CELEX: 51975PC0516
Language: en
Date: 1975-12-22
Title: PROPOSAL FOR A SECOND COUNCIL DIRECTIVE ON THE COORDINATION OF LAWS, REGULATIONS AND ADMINISTRATIVE PROVISIONS RELATING TO DIRECT INSURANCE OTHER THAN LIFE ASSURANCE AND LAYING DOWN PROVISIONS TO FACILITATE THE EFFECTIVE EXERCISE OF FREEDOM TO PROVIDE SERVICES

No C 32/2                          Official Journal of the European Communities                              12. 2. 76
                                                          II
                                                 (Preparatory Acts)
                                             COMMISSION
              Proposal for a second Council Directive on the coordination of laws, regulations and
              administrative provisions relating to direct insurance other than life assurance and
              laying down provisions to facilitate the effective exercise of freedom to provide services
                        (Submitted by the Commission to the Council on 30 December 1975)
THE COUNCIL OF T H E EUROPEAN COMMUNITIES,                     until certain aspects have been harmonized; whereas
                                                               such work, because of its complex nature, can be
Having regard to the Treaty establishing the                   accomplished only after a certain time; whereas it is
European Economic Community, and in particular                 possible meanwhile to adopt arrangements whereby
Articles 57 (2), 59 (2) and 66 thereof,                        the present situation can be considerably improved;
Having regard to the proposal from the Commission,             Whereas with this in view, it is advisable to
                                                               supplement the first coordination Directive on direct
Having regard to the opinion of the European                   insurance other than life assurance adopted by the
Parliament,                                                    Council on 24 July 1973 in particular with regard to
                                                               the method of calculating technical reserves and the
Having regard to the opinion of the Economic and               powers granted to the "supervisory authorities of the
Social Committee,                                              various Member States;
Whereas it is necessary to develop a European                  Whereas the provisions in force in the Member States
insurance market due in particular to the steady                concerning the law governing insurance contracts
increase in the size of risks to be covered; whereas to        remain divergent; whereas the disadvantages resulting
achieve this objective, it is desirable to allow policy         from these differences, can, in the interest of a real
holders to avail themselves of insurers established not        common market for insurance, be eliminated by
only in their country but also in other Member                 allowing the parties a freedom of choice of the law
States;                                                        which should apply; whereas however too wide an
                                                               interpretation of this freedom might result, in the
Whereas pursuant to the Treaty any discrimination               absence of coordination, in serious weakness either in
with regard to freedom to provide services based on            the protection of the insured or in the conditions
 the fact that an undertaking is not established in the        under which many insurance undertakings conduct
 Member State in which the services are provided has            their business;
 been prohibited since the end of the transitional
 period; whereas this prohibition applies to services
 provided from any establishment in the Community,              Whereas the first step in coordination can be taken
 whether it is the head office of an undertaking or an          straight away by determining on a Community basis
 agency or branch;                                               those essential dispositions which the Member States
                                                                may continue to apply in respect of risks situated on
Whereas, however, the effective exercise of freedom             their territory; whereas, with this end in view, only
 to provide services will not be fully accomplished             certain of these dispositions should retain their
 ---pagebreak---   12. 2. 76                         Official Journal of the European Communities                             No C 32/3
'essential' character, all others becoming open to             of the Directive without creating, through the
coordination;                                                  resulting     situation,     serious   distortions   of
                                                               competition; whereas it is nevertheless desirable to
                                                               apply to contracts covering such risks all the laws of
Whereas more complete coordination shall occur in              the Member State where these risks are situated;
the shortest possible time; whereas however the
choice of the law applicable to contracts can be freed
immediately without restriction by the complete                Whereas some Member States do not subject
elimination of the 'essential' character of the said           insurance transactions to any form of indirect
dispositions, on the one hand in the case of risks             taxation while the majority apply a special tax;
classified as transport, credit and caution primarily          whereas the structure and rate of this tax vary
on account of their frequently international nature,           considerably between the Member States in which it
and on the other hand in the case of certain large             is applied; whereas pending future harmonization, it
risks, defined by precise quantitative criteria, in            is desirable to avoid a situation where existing
which there is less evident need of protection for the         differences lead       to    serious  disturbances   of
insured.                                                       competition in insurance services between the
                                                               Member States; whereas the application of the tax
                                                               system of the Member State in which the risk is
Whereas the fact that certain Member States require            situated will remedy such a situation;
authorization for the general and special conditions
of insurance policies as well as tariffs constitutes an         Whereas agencies or branches established within the
obstacle to freedom to provide services; whereas                Community and belonging to undertakings whose
 although it appears possible at this stage to abolish         head offices are outside the Community are the
 such authorization for the classes of transport, credit       subject of the provisions of title III of the first
 and fidelity insurance and for large risks, the removal       coordinating Directive; whereas in this respect they
 of this obstacle will be achieved by harmonizing the          are subject to harmonized conditions with regard to
 laws in force; whereas meanwhile the applicable law           entitlement to and exercise of freedom to provide
in this respect must remain that of the Member State           services; whereas in these conditions it appears
 in which the risk is situated;                                normal to enable these agencies and branches to
                                                               benefit from the provisions of this Directive;
 Whereas the provision of services by an undertaking
 must be considered as a territorial extension of the          Whereas it is necessary to initiate special cooperation
 business of that undertaking; whereas such an                 with regard to freedom to provide services between
 extension, in accordance with the principles already          the competent supervisory authorities of the Member
 adopted in the first coordinating Directive of 24 July         States and between these authorities and the
 1973, should be the subject of an authorization;              Commission,
 Whereas such authorization must be given by the
 competent authority of the Member State in which               HAS ADOPTED THIS DIRECTIVE:
 the undertaking is already established; whereas the
 various authorities concerned must be in a position,
 through close cooperation, to put an end to any
 infringement of the rules remaining applicable in the                                   Title I
 Member State where the risk is situated;
                                                                                   General provisions
 Whereas the first coordinating Directive adopted by
 the Council on 24 July 1973 laid down that the law                                     Article  1
 of the authorizing Member State applies to technical
 reserves; whereas this principle is equally valid for         The object of this Directive is:
 operations carried out by way of freedom to provide
 services; whereas for such operations it is desirable to
                                                                (a) to supplement the first Council Directive of 24
 lay down that technical reserves may be located
                                                                     July 1973 on the coordination of laws,
 throughout the Community, although the principle of
                                                                    regulations and administrative provisions relating
 matching and equivalent assets must be consolidated;
                                                                    to the taking-up and pursuit of the business of
                                                                    direct insurance other than life assurance;
 Whereas considerable differences are apparent from
 one Member State to another with regard to the                 (b) to lay down provisions to facilitate the effective
 number and size of risks subject to compulsory                      exercise of freedom to provide services by the
  cover; whereas under these conditions it is impossible            undertakings and in respect of the classes of
  to exclude these classes of insurance from the scope               insurance covered by that coordinating Directive.
 ---pagebreak--- No C 32/4                            Official Journal of the European Communities                                 12. 2. 76
                          Article 2                                       referred to in Article 6 (2) (a) of the first
                                                                          coordinating Directive or for supervising
For the purposes of this Directive:                                       private insurance business,
(a) 'first coordinating Directive'
                                                                    — in the case of agencies and branches, the
     means the first Council Directive referred to in                     authority responsible for granting the
     Article 1 (a);                                                       authorization referred to in Article 6 (2) (b) of
                                                                          that Directive or for supervising private
(b) 'undertaking'                                                         insurance business.
     means any undertaking which has received                             These authorities are hereafter called the
     official authorization under Article 6 (2) (a) or (b)                supervisory authorities of the authorizing
     of that Directive;                                                   State;
 (c) 'freedom to provide services'
     means the covering by an undertaking of a risk             (f) 'unit of account'
     situated in another Member State;
 (d) 'Member State in which the risk is situated'                    means the European unit of account (EUA) as
                                                                     defined by Council Decision 75/250/EEC of 21
     means:                                                          April 1975.
     — the Member State in which the insured
          property is situated, where the insurance                  Wherever reference is made in this Directive to
          covers immovable property or movable                       the unit of account, the corresponding amount in
          property which, because of its situation, is               national currency to be applied shall be that of
          connected with the immovable property and                  the last working day of the preceding year.
          used for the same purpose, together with any
          objects contained therein,
      — the Member States in which insured movable
                                                                                          Title II
          property other than that specified in the
          preceding indent is situated, where because of
          the purpose for which the property is                     Provisions supplementing the first coordinating
          intended or used the location thereof is                                        Directive
          neither provisional nor temporary,
      — the Member State in which the contract was
          concluded, where the insurance covers                                           Article 3
          persons, or objects other than those referred
          to in the preceding indents, and was taken
                                                                 1.     Member States shall take all steps necessary to
          out for a short period or from an automatic
                                                                 ensure that at least the following principles are
          machine,
                                                                 observed in calculating the technical reserves:
      — the Member State of registration, where the
           insurance covers land vehicles,
                                                                 (a) Unearned premiums are to be calculated, in
      — the Member State in which the policy-holder                   principal, on a time basis. The calculation may,
           habitually resides in so far as he is the owner             however, be made by methods of approximation
           of the vehicle in question, has a financial                if these lead to practically the same results as
           interest therein or operates the said vehicle, or,         individual calculations.
           failing this, the Member State in which the
           vehicle is registered, where the insurance
                                                                       The gross premiums shall be taken as the basis
           covers railway rolling stock, aircraft or sea,
                                                                      for the calculation. The resulting unearned
           lake, river and canal vessels,
                                                                       premiums should then in principle be reduced by
      — the Member State in which the policy-holder                   the     pro    rata    commissions      and      other
            habitually resides where any other form of                 representatives' charges (agency costs). Member
           insurance is involved, including insurance in               States will determine what is meant by deductible
           respect of 'goods in transit';                              agency costs;
  (e) f supervisory authority'
                                                                 (b) A reserve for potential losses from current
      means:
                                                                       contracts is to be formed if, on the basis of the
      — in the case of the head office, the authority                  trend of claims, having regard to their frequency
            responsible for granting the authorization                 and average amount in the financial year, future
 ---pagebreak---  12. 2. 76                          Official Journal of the European Communities                            N o C 32/5
      insurance payment will probably exceed the              Any technical deficit which may occur in the course
      corresponding net premiums;                             of a given financial year in these classes of insurance
                                                              shall be charged to the reserve.
 (c) For the purposes of calculating the loss reserves,
      the future gross expenditure on claims is to be         4.     The reserves referred to in this Article shall be
      estimated individually on the basis of known            disregarded for purposes of calculating the solvency
      ontstanding claims.                                     margin and shall be under exemption from any
      Member States may permit flat-rate methods of           liability to tax.
      calculation, instead of individual calculation if:
      — the number of similar outstanding claims is so
          great that the flat-rate method leads to a
          result which is not significantly different from                            Article 4
          that obtained by individual calculation, or
                                                               1.    Insurance contracts concluded in the classes
      — the nature of the risks listed under numbers 3,
                                                              covered by the first coordinating Directive shall be
          4, 5, 6, 7, 11 and 12 of point A of the Annex
                                                              governed by the law of the parties' choice. Where the
          to the first coordinating Directive does not
                                                               risk is situated within the Community the choice
          permit individual calculation.
                                                              must be made from among the laws in force in the
      Reserves for late claims are to be formed for            Member States.
      claims which have occurred but which have not
      yet been notified to the insurer; these shall be        The parties shall be free to choose the law of a third
      calculated on the basis of values gained from past      country if the risk in question is one of those listed
      experience, having regard to the probable trend         under numbers 4, 5, 6, 7, 11, 12, 14 and 15 in point A
      of claims;                                              of the Annex to the first coordinating Directive,
                                                              where there is a definite connection between the laws
                                                               of that country and the risk insured or the insured
 (d) As regards the risks listed under numbers 4, 5, 6,
                                                               person.
      7, 11 and 12 in point A of the Annex to the first
      coordinating Directive, amounts representing
      premiums and loss reserves may be consolidated          2.     In the absence of a choice of law to be applied
      in one amount.                                          or where the choice made is contrary to the
                                                              provisions of paragraph 1, the contract shall be
                                                              governed by the internal law of the Member States in
2.     Systems based on an 'account over a period not         which the risk is situated.
exceeding three years' shall be considered as
equivalent to the system described in the preceding
paragraph for unearned premiums and outstanding
                                                                                      Article 5
claims.
                                                              1.     Pending their further coordination, which shall
3.     Undertakings shall set up an equalization reserve      occur within a maximum period of three years from
for the credit, hail and frost classes and for the risks      the date of notification of the present Directive, and
of storm and natural forces other than storm, where           in cases where the law chosen by the parties is other
such risks are included in the hail and frost classes.        than that of the Member State where the risk is
                                                              situated, only those 'essential' dispositions of the law
The equalization reserve shall each year receive 75 %         applicable in that State may be applied; those
of any technical surplus remaining for that financial         essential dispositions can cover:
year. However, in the case of credit insurance, the
amount involved may not exceed 12 % of the net                — the declaration of the risk by the policy-holder,
premiums for the same financial year.                              either when the policy is taken out or during the
                                                                   period of the contract, and penalties,
This transfer shall no longer be obligatory when the          — the payment of the premium and the consequences
reserves have reached:                                             of non-payment,
— in the case of credit insurance, 150 % of the               — the obligations of the policy-holder on the
    highest annual amount of net premiums paid in                  occurrence of a claimable event, and penalties,
     during the last five financial years, and
                                                              — the circumstances in which the contract may be
— in the case of all other classes of insurance, 200 %             annulled,
     of the amount of net premiums paid in during the
    last financial year.                                      — the rights of third parties,
 ---pagebreak--- No C 32/6                            Official Journal of the European Communities                                  12. 2. 76
shall, pending their subsequent coordination, remain                                     Article 7
applicable.
                                                                Every Member State shall take all steps necessary to
2.     The restrictions imposed by the preceding                ensure that the authorities responsible for supervising
paragraph on the freedom to choose the law                      insurance undertakings are able:
governing the contract shall not apply to contracts
covering risks referred to in Article 6 provided that           (a) to supervise all the activities          of   insurance
the conditions laid down in that Article are met.                     undertakings and to ensure that:
3.     Member States under whose legislation or case                 — the laws, regulations and administrative
law the provisions referred to in paragraph 1 are                         provisions concerning insurance are complied
mandatory shall forward the list of those provisions                      with,
to the Commission within 18 months of the                            — the schemes of operations referred to in
notification of the Directive. The Commission shall                       Articles 8 (1) (c) and 10 (1) (c) of the first
forward that list to the other Member States.                             coordinating Directive are properly executed,
                                                                          and
                         Article 6                                    — insured persons are protected against abuses;
 1.    The following is added to Articles 8 (3) and 10          (b) to carry out the checks and to take the measures
(3) of the first coordinating Directive:                              necessary for this purpose, and in particular:
'However, Member States may not apply provisions                      — to require undertakings          to   transmit    all
which require general and special policy conditions                       relevant documents,
and tariffs to be approved:
                                                                          to     examine      the     administration       of
                                                                          undertakings in situ,
 (a) in respect of risks listed under numbers 4, 5, 6, 7,
      11, 12, 14 and 15 in point A of the Annex to the                — to be vested with sufficient powers of
     first coordinating Directive:                                        constraint to ensure that Decisions are
     — where the policy-holder has the status of a                        properly enforced.
          trader, and
     — where the risk to be covered relates to his                                        Title III
          business activity;
                                                                      Provisions to facilitate the effective exercise of
 (b) in respect of risks listed under numbers 8, 9, 13                          freedom to provide services
      and 16 in point A of the Annex to the first
      coordinating Directive:
                                                                                          Article 8
      — where these risks are the subject of a contract
          concluded for his own account and/or for                1.    Any undertaking wishing to extend its business,
          account of a third party by a legal or natural         by way of the exercise of freedom to provide services,
          person who owns all or part of the interest            to the territory of another Member State shall seek
          insured and who, under the law applying to             authorization for that purpose from the supervisory
          him, has the status of a trader; and                   authority of the authorizing Member State.
      — where the amount insured in respect of risks
                                                                 2.     The undertaking shall supply the following
          listed under number 8 in point A of the
                                                                 information:
          Annex to the first coordinating Directive is
          not less than 7 million units of account or
          where the aggregate amount insured in                   (a) the Member State on whose territory it intends
          respect of risks listed under numbers 8, 9 and              to provide services;
           16 is not less than 10 million units of
          account.'.                                             (b) the nature of the risks which it intends to insure
                                                                       on the territory of that State;
 2.    The figures given in point (b) second sentence,
 shall be reviewed and if necessary adapted, at the               (c) the general and special conditions of the policies
 latest within three years from the date of notification               which it intends to use and the tariffs which it
 of the present Directive, in the light of progress                    intends to apply provided the legislation of the
 achieved in the coordination of legislation provided                  Member State referred to in (a) requires those
 for in Article 5(1).                                                  conditions and tariffs to be approved.
 ---pagebreak---  12. 2. 76                          Official Journal of the European Communities                            No C 32/7
3.    The authorization referred to in paragraph 1                                    Article 10
shall be granted after consultation with the
supervisory authority of the State on whose territory          1.    Subject to Article 13 and notwithstanding
the undertaking intends to provide services.                  Articles 4 and 5, contracts concluded by way of the
                                                               exercise of freedom to provide services and covering
 The supervisory authority of the authorizing Member           risks insurance of which is compulsory in the
State shall send a copy of the application of the              Member State in which the risk is situated must
undertaking concerned, together with the information           comply with the legislation in force in that Member
specified in paragraph 2, to the supervisory authority        State.
of the State on whose territory the undertaking is
intending to provide services.                                 This provisions shall not apply to the risks referred
                                                               to in Article 6.
The latter's comments must be forwarded to the
supervisory authority of the authorizing State within
six weeks of the forwarding of the application for             2.    Where the Member State in which the risk is
 authorization.                                                situated requires proof that the obligation to take out
                                                               insurance has been complied with, it shall accept for
                                                               this purpose the certificate issued by the insurance
                                                               undertaking availing itself of freedom to provide
                         Article 9                             services.
1.    Subject to the provisions of this Directive, the
undertaking must comply with the rules in force in            3.     Where, in the Member State in which the risk is
the Member State in which the risk is situated which          situated, the insurer has to notify certain competent
concern:                                                       authorities when cover ceases to be provided, the
                                                               termination of cover can be invoked against injured
— compulsory insurance,                                       third parties only one month after the date on which
                                                              the competent authorities receive such notification
— the mandatory provisions concerning the                      from the insurance undertaking.
      insurance contract mentioned in Article 5(1),
— tariffs and the general and special conditions of
    insurance policies,                                                               Article 11
— fair trading.                                                Where contracts are concluded by way of the exercise
                                                              of freedom to provide services, the policy-holder
                                                               must be informed before the contract is signed that
2.    If the supervisory authority of the Member State         the insurer is not established in the country in which
in which the risk is situated is aware that these             the risk is situated. Furthermore, the policy must
provisions are being violated by an undertaking               specify the address of the competent supervisory
exercising freedom to provide services on its territory,      authority and the address of the office of the insurer
it shall submit its complaint to the supervisory              to whom the policy-holder may submit his claims.
authority of the authorizing State and shall propose
suitable measures for putting an end to the situation.
                                                                                      Article 12
3.    The supervisory authority of the authorizing
State shall take all appropriate measures, which may           1,    The supervisory authority of the Member State
extend to withdrawal of the authorization referred to         in which the head office is situated shall require that
in Article 8, to put an end to the infringements of           office to keep for each class of insurance and for each
which it has thus been notified. It shall inform the          Member State, a special trading account in respect of
supervisory authority of the Member State in which            all business transacted by way of the exercise of
the risk is situated thereof.                                 freedom to provide services, including that transacted
                                                              by its agencies and branches. This account, the form
                                                               of which is set out in the Annex, must show
4.    If, in spite of the measures thus taken by the           premiums, claims and technical reserves.
 authorizing State, the undertaking persists in
seriously violating the provisions referred to in
paragraph 1, the Member State in which the risk is            2.     The supervisory authority of the Member State
situated may, after having informed the supervisory           in which the head office is situated shall, if the
authority of the authorizing State thereof, take any          supervisory authority of the Member State in which
appropriate measures which are strictly necessary to          the risk is situated so requests, forward to the latter a
put an end to the situation.                                  copy of the special trading account.
 ---pagebreak--- No C 32/8                           Official Journal of the European Communities                               12. 2. 76
3.     For undertakings keeping their accounts in                                      Title IV
accordance with the system provided for in Article
3 (2), the trading account may be restricted to the net                             Final provisions
premiums received, less commission, and the claims
paid during the calendar year, set out according to
classes of insurance and countries of origin.                                          Article 16
                                                               The Commission and the competent authorities of
                                                               the Member States shall collaborate closely for the
                         Article 13                            purpose of facilitating the supervision of direct
                                                               insurance within the Community and of examining
                                                               any difficulties which might arise in the application of
1.     The technical reserves relating to contracts
                                                               this Directive, and in particular of Article 9.
concluded by way of the exercise of freedom to
provide services shall be subject to the rules laid
down by the authorizing State or, failing such rules,                                  Article 17
shall be in accordance with established practice in
that State.
                                                               The Commission shall forward to the Council within
                                                               five years of notification of this Directive a report on
2.     These reserves may be located in the                    the developments on the market in insurances
Community without territorial restriction. They must            transacted by way of the exercise of freedom to
in all cases be covered by equivalent and matching             provide services.
assets.
                                                                                       Article 18
                                                                Member States shall amend their national provisions
                         Article 14                             to comply with this Directive within 18 months of
                                                                this notification and shall forthwith inform the
 Without prejudice to subsequent        harmonization of        Commission thereof.
 indirect     taxes   on     insurance,     all insurance
 contracts concluded by way of            the exercice of       The provisions thus amended shall be applied within
 freedom to provide services shall       be subject solely      24 months of notification.
 to the relevant taxation in force in   the Member State
 in which the risk is situated.
                                                                                        Article 19
                                                                Upon notification of this Directive, Member States
                                                                 shall ensure that the texts of the main laws,
                         Article 15                              regulations of administrative provisions which they
                                                                  adopt in the field covered by this Directive are
 The provisions of this Directive shall apply to                 communicated to the Commission.
  agencies and branches established within the
 Community and belonging to undertakings whose
  head office is outside the Community which are                                        Article 20
 subject to and which satisfy the provisions of Title III
  of the first coordinating Directive.                           This Directive is addressed to the Member States.
 ---pagebreak--- 12. 2. 7 6                       Official Journal of the European C o m m u n i t i e s                N o C 32/9
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