CELEX: 51995PC0406
Language: en
Date: 1995-10-04
Title: Proposal for a EUROPEAN PARLIAMENT AND COUNCIL DIRECTIVE on the supplementary supervision of insurance undertakings in an insurance group

Avis juridique important

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51995PC0406

Proposal for a EUROPEAN PARLIAMENT AND COUNCIL DIRECTIVE on the supplementary supervision of insurance undertakings in an insurance group  /* COM/95/406 FINAL - COD 95/0245 */  

Official Journal C 341 , 19/12/1995 P. 0016

Proposal for a European Parliament and Council Directive on  the supplementary supervision of insurance undertakings in an insurance group (95/C 341/09) (Text  with EEA relevance) COM(95) 406 final - 95/0245(COD)(Submitted by the Commission on 20  October 1995) THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION, Having regard to the Treaty establishing the European Community, and in particular Article 57 (2)  thereof, Having regard to the proposal from the Commission, Having regard to the opinion of the Economic and Social Committee, Acting in accordance with the procedure referred to in Article 189b of the Treaty, Whereas Council Directive 73/239/EEC of 24 July 1973 on the coordination of laws, regulations and  administrative provisions relating to the taking-up and pursuit of the business of direct insurance  other than life assurance (1), as last amended by European Parliament and Council Directive  95/26/EC (2) and 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 (3), as last amended by Directive 95/26/EC require insurance undertakings to  possess a solvency margin; Whereas, as a result of Council Directive 92/49/EEC of 18 June 1992 on the coordination of laws,  regulations and administrative provisions relating to direct insurance other than life assurance  and amending Directives 73/239/EEC and 88/357/EEC (third non-life assurance Directive) (4), and  Council Directive 92/96/EEC of 10 November 1992 on the coordination of laws, regulations and  administrative provisions relating to direct life assurance and amending Directives 79/267/EEC and  90/619/EEC (third life assurance Directive) (5), the taking-up and the pursuit of the business of  insurance is subject to the granting of a single authorization issued by the competent authorities  of the Member State in which an insurance undertaking has its head office; whereas such  authorization allows an undertaking to carry on business throughout the Community, under the right  of establishment or the freedom to provide services; whereas the competent authorities of home  Member States are responsible for monitoring the financial health of insurance undertakings,  including their state of solvency; Whereas measures involving supplementary supervision on insurance undertakings in a group should  enable the authorities supervising a parent insurance undertaking to make a more soundly based  judgment about the financial situation of that insurance undertaking; whereas supplementary  supervision should take into account certain undertakings which are presently not subject to  supervision under Community directives; whereas this Directive does not in any way imply that  Member States are required to play a supervisory role in relation to those undertakings standing  alone; Whereas insurance undertakings in a single insurance market engage in direct competition with each  other and the standards pertaining to capital requirements must therefore be equivalent; whereas,  to that end, the criteria for determining supplementary supervision must not be left solely to  Member States; whereas the adoption of common basic standards will be in the best interests of the  Community in that it will prevent distortions of competition and will strengthen the Community  insurance system; whereas it is necessary to eliminate certain differences between the laws of the  Member States as regards the prudential rules to which insurance undertakings that are part of a  group are subject; Whereas it is necessary to calculate an adjusted solvency situation for insurance undertakings in a  group; whereas different methods are applied by some authorities in the Community to take into  account the effects on the financial position of an insurance undertaking in a group; whereas the  principle is accepted that these methods are prudentially equivalent; Whereas the approach adopted consists in bringing about such harmonization as is essential,  necessary and sufficient to achieve the mutual recognition of prudential control systems in this  field; Whereas certain provisions of this Directive define minimum standards; whereas a home Member State  may lay down stricter rules for insurance undertakings authorized by its own competent  authorities; Whereas this Directive is concerned solely with cases where one insurance undertaking is owned  wholly or in part by another insurance undertaking or holding company; whereas the supervision of  individual insurance undertakings by the competent authorities remains an essential principle of  insurance supervision; Whereas the competent authorities must at least have the means of obtaining from all undertakings  within a group the information necessary for the performance of their function; whereas cooperation  between the authorities responsible for the supervision of insurance undertakings as well as  between the authorities responsible for the supervision of different financial sectors must be  established; Whereas certain types of intra-group transactions can affect the financial position of an insurance  undertaking; whereas the competent authorities should determine whether intra-group transactions  are concluded in principle according to normal market conditions; whereas the application of this  general principle does not imply that intra-group transactions concluded on other terms should be  prohibited under all circumstances; whereas it is therefore desirable that the competent  authorities monitor such transactions; Whereas this Directive will, in particular, ensure the homogeneous application throughout the  Community of prudential rules established by other Community legislation and facilitate the  taking-up and pursuit of the business of insurance; whereas application of this Directive must be  aimed at, in particular, protecting the interests of the policyholders of insurance undertakings; Whereas the application of this Directive requires complicated adaptations to be made to the laws  of certain Member States in the fields of prudential supervision, company law and taxation, and  that these adaptations therefore justify that these Member States may apply the definition of a  participation in another undertaking at the level of 25 % of the capital or the voting rights until  1 July 2001 at the latest, HAVE ADOPTED THIS DIRECTIVE: Article 1 Definitions For the purpose of this Directive: (a) 'insurance undertaking` means an undertaking which has received official authorization in  accordance with Article 6 of Directive 73/239/EEC or Article 6 of Directive 79/267/EEC; (b) 'reinsurance undertaking` means an undertaking which only accepts risks ceded by an insurance  undertaking or other reinsurance undertakings established in the Community or in a third country; (c) 'parent undertaking` means a parent undertaking within the meaning of Article 1 (1) of Council  Directive 83/349/EEC (6) and any undertaking which, in the opinion of the competent authorities,  effectively excercises a dominant influence over another undertaking; (d) 'subsidiary` means a subsidiary undertaking within the meaning of Article 1 (1) of Directive  83/349/EEC and any undertaking over which, in the opinion of the competent authorities, a parent  undertaking effectively exercises a dominant influence. All subsidiaries of subsidiary undertakings  shall also be considered subsidiaries of the undertaking that is their original parent; (e) 'participation` means the ownership, direct or indirect, of 20 % or more of the voting rights  or capital of an undertaking; (f) 'participating undertaking` means an undertaking which is either a parent undertaking or an  undertaking which holds a participation; (g) 'related undertaking` means either a subsidiary or any other undertaking in which a  participation is held; (h) 'insurance holding company` means an undertaking other than an insurance undertaking, the  subsidiary undertakings of which are exclusively or mainly insurance or reinsurance undertakings,  one at least of such subsidiaries being an insurance undertaking; (i) 'mixed activity insurance holding company` means a parent undertaking, other than an insurance  holding company or an insurance undertaking, the subsidiaries of which include at least one  insurance undertaking; (j) 'competent authorities` means the national authorities which are empowered by law or regulation  to supervise insurance undertakings. Article 2 Scope Subject to the provisions of Article 3, this Directive shall apply to insurance undertakings which  have their registered offices in the Community. Article 3 Supplementary supervision of insurance undertakings in a group 1. In addition to the provisions of Directives 73/239/EEC and 79/267/EEC laying down the rules for  the supervision of insurance undertakings, Member States shall provide that the supervision of any  insurance undertaking which is a participating undertaking of at least one insurance undertaking or  reinsurance undertaking shall be supplemented to the extent and in the manner prescribed in  Articles 5, 6, 8 and 9. 2. Every insurance undertaking the parent undertaking of which is an insurance holding company  which has its registered office in the Community shall be subject, to the extent and in the manner  prescribed in Articles 5 (2), 6, 8 and 10, to supplementary supervision. 3. Every insurance undertaking the parent undertaking of which is a mixed activity insurance  holding company which has its registered office in the Community shall be subject, to the extent  and in the manner prescribed in Articles 5 (2), 6 and 8, to supplementary supervision. 4. The exercise of supplementary supervision in accordance with this Article shall not in any way  imply that the competent authorities are required to play a supervisory role in relation to the  insurance holding company or mixed activity insurance holding company or reinsurance undertaking  standing alone. 5. Member States or the competent authorities responsible for exercising supplementary supervision  may decide that in the cases listed below an insurance undertaking or other undertaking which is a  subsidiary or in which a participation is held need not be included in the supplementary  supervision: - if the undertaking that should be included is situated in a third country where there are legal  impediments to the transfer of the necessary information, - if, in the opinion of the competent authorities, the undertaking that should be included is of  negligible interest only with respect to the objective of monitoring insurance undertakings, or - if, in the opinion of the competent authorities, the inclusion of the financial situation of the  undertaking in the calculation of the adjusted solvency situation would be inappropriate or  misleading as far as the objectives of the supplementary supervision of insurance undertakings are  concerned. Article 4 Competent authorities for exercising supplementary supervision 1. The supervision referred to in Article 3 shall be exercised by the competent authorities of the  Member State that authorized the insurance undertaking under Article 6 of Directive 73/239/EEC or  Article 6 of Directive 79/267/EEC. 2. Where Member States have more than one competent authority for the prudential supervision of  insurance undertakings and reinsurance undertakings, Member States shall take the requisite  measures to organize coordination between such authorities. Article 5 Availability and quality of information 1. Member States shall prescribe that the competent authorities shall require that, in any  insurance undertaking, which is a participating undertaking or related undertaking of one or more  insurance undertakings, insurance holding companies or reinsurance undertakings, there are adequate  internal control mechanisms for the production of any data and information which would be relevant  for the purposes of supervision in accordance with this Directive. 2. Member States shall take the necessary steps to ensure that there are no legal impediments  preventing the undertakings that are subject to the supervision referred to in Article 3, and their  related undertakings and participating undertakings, from exchanging amongst themselves any  information which would be relevant for the purposes of supervision in accordance with this  Directive. Article 6 Access to information 1. Member States shall provide that their competent authorities responsible for exercising the  supervision referred to in Article 3 shall have access to any information which would be relevant  for the purpose of supervision of an insurance undertaking which has participating undertakings,  related undertakings or related undertakings of participating undertakings in the insurance  undertaking. The competent authorities may address themselves to the undertakings concerned  directly to ensure the communication of the required information, or they may receive such  information through the insurance undertaking. 2. Member States shall provide that their competent authorities may carry out, within their  territory, themselves or through the intermediary of persons they appoint for that purpose,  on-the-spot verification of the information received under paragraph 1. 3. Where, in applying paragraph 2, the competent authorities of one Member State wish in specific  cases to verify the information concerning an insurance undertaking situated in another Member  State, they must ask the competent authorities of that other Member State to have that verification  carried out. The authorities which receive such a request, must, within the framework of their  competence, act upon it either by carrying out the verification themselves, by allowing the  authorities who made the request to carry it out, or by allowing an auditor or expert to carry it  out. Article 7 Cooperation between competent authorities 1. Where insurance undertakings are directly or indirectly related, or have a common participating  undertaking and are established in different Member States, the competent authorities of each  Member State shall communicate to each other all relevant information which may allow or aid the  exercise of supervision in the framework of this Directive. 2. Where an insurance undertaking and a credit institution as defined in Council Directive  77/780/EEC (7) or investment firm as defined in Council Directive 93/22/EEC (8) are directly or  indirectly related, or have a common participating undertaking, the competent authorities and the  authorities entrusted with the public task of supervising those other undertakings shall cooperate  closely. Without prejudice to their respective responsibilities, those authorities shall provide  one another with any information likely to simplify their task, in particular in the framework of  this Directive. 3. Information received pursuant to this Directive and, in particular, any exchange of information  between competent authorities which is provided for in this Directive shall be subject to the  obligation of professional secrecy defined in Article 16 of Directive 92/49/EEC and Article 15 of  Directive 92/96/EEC. Article 8 Intra-group transactions 1. With a view to establishing whether transactions are, in principle, carried out according to  normal market conditions, Member States shall provide that the competent authorities monitor: (a) the transactions referred to in paragraph 2 between an insurance undertaking and: (i) a related undertaking of the insurance undertaking; (ii) a participating undertaking in the insurance undertaking; (iii) a related undertaking of a participating undertaking in the insurance undertaking; (b) the transactions referred to in paragraph 2 between the insurance undertaking and a natural  person which holds a participation in: (i) the insurance undertaking or any of its related undertakings; (ii) a participating undertaking in the insurance undertaking; (iii) a related undertaking of a participating undertaking in the insurance undertaking. 2. Member States shall require at least an annual reporting by the insurance undertaking to the  competent authorities of the transactions as described in paragraph 1, concerning in particular  significant: - loans, - guarantees and other off-balance sheet transactions, - elements eligible for the solvency margin, - investments. Article 9 Adjusted solvency requirement 1. Subject to Article 3 (1), Member States shall require that an adjusted solvency calculation  shall be carried out in accordance with Annex I. 2. The calculation described in Annex I shall include a related undertaking or participating  undertaking which has its registered office in a third country and which is: - an undertaking which, if it were established in the Community, would be required to have an  authorization in accordance with Article 6 of Directive 73/239/EEC or Article 6 of Directive  79/267/EEC, - a reinsurance undertaking, or - an insurance holding company. 3. If the adjusted solvency situation is negative, the competent authorities shall take appropriate  measures at the level of the relevant insurance undertaking. Article 10 Insurance holding companies 1. In the case referred to in Article 3 (2), Member States shall require the application of one of  the supplementary methods of supervision in accordance with Annex II. 2. In the case referred to in Article 3 (2), the calculation shall include all related undertakings  of the insurance holding company referred to in Article 9 (2). 3. If, as a result, the competent authorities are of the opinion that the state of solvency of a  related insurance undertaking of the insurance holding company is affected, the competent  authorities shall take appropriate measures at the level of that insurance undertaking. Article 11 Implementation 1. Member States shall adopt the laws, regulations and administrative provisions necessary to  comply with this Directive no later than 1 January 1997, and bring them into force no later than 1  July 1997. They shall immediately inform the Commission thereof. 2. Member States may decide to apply the definition of a 'participation` at a level of 25 % for a  period expiring not later than 1 July 2001. 3. When Member States adopt the measures referred to in paragraph 1, these shall contain a  reference to this Directive, or shall be accompanied by such reference at the time of their  official publication. The procedure for such reference shall be adopted by Member States. 4. Member States shall communicate to the Commission the texts of the main provisions of national  law which they adopt in the field covered by this Directive. Article 12 Entry into force This Directive shall enter into force on the 20 day following that of its publication in the  Official Journal of the European Communities. Article 13 Addressees This Directive is addressed to the Member States.  (1) OJ No L 228, 16. 8. 1973, p. 3.  (2) OJ No L 168, 18. 7. 1995, p. 7.  (3) OJ No L 63, 13. 3. 1979, p. 1.  (4) OJ No L 228, 11. 8. 1992, p. 1.  (5) OJ No L 360, 9. 12. 1992, p. 1.  (6) OJ No L 193, 18. 7. 1983, p. 1.  (7) OJ No L 322, 17. 12. 1977, p. 30.  (8) OJ No L 141, 11. 6. 1993, p. 27.   ANNEX I CALCULATION OF THE ADJUSTED SOLVENCY SITUATION 1. Choice of method of  calculation and general principles A. One or more of the methods described below shall be applied for the calculation of the adjusted  solvency situation of insurance undertakings referred to in Article 3 (1). For this purpose, the  elements eligible for the solvency margin shall be adjusted an compared with an adjusted solvency  margin. B. Regardless of the method applied, the intra-group creation of elements eligible for the solvency  margin must be eliminated in the calculation of the adjusted solvency situation. For this purpose, where the methods do not already provide for this, for the calculation of the  elements eligible for the adjusted solvency situation no account shall be taken of: (i) all elements eligible for the solvency margin of the insurance undertaking for which the  adjusted solvency situation is calculated, which ultimately originate from: - a related undertaking of this insurance undertaking, or - a related undertaking of a participating undertaking in the insurance undertaking; and (ii) all elements eligible for the solvency margin of a related insurance undertaking or the  notional solvency requirement of a related reinsurance undertaking, of a participating insurance  undertaking for which the adjusted solvency situation is calculated, originating from: - the participating insurance undertaking, - related undertakings of the participating insurance undertaking, - a related undertaking of a participating undertaking in the participating insurance undertaking  for which the adjusted solvency situation is calculated. Applying the same rules mutatis mutandis, the calculation shall also not take into account: - all subscribed but non paid-in parts of the capital, - profit reserves and future profits of life assurance undertakings. C. With the exception of calculating a solvency deficit in a subsidiary, the calculation shall be  carried out on a proportional basis (1) taking into account the relevant percentages of the  mediating participations. D. The competent authorities shall ensure that the adjusted solvency situation is calculated at the  same frequency as the calculation of the solvency margin for insurance undertakings according to  Directives 73/239/EEC and 79/267/EEC. The value of the assets and liabilities shall be assessed  according to the relevant provisions of Directives 73/239/EEC and Directive 79/267/EEC, as amended  by Directives 92/49/EEC and 92/96/EEC. 2. Methods and relevant situations 2.1. Related insurance undertakings In the case of an insurance undertaking which is a directly participating undertaking in another  insurance undertaking, the adjusted solvency calculation shall be carried out in accordance with  one of the following methods. In all methods and in the case that the insurance undertaking has more than one directly related  insurance undertaking, the adjusted solvency calculation shall be carried out by integrating each  of these directly related undertakings. In cases of successive participations (e. g. an insurance undertaking is a participating  undertaking in another insurance undertaking which is also a participating undertaking in an  insurance undertaking) the adjusted solvency calculation shall be carried out at the level of each  participating undertaking which has at least one related insurance or reinsurance undertaking. If method 3 is applied, and without prejudice to specific provisions contained in other Directives,  Member States may waive calculation of the adjusted solvency situation for an insurance  undertaking, if this undertaking is a related undertaking of another insurance undertaking in the  same Member State, which calculates an adjusted solvency situation taking into account its related  insurance undertakings and reinsurance undertakings. The same waiver shall be allowed where the  participating undertaking is an insurance holding company which has its head office in the same  Member State as the insurance undertaking, provided that it is subject to the same standard of  supervision as that exercised over insurance undertakings. In both cases, steps must be taken to  ensure that capital is distributed adequately within the insurance group, and is genuinely  available for transfer between the related and participating undertaking or undertakings  concerned. METHOD 1: Deduction and aggregation method The adjusted solvency situation of the participating insurance undertaking is the difference  between: (i) the sum of: 1. the elements eligible for the solvency margin of the participating undertaking; 2. the proportional share of the participating undertaking in the solvency margin of the related  undertaking, which originates from the participating undertaking; and (ii) the sum of: (a) the book value in the participating undertaking of all elements eligible for the solvency  margin of the related undertaking; (b) the solvency requirement of the participating undertaking; (c) the proportional share of the solvency requirement of the related undertaking; if the related  undertaking is a subsidiary and has a solvency deficit, the total requirement has to be taken into  account. METHOD 2: Requirement deduction method The adjusted solvency situation of the participating insurance undertaking is the difference  between (2): (i) the sum of the elements eligible for the solvency margin of the participating undertaking; and (ii) the sum of: (a) the solvency requirement of the participating undertaking; (b) the proportional share of the solvency requirement of the related undertaking; if the related  undertaking is a subsidiary and has a solvency deficit, the total requirement has to be taken into  account. METHOD 3: Accounting consolidation-based method The calculation of the adjusted solvency situation of the participating undertaking shall start  from the consolidated accounts in order to calculate the consolidated elements eligible for the  solvency margin of the participating and the related undertakings concerned in accordance with  Directive 91/674/EEC and Directive 73/239/EEC and Directive 79/267/EEC, as amended by Directives  92/49/EEC and 92/96/EEC. The adjusted solvency situation of the participating undertaking is the difference between: (i) the elements eligible for the solvency margin as shown in the consolidated accounts; and (ii) the sum of the solvency requirement of the participating undertaking, and the full or relevant  proportional share of the solvency requirement of the related undertaking. If the related  undertaking is a subsidiary and has a solvency deficit, its solvency requirement shall be taken  into account in full. 2.2. Related reinsurance undertaking For each related reinsurance undertaking of an insurance undertaking, a notional solvency  requirement shall be established according to the same rules that have been laid down in Article 16  (3) of Directive 73/239/EEC or Article 18 (3) of Directive 79/267/EEC. The same own funds elements  for the related reinsurance undertaking shall be recognized as eligible for its national own funds,  as those according to the rules laid down in Article 24 of Directive 92/49/EEC or Article 25 of  Directive 92/96/EEC. The value of the assets and liabilities shall be assessed according to the  same rules that have been laid down in Directive 73/239/EEC and Directive 79/267/EEC, as amended by  Directives 92/49/EEC and 92/96/EEC. The adjusted solvency situation of the participating insurance undertaking is obtained by applying  the methods and general principles described above. 2.3. Intermediate insurance holding company Methods 1 and 2 For each participating insurance undertaking in an insurance holding company which is a  participating undertaking in an insurance undertaking or reinsurance undertaking, the adjusted  solvency situation shall be calculated applying the methods and general principles described above,  mutatis mutandis. Method 3 The insurance holding company shall be taken into account in the assessment by integration in the  accounting consolidation applying the methods and general principles described above, mutatis  mutandis. 3. Undertakings in third countries Where there are legal impediments to the transfer of the information necessary for the inclusion of  a related undertaking situated in a third country as referred to in Article 9 (2), the calculation  shall, in applying the methods referred to in this Annex, deduct from the elements eligible for the  adjusted solvency margin, the book value in the participating undertaking of all elements eligible  for the solvency margin of the related undertaking. 4. Non-specified cases The competent authorities shall require in cases that are not covered in 2.1-2.3, an appropriate  combination of the described methods. (1) Where this Annex refers to a proportional share or relevant percentage, the  calculation shall be based on the basis of the percentage used for the establishment of the  consolidated accounts.  (2) The participation in a related undertaking must be included at the net asset value of shares.   ANNEX II SUPPLEMENTARY SUPERVISORY METHODS FOR INSURANCE UNDERTAKINGS THAT ARE  SUBSIDIARIES OF AN INSURANCE HOLDING COMPANY WHICH IS THE ULTIMATE PARENT OF AN INSURANCE  UNDERTAKING IN A GROUP 1. Choice of supplementary supervisory method - One of the methods described below shall be applied in order to check that its capital is  sufficient. - In the case of insurance undertakings referred to in Article 3 paragraph 2, which are the  subsidiaries of an insurance holding company and which are established in different Member States,  the competent authorities shall ensure that the methods described in this Annex are applied in a  coherent manner. - The competent authorities shall exercise the supplementary supervision in the same frequency as  the calculation of the solvency margin for insurance undertakings according to Directives  73/239/EEC and 79/267/EEC. 2. Methods 2.1. 'Solvency warning test` The capital of an insurance holding company shall equal or exceed the sum of the solvency  requirements of its related insurance undertakings and the notional solvency requirements of its  related reinsurance undertakings. 2.2. 'Accounting consolidation test` The capital situation of an insurance holding company must equal or exceed the sum of the solvency  requirements of its related insurance undertakings and the notional solvency requirements of its  related reinsurance undertakings. The capital situation of this insurance holding company is  calculated in accordance with the accounting consolidation method in Annex 1, under 2.3, method 3. 3. Undertakings in third countries Where there are legal impediments to the transfer of the information necessary for the inclusion of  a related undertaking situated in a third country as referred to in Article 10 (2), the calculation  shall, in applying the methods referred to in this Annex, deduct from the elements eligible for the  adjusted solvency margin the book value of the participation and of all other elements eligible for  the solvency margin of the related undertaking, which are held by the insurance  undertaking. Proposal for a European Parliament and Council Directive on  the supplementary supervision of insurance undertakings in an insurance group (95/C 341/09) (Text  with EEA relevance) COM(95) 406 final - 95/0245(COD)(Submitted by the Commission on 20  October 1995) THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION, Having regard to the Treaty establishing the European Community, and in particular Article 57 (2)  thereof, Having regard to the proposal from the Commission, Having regard to the opinion of the Economic and Social Committee, Acting in accordance with the procedure referred to in Article 189b of the Treaty, Whereas Council Directive 73/239/EEC of 24 July 1973 on the coordination of laws, regulations and  administrative provisions relating to the taking-up and pursuit of the business of direct insurance  other than life assurance (1), as last amended by European Parliament and Council Directive  95/26/EC (2) and 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 (3), as last amended by Directive 95/26/EC require insurance undertakings to  possess a solvency margin; Whereas, as a result of Council Directive 92/49/EEC of 18 June 1992 on the coordination of laws,  regulations and administrative provisions relating to direct insurance other than life assurance  and amending Directives 73/239/EEC and 88/357/EEC (third non-life assurance Directive) (4), and  Council Directive 92/96/EEC of 10 November 1992 on the coordination of laws, regulations and  administrative provisions relating to direct life assurance and amending Directives 79/267/EEC and  90/619/EEC (third life assurance Directive) (5), the taking-up and the pursuit of the business of  insurance is subject to the granting of a single authorization issued by the competent authorities  of the Member State in which an insurance undertaking has its head office; whereas such  authorization allows an undertaking to carry on business throughout the Community, under the right  of establishment or the freedom to provide services; whereas the competent authorities of home  Member States are responsible for monitoring the financial health of insurance undertakings,  including their state of solvency; Whereas measures involving supplementary supervision on insurance undertakings in a group should  enable the authorities supervising a parent insurance undertaking to make a more soundly based  judgment about the financial situation of that insurance undertaking; whereas supplementary  supervision should take into account certain undertakings which are presently not subject to  supervision under Community directives; whereas this Directive does not in any way imply that  Member States are required to play a supervisory role in relation to those undertakings standing  alone; Whereas insurance undertakings in a single insurance market engage in direct competition with each  other and the standards pertaining to capital requirements must therefore be equivalent; whereas,  to that end, the criteria for determining supplementary supervision must not be left solely to  Member States; whereas the adoption of common basic standards will be in the best interests of the  Community in that it will prevent distortions of competition and will strengthen the Community  insurance system; whereas it is necessary to eliminate certain differences between the laws of the  Member States as regards the prudential rules to which insurance undertakings that are part of a  group are subject; Whereas it is necessary to calculate an adjusted solvency situation for insurance undertakings in a  group; whereas different methods are applied by some authorities in the Community to take into  account the effects on the financial position of an insurance undertaking in a group; whereas the  principle is accepted that these methods are prudentially equivalent; Whereas the approach adopted consists in bringing about such harmonization as is essential,  necessary and sufficient to achieve the mutual recognition of prudential control systems in this  field; Whereas certain provisions of this Directive define minimum standards; whereas a home Member State  may lay down stricter rules for insurance undertakings authorized by its own competent  authorities; Whereas this Directive is concerned solely with cases where one insurance undertaking is owned  wholly or in part by another insurance undertaking or holding company; whereas the supervision of  individual insurance undertakings by the competent authorities remains an essential principle of  insurance supervision; Whereas the competent authorities must at least have the means of obtaining from all undertakings  within a group the information necessary for the performance of their function; whereas cooperation  between the authorities responsible for the supervision of insurance undertakings as well as  between the authorities responsible for the supervision of different financial sectors must be  established; Whereas certain types of intra-group transactions can affect the financial position of an insurance  undertaking; whereas the competent authorities should determine whether intra-group transactions  are concluded in principle according to normal market conditions; whereas the application of this  general principle does not imply that intra-group transactions concluded on other terms should be  prohibited under all circumstances; whereas it is therefore desirable that the competent  authorities monitor such transactions; Whereas this Directive will, in particular, ensure the homogeneous application throughout the  Community of prudential rules established by other Community legislation and facilitate the  taking-up and pursuit of the business of insurance; whereas application of this Directive must be  aimed at, in particular, protecting the interests of the policyholders of insurance undertakings; Whereas the application of this Directive requires complicated adaptations to be made to the laws  of certain Member States in the fields of prudential supervision, company law and taxation, and  that these adaptations therefore justify that these Member States may apply the definition of a  participation in another undertaking at the level of 25 % of the capital or the voting rights until  1 July 2001 at the latest, HAVE ADOPTED THIS DIRECTIVE: Article 1 Definitions For the purpose of this Directive: (a) 'insurance undertaking` means an undertaking which has received official authorization in  accordance with Article 6 of Directive 73/239/EEC or Article 6 of Directive 79/267/EEC; (b) 'reinsurance undertaking` means an undertaking which only accepts risks ceded by an insurance  undertaking or other reinsurance undertakings established in the Community or in a third country; (c) 'parent undertaking` means a parent undertaking within the meaning of Article 1 (1) of Council  Directive 83/349/EEC (6) and any undertaking which, in the opinion of the competent authorities,  effectively excercises a dominant influence over another undertaking; (d) 'subsidiary` means a subsidiary undertaking within the meaning of Article 1 (1) of Directive  83/349/EEC and any undertaking over which, in the opinion of the competent authorities, a parent  undertaking effectively exercises a dominant influence. All subsidiaries of subsidiary undertakings  shall also be considered subsidiaries of the undertaking that is their original parent; (e) 'participation` means the ownership, direct or indirect, of 20 % or more of the voting rights  or capital of an undertaking; (f) 'participating undertaking` means an undertaking which is either a parent undertaking or an  undertaking which holds a participation; (g) 'related undertaking` means either a subsidiary or any other undertaking in which a  participation is held; (h) 'insurance holding company` means an undertaking other than an insurance undertaking, the  subsidiary undertakings of which are exclusively or mainly insurance or reinsurance undertakings,  one at least of such subsidiaries being an insurance undertaking; (i) 'mixed activity insurance holding company` means a parent undertaking, other than an insurance  holding company or an insurance undertaking, the subsidiaries of which include at least one  insurance undertaking; (j) 'competent authorities` means the national authorities which are empowered by law or regulation  to supervise insurance undertakings. Article 2 Scope Subject to the provisions of Article 3, this Directive shall apply to insurance undertakings which  have their registered offices in the Community. Article 3 Supplementary supervision of insurance undertakings in a group 1. In addition to the provisions of Directives 73/239/EEC and 79/267/EEC laying down the rules for  the supervision of insurance undertakings, Member States shall provide that the supervision of any  insurance undertaking which is a participating undertaking of at least one insurance undertaking or  reinsurance undertaking shall be supplemented to the extent and in the manner prescribed in  Articles 5, 6, 8 and 9. 2. Every insurance undertaking the parent undertaking of which is an insurance holding company  which has its registered office in the Community shall be subject, to the extent and in the manner  prescribed in Articles 5 (2), 6, 8 and 10, to supplementary supervision. 3. Every insurance undertaking the parent undertaking of which is a mixed activity insurance  holding company which has its registered office in the Community shall be subject, to the extent  and in the manner prescribed in Articles 5 (2), 6 and 8, to supplementary supervision. 4. The exercise of supplementary supervision in accordance with this Article shall not in any way  imply that the competent authorities are required to play a supervisory role in relation to the  insurance holding company or mixed activity insurance holding company or reinsurance undertaking  standing alone. 5. Member States or the competent authorities responsible for exercising supplementary supervision  may decide that in the cases listed below an insurance undertaking or other undertaking which is a  subsidiary or in which a participation is held need not be included in the supplementary  supervision: - if the undertaking that should be included is situated in a third country where there are legal  impediments to the transfer of the necessary information, - if, in the opinion of the competent authorities, the undertaking that should be included is of  negligible interest only with respect to the objective of monitoring insurance undertakings, or - if, in the opinion of the competent authorities, the inclusion of the financial situation of the  undertaking in the calculation of the adjusted solvency situation would be inappropriate or  misleading as far as the objectives of the supplementary supervision of insurance undertakings are  concerned. Article 4 Competent authorities for exercising supplementary supervision 1. The supervision referred to in Article 3 shall be exercised by the competent authorities of the  Member State that authorized the insurance undertaking under Article 6 of Directive 73/239/EEC or  Article 6 of Directive 79/267/EEC. 2. Where Member States have more than one competent authority for the prudential supervision of  insurance undertakings and reinsurance undertakings, Member States shall take the requisite  measures to organize coordination between such authorities. Article 5 Availability and quality of information 1. Member States shall prescribe that the competent authorities shall require that, in any  insurance undertaking, which is a participating undertaking or related undertaking of one or more  insurance undertakings, insurance holding companies or reinsurance undertakings, there are adequate  internal control mechanisms for the production of any data and information which would be relevant  for the purposes of supervision in accordance with this Directive. 2. Member States shall take the necessary steps to ensure that there are no legal impediments  preventing the undertakings that are subject to the supervision referred to in Article 3, and their  related undertakings and participating undertakings, from exchanging amongst themselves any  information which would be relevant for the purposes of supervision in accordance with this  Directive. Article 6 Access to information 1. Member States shall provide that their competent authorities responsible for exercising the  supervision referred to in Article 3 shall have access to any information which would be relevant  for the purpose of supervision of an insurance undertaking which has participating undertakings,  related undertakings or related undertakings of participating undertakings in the insurance  undertaking. The competent authorities may address themselves to the undertakings concerned  directly to ensure the communication of the required information, or they may receive such  information through the insurance undertaking. 2. Member States shall provide that their competent authorities may carry out, within their  territory, themselves or through the intermediary of persons they appoint for that purpose,  on-the-spot verification of the information received under paragraph 1. 3. Where, in applying paragraph 2, the competent authorities of one Member State wish in specific  cases to verify the information concerning an insurance undertaking situated in another Member  State, they must ask the competent authorities of that other Member State to have that verification  carried out. The authorities which receive such a request, must, within the framework of their  competence, act upon it either by carrying out the verification themselves, by allowing the  authorities who made the request to carry it out, or by allowing an auditor or expert to carry it  out. Article 7 Cooperation between competent authorities 1. Where insurance undertakings are directly or indirectly related, or have a common participating  undertaking and are established in different Member States, the competent authorities of each  Member State shall communicate to each other all relevant information which may allow or aid the  exercise of supervision in the framework of this Directive. 2. Where an insurance undertaking and a credit institution as defined in Council Directive  77/780/EEC (7) or investment firm as defined in Council Directive 93/22/EEC (8) are directly or  indirectly related, or have a common participating undertaking, the competent authorities and the  authorities entrusted with the public task of supervising those other undertakings shall cooperate  closely. Without prejudice to their respective responsibilities, those authorities shall provide  one another with any information likely to simplify their task, in particular in the framework of  this Directive. 3. Information received pursuant to this Directive and, in particular, any exchange of information  between competent authorities which is provided for in this Directive shall be subject to the  obligation of professional secrecy defined in Article 16 of Directive 92/49/EEC and Article 15 of  Directive 92/96/EEC. Article 8 Intra-group transactions 1. With a view to establishing whether transactions are, in principle, carried out according to  normal market conditions, Member States shall provide that the competent authorities monitor: (a) the transactions referred to in paragraph 2 between an insurance undertaking and: (i) a related undertaking of the insurance undertaking; (ii) a participating undertaking in the insurance undertaking; (iii) a related undertaking of a participating undertaking in the insurance undertaking; (b) the transactions referred to in paragraph 2 between the insurance undertaking and a natural  person which holds a participation in: (i) the insurance undertaking or any of its related undertakings; (ii) a participating undertaking in the insurance undertaking; (iii) a related undertaking of a participating undertaking in the insurance undertaking. 2. Member States shall require at least an annual reporting by the insurance undertaking to the  competent authorities of the transactions as described in paragraph 1, concerning in particular  significant: - loans, - guarantees and other off-balance sheet transactions, - elements eligible for the solvency margin, - investments. Article 9 Adjusted solvency requirement 1. Subject to Article 3 (1), Member States shall require that an adjusted solvency calculation  shall be carried out in accordance with Annex I. 2. The calculation described in Annex I shall include a related undertaking or participating  undertaking which has its registered office in a third country and which is: - an undertaking which, if it were established in the Community, would be required to have an  authorization in accordance with Article 6 of Directive 73/239/EEC or Article 6 of Directive  79/267/EEC, - a reinsurance undertaking, or - an insurance holding company. 3. If the adjusted solvency situation is negative, the competent authorities shall take appropriate  measures at the level of the relevant insurance undertaking. Article 10 Insurance holding companies 1. In the case referred to in Article 3 (2), Member States shall require the application of one of  the supplementary methods of supervision in accordance with Annex II. 2. In the case referred to in Article 3 (2), the calculation shall include all related undertakings  of the insurance holding company referred to in Article 9 (2). 3. If, as a result, the competent authorities are of the opinion that the state of solvency of a  related insurance undertaking of the insurance holding company is affected, the competent  authorities shall take appropriate measures at the level of that insurance undertaking. Article 11 Implementation 1. Member States shall adopt the laws, regulations and administrative provisions necessary to  comply with this Directive no later than 1 January 1997, and bring them into force no later than 1  July 1997. They shall immediately inform the Commission thereof. 2. Member States may decide to apply the definition of a 'participation` at a level of 25 % for a  period expiring not later than 1 July 2001. 3. When Member States adopt the measures referred to in paragraph 1, these shall contain a  reference to this Directive, or shall be accompanied by such reference at the time of their  official publication. The procedure for such reference shall be adopted by Member States. 4. Member States shall communicate to the Commission the texts of the main provisions of national  law which they adopt in the field covered by this Directive. Article 12 Entry into force This Directive shall enter into force on the 20 day following that of its publication in the  Official Journal of the European Communities. Article 13 Addressees This Directive is addressed to the Member States.  (1) OJ No L 228, 16. 8. 1973, p. 3.  (2) OJ No L 168, 18. 7. 1995, p. 7.  (3) OJ No L 63, 13. 3. 1979, p. 1.  (4) OJ No L 228, 11. 8. 1992, p. 1.  (5) OJ No L 360, 9. 12. 1992, p. 1.  (6) OJ No L 193, 18. 7. 1983, p. 1.  (7) OJ No L 322, 17. 12. 1977, p. 30.  (8) OJ No L 141, 11. 6. 1993, p. 27.   ANNEX I CALCULATION OF THE ADJUSTED SOLVENCY SITUATION 1. Choice of method of  calculation and general principles A. One or more of the methods described below shall be applied for the calculation of the adjusted  solvency situation of insurance undertakings referred to in Article 3 (1). For this purpose, the  elements eligible for the solvency margin shall be adjusted an compared with an adjusted solvency  margin. B. Regardless of the method applied, the intra-group creation of elements eligible for the solvency  margin must be eliminated in the calculation of the adjusted solvency situation. For this purpose, where the methods do not already provide for this, for the calculation of the  elements eligible for the adjusted solvency situation no account shall be taken of: (i) all elements eligible for the solvency margin of the insurance undertaking for which the  adjusted solvency situation is calculated, which ultimately originate from: - a related undertaking of this insurance undertaking, or - a related undertaking of a participating undertaking in the insurance undertaking; and (ii) all elements eligible for the solvency margin of a related insurance undertaking or the  notional solvency requirement of a related reinsurance undertaking, of a participating insurance  undertaking for which the adjusted solvency situation is calculated, originating from: - the participating insurance undertaking, - related undertakings of the participating insurance undertaking, - a related undertaking of a participating undertaking in the participating insurance undertaking  for which the adjusted solvency situation is calculated. Applying the same rules mutatis mutandis, the calculation shall also not take into account: - all subscribed but non paid-in parts of the capital, - profit reserves and future profits of life assurance undertakings. C. With the exception of calculating a solvency deficit in a subsidiary, the calculation shall be  carried out on a proportional basis (1) taking into account the relevant percentages of the  mediating participations. D. The competent authorities shall ensure that the adjusted solvency situation is calculated at the  same frequency as the calculation of the solvency margin for insurance undertakings according to  Directives 73/239/EEC and 79/267/EEC. The value of the assets and liabilities shall be assessed  according to the relevant provisions of Directives 73/239/EEC and Directive 79/267/EEC, as amended  by Directives 92/49/EEC and 92/96/EEC. 2. Methods and relevant situations 2.1. Related insurance undertakings In the case of an insurance undertaking which is a directly participating undertaking in another  insurance undertaking, the adjusted solvency calculation shall be carried out in accordance with  one of the following methods. In all methods and in the case that the insurance undertaking has more than one directly related  insurance undertaking, the adjusted solvency calculation shall be carried out by integrating each  of these directly related undertakings. In cases of successive participations (e. g. an insurance undertaking is a participating  undertaking in another insurance undertaking which is also a participating undertaking in an  insurance undertaking) the adjusted solvency calculation shall be carried out at the level of each  participating undertaking which has at least one related insurance or reinsurance undertaking. If method 3 is applied, and without prejudice to specific provisions contained in other Directives,  Member States may waive calculation of the adjusted solvency situation for an insurance  undertaking, if this undertaking is a related undertaking of another insurance undertaking in the  same Member State, which calculates an adjusted solvency situation taking into account its related  insurance undertakings and reinsurance undertakings. The same waiver shall be allowed where the  participating undertaking is an insurance holding company which has its head office in the same  Member State as the insurance undertaking, provided that it is subject to the same standard of  supervision as that exercised over insurance undertakings. In both cases, steps must be taken to  ensure that capital is distributed adequately within the insurance group, and is genuinely  available for transfer between the related and participating undertaking or undertakings  concerned. METHOD 1: Deduction and aggregation method The adjusted solvency situation of the participating insurance undertaking is the difference  between: (i) the sum of: 1. the elements eligible for the solvency margin of the participating undertaking; 2. the proportional share of the participating undertaking in the solvency margin of the related  undertaking, which originates from the participating undertaking; and (ii) the sum of: (a) the book value in the participating undertaking of all elements eligible for the solvency  margin of the related undertaking; (b) the solvency requirement of the participating undertaking; (c) the proportional share of the solvency requirement of the related undertaking; if the related  undertaking is a subsidiary and has a solvency deficit, the total requirement has to be taken into  account. METHOD 2: Requirement deduction method The adjusted solvency situation of the participating insurance undertaking is the difference  between (2): (i) the sum of the elements eligible for the solvency margin of the participating undertaking; and (ii) the sum of: (a) the solvency requirement of the participating undertaking; (b) the proportional share of the solvency requirement of the related undertaking; if the related  undertaking is a subsidiary and has a solvency deficit, the total requirement has to be taken into  account. METHOD 3: Accounting consolidation-based method The calculation of the adjusted solvency situation of the participating undertaking shall start  from the consolidated accounts in order to calculate the consolidated elements eligible for the  solvency margin of the participating and the related undertakings concerned in accordance with  Directive 91/674/EEC and Directive 73/239/EEC and Directive 79/267/EEC, as amended by Directives  92/49/EEC and 92/96/EEC. The adjusted solvency situation of the participating undertaking is the difference between: (i) the elements eligible for the solvency margin as shown in the consolidated accounts; and (ii) the sum of the solvency requirement of the participating undertaking, and the full or relevant  proportional share of the solvency requirement of the related undertaking. If the related  undertaking is a subsidiary and has a solvency deficit, its solvency requirement shall be taken  into account in full. 2.2. Related reinsurance undertaking For each related reinsurance undertaking of an insurance undertaking, a notional solvency  requirement shall be established according to the same rules that have been laid down in Article 16  (3) of Directive 73/239/EEC or Article 18 (3) of Directive 79/267/EEC. The same own funds elements  for the related reinsurance undertaking shall be recognized as eligible for its national own funds,  as those according to the rules laid down in Article 24 of Directive 92/49/EEC or Article 25 of  Directive 92/96/EEC. The value of the assets and liabilities shall be assessed according to the  same rules that have been laid down in Directive 73/239/EEC and Directive 79/267/EEC, as amended by  Directives 92/49/EEC and 92/96/EEC. The adjusted solvency situation of the participating insurance undertaking is obtained by applying  the methods and general principles described above. 2.3. Intermediate insurance holding company Methods 1 and 2 For each participating insurance undertaking in an insurance holding company which is a  participating undertaking in an insurance undertaking or reinsurance undertaking, the adjusted  solvency situation shall be calculated applying the methods and general principles described above,  mutatis mutandis. Method 3 The insurance holding company shall be taken into account in the assessment by integration in the  accounting consolidation applying the methods and general principles described above, mutatis  mutandis. 3. Undertakings in third countries Where there are legal impediments to the transfer of the information necessary for the inclusion of  a related undertaking situated in a third country as referred to in Article 9 (2), the calculation  shall, in applying the methods referred to in this Annex, deduct from the elements eligible for the  adjusted solvency margin, the book value in the participating undertaking of all elements eligible  for the solvency margin of the related undertaking. 4. Non-specified cases The competent authorities shall require in cases that are not covered in 2.1-2.3, an appropriate  combination of the described methods. (1) Where this Annex refers to a proportional share or relevant percentage, the  calculation shall be based on the basis of the percentage used for the establishment of the  consolidated accounts.  (2) The participation in a related undertaking must be included at the net asset value of shares.   ANNEX II SUPPLEMENTARY SUPERVISORY METHODS FOR INSURANCE UNDERTAKINGS THAT ARE  SUBSIDIARIES OF AN INSURANCE HOLDING COMPANY WHICH IS THE ULTIMATE PARENT OF AN INSURANCE  UNDERTAKING IN A GROUP 1. Choice of supplementary supervisory method - One of the methods described below shall be applied in order to check that its capital is  sufficient. - In the case of insurance undertakings referred to in Article 3 paragraph 2, which are the  subsidiaries of an insurance holding company and which are established in different Member States,  the competent authorities shall ensure that the methods described in this Annex are applied in a  coherent manner. - The competent authorities shall exercise the supplementary supervision in the same frequency as  the calculation of the solvency margin for insurance undertakings according to Directives  73/239/EEC and 79/267/EEC. 2. Methods 2.1. 'Solvency warning test` The capital of an insurance holding company shall equal or exceed the sum of the solvency  requirements of its related insurance undertakings and the notional solvency requirements of its  related reinsurance undertakings. 2.2. 'Accounting consolidation test` The capital situation of an insurance holding company must equal or exceed the sum of the solvency  requirements of its related insurance undertakings and the notional solvency requirements of its  related reinsurance undertakings. The capital situation of this insurance holding company is  calculated in accordance with the accounting consolidation method in Annex 1, under 2.3, method 3. 3. Undertakings in third countries Where there are legal impediments to the transfer of the information necessary for the inclusion of  a related undertaking situated in a third country as referred to in Article 10 (2), the calculation  shall, in applying the methods referred to in this Annex, deduct from the elements eligible for the  adjusted solvency margin the book value of the participation and of all other elements eligible for  the solvency margin of the related undertaking, which are held by the insurance  undertaking.