terms of the competence for defining the contributions of the supervised insurance undertakings, 

the  ECB  notes  that,  to  the  extent  that  the  new  supervisory  competences  will  be  exclusively 

transferred to the Bank of Greece, the modalities for the definition of such contributions should be 
defined  independently  by  the  Bank  of  Greece20.  The  attribution  of  such  power  to  the  Bank  of 

Greece would reflect international practice established with the aim of safeguarding the supervisory 

authorities’ independence. 

3.2.6  Transitional period 

The substantive and technical details for the unimpeded substitution of the Bank of Greece for the 

abolished HPISC, as well as any other specific issues and details for the purposes of the application 

As provided for in Article 17 of Presidential Decree 20/2006, FEK Α 17/7.2.2006. 

16  
17   Article 1(5)(d) of the draft law. 
18  

See  e.g.  Opinions  CON/2008/9,  CON/2008/10,  CON/2009/15,  CON/2009/45  and  CON/2009/47.  See  also  ECB 
Convergence Report May 2008, p. 22. 

19   Article  1(3)  of  the  draft  law.  These  contributions  will  amount  to  a  maximum  of  1.5  thousandths  (1.5 ‰)  of  the  total 

20  

annual yield from gross insurance premiums. 
The ECB notes that the framework in place for the supervision of credit institutions in Greece (Law No 3601/2007, FEK 
A 178/1.8.2007) also provides for the possibility for the Bank of Greece to impose such contributions. 

5 

 
 
                                                 
of  Article  1,  will  be  determined  by  a  decision  of  the  Minister  for  Finance21.  In  the  light  of  the 

concerns  raised  above  about  financial  independence  and  monetary  financing,  and  with  a  view  to 

ensuring a smooth transfer of the supervisory competences to the Bank of Greece and their efficient 

performance, the ECB recommends drawing up the details for the transfer of such competences by 

a joint decision of the Ministry of Finance and the Bank of Greece. Finally, the ECB notes that the 

draft law provides that the HPISC must be abolished from the first day of the third month following 
the  publication  of  the  law22.  To  ensure  a  smooth  transfer  of  the  tasks  to  the  Bank  of  Greece,  the 

draft  law  should  provide  for  a  longer  transitional  period,  to  be  determined  in  agreement  with  the 

Bank of Greece. 

3.3   Failure to amend the draft law along the lines suggested in paragraphs 3.2.2, 3.2.3 and 3.2.4 would 

lead the ECB to the conclusion that the proposed arrangements are incompatible with Articles 123 

and 130 of the Treaty.  

4. 

Establishment of the Private Life Insurance Guarantee Fund (PLIGF) 

4.1  The  PLIGF  will  be  established  as  a  private  law  legal  entity  supervised  and  controlled  by  the 
Minister of Finance23. At the same time, several provisions of the draft law assign to the Bank of 

Greece  decision-making  and/or  approving  powers  in  relation  to  the  PLIGF’s  operations,  in 

particular  in  terms  of  coverage,  transfer  of  life  insurance  portfolios  following  revocation  of  an 
insurance  undertaking’s  authorisation, contributions  and  internal  governance24.  In  this  regard,  the 

ECB would like to stress that the activities performed by the Bank of Greece need to comply with 

the monetary financing prohibition contained in Article 123 of the Treaty, so it should not have to 

finance  any  of  the  PLIGF’s  activities  in  the  event  that  the  members’  contributions  to  the  Fund 

under the first and second paragraphs of Article 10 of the draft law prove insufficient. Moreover, 

the  Bank  of  Greece’s  operational  independence  would  need  to  be  enhanced.  This  could  be 

facilitated  by  giving  a  clearer  definition  of  the  Bank  of  Greece’s  involvement  in  the  PLIGF’s 
operations and by an adequate level of central bank involvement in the PLIGF’s governance25. The 

attribution to the Bank of Greece of clear and autonomous responsibility for supervising the PLIGF 

may greatly benefit the efficient and effective fulfilment of the aims of the draft law to extend its 

current  supervisory  responsibilities  to  encompass  the  insurance  sector.  In  order  to  ensure  the 

Article 1(10) of the draft law. 
Article 1(1) of the draft law. 
Article 4 of the draft law. 

21  
22  
23  
24  More specifically, the draft law provides that: (i) the Bank of Greece will decide on actuarial operations and adjustments 
to  be  performed  by  the  PLIGF,  where  insurance  policy  terms  and  conditions  infringe  the  relevant  legislation  in  force 
(Article  7(2)),  while  the  Minister  for  Finance,  on  a  proposal  by  the  PLIGF,  addresses  any  specific  issues  or  details 
(Article 7(3)); (ii) the Bank of Greece will decide on the procedure and any details for the transfer of the life insurance 
portfolios  of  insurance  companies  whose  authorisation  has  been  revoked  (Article  9(1))  and  will  approve  the  successor 
insurance undertaking selected by the PLIGF (Article 9(3)); the Bank of Greece’s Governor will decide on any specific 
issues  and  details  (Article  9(7));  (iii)  the  Bank  of  Greece  will  approve  any  decision  by  the  Management  Committee  to 
impose  extraordinary  contributions  in  urgent  cases  (Article  10(2)),  while  any  specific  issues  and  details  relating  to  the 
application of Article 10 will be regulated by a Governor’s decision (Article 10(5)); (iv) the PLIGF’s rules of procedure, 
as adopted by its members’ assembly, will be approved by the Bank of Greece (Article 11(2)(b)). 
See in this respect paragraph 4.2 of Opinion CON/2008/51. 

25  

6 

 
                                                 
compliance  of  the  draft  law  with  the  abovementioned  requirements,  substantial  substantive 

amendments should be made to the relevant provisions. 

4.2  As noted in paragraph 1.2, the PLIGF will provide cover for insurance payments deriving from any 

life insurance policies entered into and operations carried out in Greece or other Member States or 

European Economic Area countries through a branch or through the free (cross-border) provision of 

services.  The  ECB  understands  that  some  Member  States  have  already  established  private  life 

insurance guarantee funds, membership of which is obligatory for insurance companies established 

in these Member States and any branches they may have situated outside the Member State, in line 

with the general principle in Union law of home State supervision. For this reason, and with a view 

to possible future Union initiatives in this area, the ECB suggests that Article 6 of the draft law be 

amended in order to avoid the operation and membership of the PLIGF being made obligatory in 

respect of branches of insurance companies that are already covered by equivalent guarantee funds 

in their countries of establishment.  

5. 

Establishment of the Systemic Stability Council (SSC) 

5.1  As pointed out in previous opinions26, the establishment of national financial stability committees 

may  enhance  the  ability  of  NCBs  and  supervisory authorities  to provide  analytical  support to  the 

ESRB.  The  tasks  performed  by  these  committees  should  complement  the  ESRB’s  activities. 

Therefore, it is particularly important to exploit appropriate synergies. However, it is necessary to 

avoid such national committees being entrusted with tasks and powers that potentially conflict with 

those of the ESRB and which may undermine its effectiveness. Moreover, the legal frameworks of 

these  committees  should  appropriately  reflect  the  NCBs’  roles,  should  not  constrain  the 

independence of their governors or unduly affect the quality and impartiality of their contributions 

as members of the ESRB. With regard to the SSC’s composition, the ECB notes that committees 

with  similar  tasks  have  been  established  in  a  number  of  Member  States,  in  the  majority  of  cases 

with their composition restricted to institutional members. Such composition seems preferable, for 

reasons  related  to  safeguarding  the  competence  of  the  institutional  entities  entrusted  with  the 

responsibility  for  macroeconomic  stability  analysis  and  the  established  confidentiality  regime. 

Lastly,  in  view  of  the  importance  of  ensuring  the  effectiveness  of  macroprudential  supervisory 

arrangements  at  Union  level,  it  is  essential  to  safeguard  the  ESRB’s  ability  to  perform  its  tasks 

independently and to guarantee an authoritative and effective channel for transmitting its warnings 

and recommendations. Since, under the draft law, the SSC will adopt resolutions and conclusions, it 

is important to ensure that it will function in a way that is fully consistent with the abovementioned 

important principles. 

5.2 

In particular, the new institutional framework for financial stability in Greece should ensure that the 

involvement  of  the  Bank  of  Greece  and  its  Governor  and  Deputy  Governor  is  performed  in  a 

26  

Paragraph  2.1  of  Opinion  CON/2010/3,  paragraph  2.2.2  of  Opinion  CON/2010/7  and  paragraph  2.11  of  Opinion 
CON/2010/10.  

7 

 
                                                 
manner that fully complies with the institutional and financial independence of the Bank of Greece 

and  with  the  Governor’s  and  Deputy  Governor’s  personal  independence,  as  well  as  with  the 

confidentiality  requirements  resulting  from  the  Statute  of  the  European  System  of  Central  Banks 

and of the European Central Bank (hereinafter the ‘Statute of the ESCB’), which are designed to 
safeguard the proper performance of their tasks under the Treaty and the Statute of the ESCB27.  

Further implementation of the draft law with regard to the SSC’s establishment, organisation and 

mandate should also respect the principle of central bank independence. 

This opinion will be published on the ECB’s website. 

Done at Frankfurt am Main, 23 April 2010. 

[signed] 

The Vice-President of the ECB 

Lucas D. PAPADEMOS 

27  

See also paragraph 3.1 of Opinion CON/2010/4. 

8