CELEX: 51988PC0729
Language: en
Date: 1989-01-02
Title: Proposal for a SECOND COUNCIL DIRECTIVE on the coordination of laws, regulations and administrative provisions relating to direct life assurance, laying down provisions to facilitate the effective exercise of freedom to provide services and amending Directive 79/267/EEC (presented by the Commission)

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Vol. 1988/0240
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 ---pagebreak--- COMMISSION OF THE EUROPEAN COMMUNITIES
                                                                  COM ( 88 ) 729 final - SYN 177
                                                                  Brussels , 23 December 1988
                                         Proposai for a
                               SECOND COUNCIL DIRECTIVE
 on the coordination of laws , regulations and                          administrative provisions
       relating to direct life assurance , laying down provisions to
              facilitate the effective exercise of freedom to
                  provide services and amending Directive
                                               79 / 267 / EEC
                          ( presented by the                    Commission )
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 ---pagebreak---                                 EXPLANATORY MEMORANDUM
I.   Introduction
The effective establishment of a common market in life assurance is one of the
cornerstones of     the European    financial area     which the Member States have
undertaken to create by the end of 1992 .
Although Directive 79 / 267 /EEC of 5 March 1979 coordinated the conditions under
which a life assurance undertaking from one Community country may set up an
agency or     branch in another Community country ,        a citizen of one Community
country who wishes to enter directly into a life assurance contract in another
country still encounters numerous obstacles , both legal and practical .
Within the European financial area ,        every citizen should be able to approach
any assurance undertaking in the Community and thus have the widest possible
choice of assurance arrangements and assurers .
The    second    report   from    the     Commission    to   the     Council    and    the
European Parliament on the implementation of the Commission 's White Paper on
completing the internal market states that the Commission will present to the
Council before 31 December 1988 a proposal for a Directive on freedom to
provide life assurance services ( C0M(87 ) 203 final , para . 67 , p. 20 ).
While Articles 57<2 ) and 66 of the EEC Treaty form the legal basis of that
proposal , two recent events have shed much light on the subject of freedom to
provide services in the insurance sector .
The  Court of Justice    of   the   European Communities      delivered     a  number    of
judgments    on   this  matter    on    4 December 1986 ,    notably     in   Case 205 / 84
Commission v Federal Republic of Germany .
Not only did those judgments put an end to differences in the interpretation
of the Council Directive of 30 May 1978 on the coordination of laws ,
regulations and administrative provisions relating to Community co-insurance ,
they paved the way for a resumption of discussions on the proposal for a
second   Council   Directive   on   the   coordination    of  laws ,    regulations   and
 ---pagebreak---                                            3
administrative provisions relating to direct insurance other than life
assurance and laying down provisions to facilitate the effective exercise of
freedom to provide services and amending Directive 73 / 239 /EEC . That Directive
was adopted on 22 June 1988 .
In its judgment in Case 205/84 the Court recognized that , in the present state
of Community law , the Member State in which an insurance service is provided
is justified , in order to ensure the protection of policy-holders and insured
persons ,  in applying its own legislation concerning technical reserves and
conditions of insurance ( Ground 41 ).
In the same judgment ,       however ,  the Court observed that the grounds for
protecting policy-holders and insured persons " are not equally important in
every sector of insurance and that there may be cases where , because of the
nature of the risk insured and of the party seeking insurance ,       there is no
need to protect the latter by the application of the mandatory rules of his
national law " ( Ground 49 ).
Those two grounds of judgment apply equally to non-life insurance          and to
life assurance .
The second recent event is the abovementioned Directive of 22 June 1988 , which
divides all non-life risks into two categories defined according to the degree
of protection required by policy-holders .
As regards the first category , known as " large risks ", which is defined in
terms of the status and size of the policy-holder and the nature of the risk
and for which the need for as high a degree of protection does not exist , the
supervisory rules of the country of the insurer apply ( home country control ).
The reverse is true in the case of the second category , known as "mass risks ",
to which the supervisory rules of the country of the risk apply ( risk country
control ) pending , that is , subsequent coordination , notably of technical
reserves .  Such coordination ,    which will constitute a second stage , will be
directed towards further facilitating the effective exercise of freedom to
provide services and will extend the scope of the supervisory legislation of
the country of the insurer .
 ---pagebreak---                                          4
The Commission proposes to proceed along the same lines with regard to
commitments covered by the life assurance Directive .      During a first stage , a
distinction    will    be  made    between   commitments   in   respect     of  which
policy-holders are in no great need of protection - to which the supervisory
law of the country of establishment will apply - and other commitments which
will be subject to the law of the country of the commitment , i.e. as a rule
the country in which the policy-holder is resident , this move being made
pending subsequent coordination .
The structure of the present proposal is based on that of the Directive of
22 June 1988 .       Title I  " General   provisions " and    Title II   " Provisions
supplementary to the first Directive " ( 79/ 267/EEC of 5 March 1979 ) both apply
to all the classes covered by the first Directive .      Title III , on the other
hand ,  contains provisions relating specifically to freedom to provide
services .
In the case of group pensions assurance schemes and certain individual
pensions assurances , the multiplicity and complexity of the various schemes
and their close relationship with social security schemes calls for careful
study , which is not yet completed . Consequently , this field is excluded from
Title III of the proposal .       It will form the subject matter of a separate
proposal for a Directive , to be presented as soon as possible ,           which will
therefore constitute the second part of the first stage .
As a result , Title III of the proposal relates only to individual contracts
unconnected with a business activity .     In this context a person who takes the
initiative in approaching an assurer established in another country and
subject to the supervisory law of that country willingly and knowingly
forsakes the supervisory law of the country in which he is resident and shows
by his behaviour that he does not need to be protected by it .         The taking of
the initiative by the person seeking life assurance , who will have to take
formal note of the fact that he is renouncing such national protection , is
thus the criterion which delimits the category of commitments to which the
rules of the country in which the assurer is established apply .
At present , the law of several Member States either prohibits their nationals
from taking the initiative in entering into contracts abroad or considerably
restricts this possibility .
 ---pagebreak--- However ,  it will be difficult to monitor compliance with that prohibition and
those   restrictions   once   Directive  88/361 / EEC   of   24 June 1988   on  the
 liberalization of capital movements is in force .        There is an urgent need ,
therefore , to define in Community rules the conditions under which a person
seeking life assurance may act on his own initiative .
The present proposal      enables well-informed seekers of life assurance to
profit fully from the large internal market , while keeping intact the
protection afforded by national law in cases where           assurance undertakings
actively seek to sell their products abroad .
The Commission still has as its ultimate aim ,        however ,  application of the
supervisory rules of the country in which     the assurer is established .       As
in the case of non-life insurance , this will necessitate closer coordination ,
which will form the subject matter of a second stage in the work in hand .
This proposal , together with the abovementioned additional proposal concerning
group assurance schemes , brings us a step closer to establishing an internal
market in life assurance , but does not in itselfs suffice to achieve that end .
Directive 79/267/EEC of 5 March 1979 lays down specific rules for the
authorization of agencies and branches of undertakings "whose head office
is located outside the Co^^unity , but contains none relating to requests
for authorization of a subsidiary of such an undertaking or to the
 contemplated acquisition by such an undertaking of .a controlling- " ar^icination
 in a Co’– unity insurance undertaking . The onportur.ity i.~. taken in this
proposal to fill this gap by a procedure , closely - odelled on that of
Article 7 of the proposal f or a second banking coordination directive ,
•which seeks to ensure that Community undertakings enjoy reciprocal
 treatment in the parent undertaking 's country .
 ---pagebreak---                                             6
                             II . Comments on the Articles
                              Title I  General provisions
                   Article 1 - Object of the Directive ( Article 1 )
This Article specifies the dual object of the Directive , namely :
1.    to supplement the life assurance coordination Directive        79 / 267 / EEC of
      5 March 1979 ,   which is the object      of Titles I and II of the present
      Directive ;
2.    to  lay   down  provisions   relating   specifically to  freedom   to    provide
      services , which is the object    of Title III .
In view of the fact that many Articles of this Directive are identical or at
least broadly similar to those of the second non-life insurance coordination
Directive of 22 June 1988 , the numbers of the corresponding Articles are given
in brackets .
                         Article 2 - Definitions ( Article 2 )
( b ) undertaking
Article 6 of the first Directive concerns undertakings whose head office is
within the Community and Article 27 those whose head office is outside the
Community . The distinction in ( b ), which is borrowed from the second non-life
Directive ,     means that third country assurers who are established in the
Community only through an agency or a branch do not benefit from the
provisions on freedom to provide services contained in this Directive .
(e)    Member State of the commitment
Since one of the two objects of this Directive is to amend the first life
assurance Directive ,      it must apply both to the insurances referred to in
Article id ) of the first life Directive and to the operations referred to in
Article 1(2 ) of that same Directive .
 ---pagebreak---                                          7
Consequently , the expression " Member State of the commitment " has been chosen
on the strength of Article 9(a ) of the first life Directive , which refers to
commitments covered by an undertaking .
                    Artide 3 - Permanent presence ( Artide 3 )
This provision ,   which also appears in the Second non-life Directive , is taken
from Ground 21 of the judgment of the Court of Justice of 4 December 1986 in
Case 205 / 84 Commission v Federal Republic of Germany .
              Article 4 - Law applicable to the contract ( Article 7 )
Parasraph 1
The parties to the contract must be clear as to what legal provisions govern
the contract .
The Second non-life Directive fulfilled this legitimate requirement of legal
certainty by adopting uniform rules of choice of private international law and
providing in certain cases for freedom of choice of the applicable law .
This Directive adopts a similar approach , namely the adoption of a uniform
rule of private international law and the choice , on this score , of the law of
the Member State of the commitment , that is to say the habitual residence of
the policy-holder , it being understood that if the law of that country so
permits , the parties may choose another law .
If the policy-holder is a legal person , the law of the country of residence is
replaced by the law of the Member State in which the establishment of that
legal person , being that to which the contract relates , is situated .
Because life assurance always concerns , either directly or indirectly , a
person and because the law as it relates to individuals is important in this
respect , the legal environment of the policy-holder should be maintained .
This concerns ,     for example ,   the determination of the beneficiary and
acceptance by that person of the benefits flowing from the contract , the
position of the divorced spouse , the current spouse and their respective
children , that of the concubine , etc .
 ---pagebreak---                                         8
One must avoid imposing in this respect a legal order with which the parties
concerned are unfamiliar , or to which they may even be averse .
Paraaraph 2
The same reasoning underlies paragraph 2 , according to which , where the
policy-holder takes the initiative in entering into a contract under freedom
of services and has his habitual residence in a Member State other than that
of which he is a national ,  the parties may choose the law of the Member State
of which he is a national .
Paragraph 3
The concern to preserve the policyholder 's legal environment , expressed in the
first two paragraphs , relates to private contract law . It must not be used to
prevent the policyholder who takes the initiative in approaching an assurance
undertaking in another Member State from benefiting from forms of insurance
authorized under the public law in that State , even if such forms of insurance
are not authorized in his country of residence .   It is indeed one of the aims
of this Directive to facilitate the exercise of this freedom .
Paragraphs 4 to 6
These paragraphs repeat almost word for word part of Article 7 of the Second
non-life Directive .
Paragraph 4 ,  which deals with countries comprising several territorial units
each of which has its own rules of law concerning contractual obligations ,   is
directed mainly at the United Kingdom and Spain .
Paragraph 5 , like its counterpart in the Second non-life Directive , is based
on Article 7 "Mandatory rules " of the Convention on the law applicable to
contractual obligations , which was opened for signature in Rome on 19 October
1980 ( OJEC No L 266 , 9 October 1980 ) and which forms the subject matter of a
report drawn up by Mr Mario Giuliano and Mr Paul Lagarde ( OJEC No C 282 ,
31 October 1980 ).
 ---pagebreak---                                           9
The Article as a whole
A legal framework that is best suited to all the activities covered by the
first Directive , whether they be carried on under conditions of establishment
or under conditions of freedom to provide services , should be provided .    Thus ,
as in the second non-life Directive , this Article on the law applicable to the
contract is inserted in Title II ,        " Provisions supplementary to the first
Directive " .
 Art icle 5 - Supervision of activities including those carried on outside the
                            countrv of establishment
                                   ( Article 10 )
It was considered necessary in the case of the Second non-life Directive to
define the powers of the supervisory authorities and the means they must have
at their disposal when it comes to monitoring the activities of insurers ,
including activities engaged outside the country of establishment .        Such is
the object of Article 10 of that Directive .       The same reasons applying here ,
the Article has been incorporated in the present Directive .
Article 6 - Transfer of portfolios ( Article 11 )
The same reasons applying here , Article 11 of the Second non-life Directive
should be incorporated in the present Directive .
          Article 7 - Abolition of statutory cessions to the " Istituto
                        Nazionale di Assicurazioni " ( INA )
Statutory cessions by insurers to a single national body have always been
considered incompatible with the EEC Treaty .        Those in force in France were
abolished before the 1979 life assurance coordination Directive was adopted .
The original proposal for that Directive presented by the Commission and the
amended proposal presented following delivery of the opinions of the advisory
bodies and of the European Parliament provided that this exception should be
abolished either at the end of a five-year transition period or at the time of
entry into force of the present Directive .
 ---pagebreak--- The Council decided otherwise : the first life Directive , that of 1979 ,
provides that the INA may , as an exception ,      continue to receive these
cessions , subject to their not being increased ,       and adds that these
arrangements will be reviewed in connection with the present Directive .
The exception should now be abolished , otherwise undertakings establishedd in
Italy , whether they be Italian or not , will be placed at      a disadvantage
compared with undertakings established abroad and transacting   life assurance
in Italy under conditions of freedom to provide services , as  the latter will
not be subject to the obligation in question .
               Article 8 - A^end^ent to Title III of first Directive
This a’~end~ent is necessary to prepare the way for the insertion into
the first Directive of the new Article 32 A - see Article r; of this
proposal .
               Article 9 ~ pecirrocitv with third countries
This Article consists of an adaptation , for the life insurance sector ,
of Article 7 of the proposal presented by the Cov^ission on 23 February
1928 for a second Council banking coordination directive , the wording
of which is followed as closely as the different context rer-its .
 ---pagebreak--- Title III - Provisions relating specifically to freedom to provide services
Article 'C - Commitments by way of freedom to provide services covered by this
              Directive ( Article 12 )
This first Article of Title III determines the Title 's scope ,         that is to say
commitments entered into under conditions of freedom to provide services and
covered by this Directive .
Only individual commitments are covered .        The types of insurance referred to
in Article 1(1 ) of the first Directive are thus excluded where they take the
form  of   group   assurance  schemes ,    as  are   operations   connected   with  the
management   of  group pension     funds within    the meaning of     Article 1<2)(c ).
Those insurances and operations are covered by the proposal for a Directive on
group life assurance which the Commission will shortly be presenting to the
Council .
Moreover ,   this   Directive   is   concerned   only   with  individual    commitments
unrelated   to   the   employment   or   business   activity   of   the  policyholder .
Individual contracts covered by Article 1(3 ) of the first Directive arr thus
excluded .
This Directive will help create a European financial area and enable Community
citizens to conclude in other countries not only contracts similar to those
used in their country of residence , but also contracts of a type not used in
their country of residence ,         paragraph 4 stating only that the insurance
undertaking must be authorized in its country of establishment .
However , the foregoing does not apply to tontines operations as referred to in
Article 1(2)(a ) of the first Directive .        In 1979 these existed in only two
Member States and they were allowed to remain in being only after a certain
amount of discussion .    They should be excluded from this Directive as it is on
grounds of public policy that they are prohibited in other Member States .
Article ^ -_Informing the supervisory authorities ( Article 14 )
The same reasons applying here , Article 14 of the second non-life Directive
should be incorporated in this Directive .
 ---pagebreak--- Article '\Z - Authorization to transact business under conditions of freedom to
               provide services  ( Article 15 )
This Article ,   which is based on Article 15 of the second non-life Directive ,
concerns commitments which may       be covered   by way of freedom     to provide
services but in respect of which ,      in the opinion of the Court of Justice ,
policyholders require special protection .
The commitments in question are those referred to in ArticlelC , that is to
say those which , while relating to individual life assurance , cannot benefit
from the more liberal provisions of Article 13 concerning commitments entered
into on the policyholder 's initiative .
Such commitments come within the scope of the supervisory law of the country
in which the service is provived .     In other words , that   country may make the
foreign assurer 's activity conditional on the granting of authorization and ,
to that end , require the production of various documents such as a certificate
of solvency ,   a certificate of authorization and a scheme of operations .      As
stated in paragraph 3 ,   the country in which the service is provided may also
insist on the scheme of operations being in conformity with the laws ,
regulations and administrative provisions applicable in its territory , notably
as regards the technical reserves , including mathematical reserves , and the
assets representing those reserves .
Harmonization of those provisions will form the second stage of the work in
hand ,   which will enable " home country control " to       be extended to     all
commitments covered by the first Directive .
Article 15   - Commitments entered into on the initiative of the policy-holder
Paragraph 1 - Scope
This paragraph defines those commitments in respect of which the protection
afforded by the supervisory law of the country of the assurer , " home country
control ", suffices , namely commitments entered into on the initiative of the
policy-holder .
 ---pagebreak--- Paragraph 2 - Advertising
Care must   be taken to ensure    that the   intentions of this Article are not
circumvented by the assurer soliciting business or     engaging in advertising .
It is therefore reasonable to state that the assurer may make himself known
only through public notices indicating his address and the classes in respect
of which he proposes to cover commitments .
It must be stressed that ,    from the assurer’s point of view ,    the case here
dealt with covers only passive freedom to provide services .
Paragraph 3 - Brokers
The object of    Article 13  is to enable   a person seeking life assurance      to
exercise his initiative to the full and     choose from among the whole range of
assurance products on offer in the various Member States ,    using all the means
available both at home and abroad including the postal service ,     the telephone
and the services of a broker .
However , as there  a  risk that a broker might influence a client to seek life
assurance abroad contrary to his best interests ,    the prospective assured must
sign a statement to the effect that it is he himself who wishes enquiries to
be made about assurance    available in other Member States .
It is consistent with the provisions of paragraph 2 on advertising that in
such a case the broker should not    advertise this service .
Paragraph 4 - Statement by the person seeking life assurance
This statement is a special precautionary measure in the event of the person
seeking life assurance taking the initiative in approaching companies abroad .
It applies to all such cases irrespective of the means used .
 ---pagebreak--- Article 1L - Obligation to produce certificates ( Article 16 )
This Article is based on Article 16 of the second non-life Directive .    Where a
policyholder takes the initiative in entering into a life assurance contract
in  another   Member State ,   the  contract   falls  within   the  scope of  the
supervisory law of that other Member State .       However ,  as indicated in the
White Paper on completing the internal market ( paragraph 103 ), the authorities
of the country in which the service is provided will continue to exercise
their control in a complementary manner .     Article 14 provides a framework for
this .
Article 1r - Right of cancellation
Life assurance contracts are generally entered into for lengthy periods and
involve the    payment   of  substantial premiums .     Every   precaution should
therefore be taken to avoid    misunderstandings .
In  a number of     Community countries ,   experience has shown that      fairly
frequently   policyholders stop paying their premiums in the first two or three
years .
As a result ,   some countries ,   notably France and the United Kingdom ,   have
introduced a mandatory cancellation period .
The French Law of 7 January 1981 ,      as amended by the Law of 11 June 1985 ,
introduced a cancellation period of 30 days and provided that the right of
cancellation may be exercised      even where   the contract provides immediate
cover .
The United Kingdom adopted a similar measure on 1 January 1980 .             This
provides for the right to cancel the contract within ten working days ,
likewise exercisable even where the contract provides immediate cover .
It  is felt that such a measure      is   even more appropriate in the present
context . When a person enters into a life assurance contract abroad he does
not always have a clear idea , at the time of signature , of the differences
between the contract he is signing and contracts used in his own country .
 ---pagebreak--- Article    - simultaneous transaction of business by wav of establishment and
freedom to provide services ( Article 13 )
The  same reasons     applying here ,     this Article      reproduces the    terms of
Article 13 of the second non-life Directive .       It covers three eventualities :
1.  Where a contract is concluded on the initiative of the policy-holder ,          ( a
    lesser degree of protection thus being called for and home country control
    being applicable ) , there is no reason to prevent an assurer from another
    Member State from accepting the contract on the ground that that assurer
    has an establishment in the country of the policyholder .             Simultaneous
    transaction of business by way of establishment and freedom to provide
    services is therefore authorized .
2.  An assurer based in State A ,     but established also in State B ,      may cover ,
    from State A ,     a policyholder    in State     B,    even  in cases   where the
    policyholder    has   not  exercised    his   own    initiative   in  seeking   the
    assurance ,  provided that the cover in question falls within a class of
    assurance which the assurer is not authorized by State B to pursue from
    its establishment in that State .           The pursuit of both activities is
    authorized , but there is no real overlap as the classes are different .
3.  On the other hand , if the circumstances set out in 2 . above are maintained
    except that the classes are the same ,       that is to say if the assurer       is
    authorized to transact the class into which the contract falls from his
    establishmnt in State B , the authorities of country B may oppose such
    provision of services .          In these circumstances ,         therefore ,   the
    simultaneous transaction of business by way of establishment and freedom
    to provide services might not be permitted .             Some Member States might
    consider that such overlapping transactions would be a source of confusion
    for a prospective assured who does not take the initiative in going abroad
    and who ,   consequently ,   must be given special protection ,        as the same
    assurer might offer the same product twice , first under conditions of
    establishment and secondly under conditions of freedom to provide
    services .    Such an assurer might therefore be required to transact that
    class in State B only from his establishment in that State .
 ---pagebreak--- Article V? - Changes to and extension of activities ( Article 17 )
This provision is based on Article 17 of the second non-life Directive ,           the
reasons underlying both provisions being the same .
Paragraph 1 concerns changes to the activities of the assurer in the two sets
of circumstances covered by freedom to provide services ,        that is to say where
the commitment is entered into on the initiative of the policyholder and where
it  is       entered  into  otherwise   than    on  the  policyholder 's   initiative .
Paragraph 2 concerns the extension of the assurer 's activities to contracts
not entered into on the initiative of the policyholder ,              and paragraph 3
contracts entered into on the latter 's initiative .
Article “11 P^ - Composite undertakinas
After lengthy discussions , it was decided that the first life Directive should
embody the principle of specialization whereby ,              in order to protect
policyholders , a non-life insurance undertaking may not transact at the same
time the operations covered by that Directive .              Such is the object of
Article 13(1 ) of that Directive .
At the same time ,     it was decided that composite undertakings ,     that is to say
those which at the time of notification of the Directive transacted both life
assurance and non-life insurance ,      should be allowed to     continue "to carry on
such activities simultaneously ( Article 13(3 )).
Such undertakings are authorized to set up agencies or branches in other
Community countries to transact           non - life insurance ,   but they are not
authorized to do so in respect of life assurance ( Article 13(4 )).
The approach adopted in 1979 for establishment should also be followed for
operations coming under freedom to provide services . In other words , just as a
composite undertaking may not transact life assurance in another Member State
by way of establishment , it may not do so either by way of freedom to provide
services .
 ---pagebreak--- Artide 10 - Approvai of policv conditions and premium ratea ( Artide 18 )
Paragraph 1 of this article ,        which is based on Article 18 of the second
non-life Directive ,      provides that the Member State in which the service is
provided may maintain in force or introduce a degree of supervision of policy
conditions and premium rates in respect of commitments covered by way of
freedom  to    provide    services ,   but    only  with  a   view  to   protecting      the
policyholder .
These provisions are not ,      however ,   applicable to commitments entered into on
the initiative of the policyholder ,        for which Member States of residence may
not require the approval or communication of policy conditions or premium
rates .
Article 2 - - Penalties ( Article 19 )
Since the same reasons apply , Article 18 is appropriately based on Article 19
of the second non - life Directive , which places various measures and penalties
at  the  disposal     of   the  competent    authorities   of  Member States     in    which
services are provided should undertakings not fulfil their obligations .
Article - 1 - Uindins-up ( Article 20 )
The same reasons applying here , Article 20 of the second non-life Directive is
taken as a basis .
Article     - Provision of information to the policy-holder about the assurer
               ( Article 21 )
Since the same reasons apply , Article 21 of the second non-life Directive is
taken as a basis .       The policyholder should know that he is dealing with an
assurer in another Member State           and he should be aware of that assurer 's
identity and country of establishment .
Although in non-life insurance this requirement is less strict in the case of
large risks ,      the same    is not   true    of commitments    entered   into    on   the
initiative of the policyholder within the framework of this Directive ,              as the
policyholder should be as well-informed as possible .
 ---pagebreak--- Article 23 - Supervision of reserves and other technical matters ( Article 23 )
The same reasons applying here , Article 23 of the second non-life Directive is
taken as a basis .
As already indicated in this explanatory memorandum ,         technical reserves ,
including mathematical reserves , are supervised by the supervisory authority
of the Member State in which the service is provided in those cases where that
State requires the assurer to be authorized .         This is " destination State
control ",   applicable to commitments which are not entered into on the
initiative of the policyholder .       Such is the purpose of paragraph 1 of
Article 23 .
Paragraph 2 , on the other hand , provides for home country control in all other
cases .
Paragraphs 3 and 4 do not give rise to any particular comments .
Article -t - Taxation ( Article 25 )
The reasons underlying them being identical ,    Article 2-4 is based largely on
Article 25 of the second non-life Directive .
The   question   of the   taxation  of  premiums  and  its  budgetary   impact , a
well-known problem in non-life insurance where rates rang from 0*4 to 30‘4 ,
arises again in this context with rates of between 0% and 5.15‘4 .
Leaving aside stamp duties ,     which are minimal and     are based on the sum
assured , it can be said essentially that Germany , the United Kingdom , the
Netherlands and Spain appy zero rating , other countries apply rates of 2‘4 ,
2.4*4 and 4.4*4 and France applies various rates ranging from 0*4 in the case of
group assurance schemes to 5.15*4 in the case of individual assurances .
This Directive , like the second non-life Directive , does not bring about
taxation harmonization but opts for the territoriality principle whereby the
tax arrangements of the country of the policyholder are applied for the
benefit of that country .
 ---pagebreak--- Moreover ,  each Member State will apply to undertakings providing services in
its territory its national provisions concerning measures to ensure that taxes
are collected .
Article       - Co 1 laborat ion    between   the    Commission    and   Member States
                 ( Article 28 )
The same reasons applying here , Article 28 of the second non-life Directive is
taken as a basis .
Article ^6 - Regular reports from the Commission to the Council and            European
Parliament ( Article 29 )
The same comment applies .
The five-year period between the date of adoption of the Directive and the
submission   of     the  first  report   to the   Council   and  european   Parliament ,
provided for in the second non-life Directive ,           is proposed in the present
Directive .
Article - ' - Period      prescribed   for  the   implementation    of  the   Directive
               ( Article 32 )
The same reasons applying here , Article 32 of the second non-life Directive is
taken as a basis .
Article     - Communication of implementing provisions ( Article 33 )
The same comment applies .
Article     - Addressees of the Directive ( Article 35 )
The same comment applies .
 ---pagebreak---                         PROPOSAL FOR A
                  SECOND COUNCIL DIRECTIVE
                ON THE COORDINATION OF LAWS ,
   REGULATIONS AND ADMINISTRATIVE PROVISIONS RELATING TO
DIRECT LIFE ASSURANCE , LAYING DOWN PROVISIONS TO FACILITATE
   THE EFFECTIVE EXERCISE OF FREEDOM TO PROVIDE SERVICES
              AND AMENDING DIRECTIVE 79 / 267 / EEC
 ---pagebreak---                                           2
THE COUNCIL OF THE EUROPEAN COMMUNITIES ,
Having regard to the Treaty establishing the European Economic Community ,   and
in particular Articles 57(2 ) and 66 thereof ,
Having regard to the proposal from the Commission ,
In cooperation with the European Parliament ,
Having regard to the opinion of the Economic and Social Committee ,
Whereas it is necessary to develop the internal market in life assurance and
in the operations referred to in the first Council Directive 79 / 267/EEC of
5 March 1979 on the coordination of laws ,        regulations and administrative
provisions relating to the taking-up and pursuit of the business of direct
life assurance , 1 hereinafter called the "first Directive"; whereas , in order
to achieve that objective ,      it is desirable to make it easier for assurance
undertakings having their head office in the Community to provide services in
the Member States , thus making it possible for policy-holders to have recourse
not only to assurers established in their own country , but also to assurers
which have their head office in the Community and are established in " her
Member States ;
Whereas , under the Treaty , any discrimination with regard to freedom to
provide services based on the fact that an undertaking is not established in
the Member State in which the services are provided has been prohibited since
the end of the transitional period ; whereas that prohibition applies to
services provided from any establishment in the Community , whether it be the
head office of an undertaking or an agency or branch ;
Whereas , for practical reasons ,      it is desirable to define provision of
services taking into account both the assurer 's establishment and the place
where the commitment is to be covered ; whereas , therefore , commitment should
also be defined ; whereas , moreover , it is desirable to distinguish between
activities pursued by way of establishment and activities pursued by way of
freedom to provide services ;
    No L 63 , 13.3.1979 , p. 1 .
 ---pagebreak---                                         3
Whereas it is desirable to supplement the first Council Directive of 5 March
1979 in order in particular to clarify the powers and means of supervision
vested in the supervisory authorities ; whereas it is also desirable to lay
down specific provisions regarding the taking-up , pursuit and supervision of
activity by way of freedom to provide services ;
Whereas policy-holders who ,     by virtue of the fact that they take the
initiative in entering into a commitment in another State and thus place
themselves under the protection of the legal system of that other State , do
not require special protection in the State of the commitment should be
granted complete freedom to avail themselves of the widest possible market in
life    assurance   and   in  the   operations   referred   to   in   the   first
Directive ;   whereas , other policy-holders should also be afforded adequate
protection ;
Whereas in the case of group assurances and         certain individual pensions
assurances the multiplicity and complexity of the various schemes and their
close connection with social security schemes call for careful study ;    whereas
they should therefore be excluded from the scope of the provisions specific to
freedom to provide services contained in this Directive ;      whereas they will
form the subject matter of another proposal for a Directive ;
Whereas the provisions in force in the Member States regarding       contract law
applicable to the activities referred to in the first Directive continue to
differ ; whereas the freedom to choose , as the law applicable to the contract ,
a law other than that of the State of the commitment may be granted in certain
cases ,     in accordance with rules which take into account specific
circumstances ;
Whereas the first Directive 's provisions on transfer of portfolio should be
reinforced and supplemented by provisions specifically concerning the transfer
to another undertaking of the portfolio of contracts concluded by way of
freedom to provide services ;
 ---pagebreak---                                               A
Whereas , in the interests of protecting policy-holders , Member States should ,
at the present stage of the coordination process , be given the option of
limiting the simultaneous pursuit of activity by way of freedom to provide
services and activity by way of establishment ; whereas no such limitation can
be provided for where policy-holders do not require such protection ;
Whereas the taking-up and pursuit of activity by way of freedom to provide
services should be subject to procedures guaranteeing the assurance
                t
undertaking 's compliance with           provisions regarding financial guarantees ,
conditions of assurance and premium rates ; whereas those procedures may be
relaxed where the activity pursued by way of freedom to provide                 services
covers policy-holders who , by virtue of the characteristics of the commitment
they propose to enter into , do not require special protection in the State of
the commitment ;
Whereas ,   however ,    in the case of this second category of policy-holder and
where the contract is one of life assurance , , the policy-holder should be
given the opportunity of cancelling the contract within a period of 30 days ;
Whereas   the     first   Directive    adopted   the   principle   of  prohibiting   the
simultaneous pursuit of the activities covered by the first Directive on the
coordination      of   non - life   insurance   and   those   covered   by   the   first
Directive ;   whereas ,    while it authorized the continued existence of existing
composite undertakings ,         it stated that they may not set up agencies or
branches for life assurance ; whereas ,          such undertakings should likewise be
prohibited from covering by way of freedom to provide services commitments
referred to in the first Directive ;
Whereas it is necessary to make provision for special cooperation in the
sphere of freedom to provide services between the competent supervisory
authorities    of    the  Member States     and  between   those  authorities   and  the
Commission ; whereas provision should also be made for a system of penalties
to apply where the undertaking providing the service fails to comply with the
provisions of the Member State in which the service is provided ;
Whereas the technical reserves , including mathematical reserves , should be
subject to the rules of and supervision by the Member State in which the
service is provided where the provision of services involves commitments in
 ---pagebreak---                                         5
respect of which the State in which the service is received wishes to provide
special protection for policy-holders ; whereas , however , if such concern to
protect policy-holders is unjustified , the technical reserves , including
mathematical reserves ,  should remain subject to the rules of and supervision
by the Member State in which the undertaking is established ;
Whereas some Member States do not subject life assurance contracts and the
other operations covered by the first Directive to any form of indirect
taxation , while others apply special taxes ; whereas the structure and rate of
those taxes vary considerably between the Member States in which they are
applied ; whereas it is desirable to avoid a situation where those differences
 lead to distortions of competition between undertakings in the various
Member States ; whereas the application of the tax arrangements provided for
by the Member State in which the commitment is entered into is a means of
remedying such mischief ; whereas it is for the Member States to establish a
method of ensuring that such taxes are collected ;
V1Whereas the first Council Directive of 5 varch 1979 rakes express provision
for specific rules concerning the authorization of agencies a no. branches
belonging to undertakings whose head offices are outside the lo - ’- unity ;
whereas it is also desirable to provide for a specific procedure for all
requests for the authorisation of a subsidiary of an undertaking governed
by the laws of a third country or the acquisition of a participation by
such an undertaking with a view to ensuring that Community undertakings
benefit from reciprocity in the third countries in question ; whereas
this Directive lays down such a procedure ;
BAS AD0PT2D THIS DIRECTIVE     :
 ---pagebreak---                                               ô
TITLE I - GENERAL PROVISIONS
                                          Article 1
The object of this Directive is :
( a ) to supplement the first Directive 79 / 267 /EEC ;
( b ) to lay down specific provisions relating to freedom to provide services in
      respect of the activities referred to in the first Directive ,             such
      provisions being set forth in Title III of this Directive .
                                          Article 2
For the purposes of this Directive :
( a ) " first Directive ":
      means Directive 79 / 267 / EEC ;
( b ) " undertaking ":
      - for the purposes of      Titles I and II , means :
         any  undertaking    which     has   received  official authorization   under
         Article 6 or Article 27 of the first Directive ,
      - for the purposes of      Titles III and IV , means :
         any  undertaking    which     has   received  official authorization   under
         Article 6 of the first Directive ;
( c > " establishment ":
      means the head office ,      an agency or a branch of an undertaking ,   having
      regard to Article 3 ;
( d ) " commitment ":
      means a commitment      represented by one      of the kinds of   insurance or
      operation referred to in Article 1 of the first Directive ;
 ---pagebreak---                                                7
 ( e ) " Member State of the commitment ":
       means the Member State where the policy-holder has his habitual residence
       or ,  if the policy-holder is a legal person ,       the Member State where the
       latter 's establishment , to which the contract relates , is situated ;
 ( f ) " Member State of establishment ":
       means the Member State in which the establishment covering        the commitment
       is situated ;
 ( g ) "Member State of provision of services ":
       means the Member State of the commitment where the commitment is covered
       by an establishment situated in another Member State .
(h)     " tarent undertaking " :
        means a parent undertaking within the meaning of Ar ^ icle 1
        of the Seventh Council Directive 83/3^9/ 230 of 13 June 1rf5 ,
        based on Article        ( 3 ) ( g ) of the Treaty , on consolidated
        accounts ; ' )
(i)     " subsidiary ":
        means a subsidiary undertaking in accordance with .‘rude 1
        of Directive 33/ 3^9/ EEC .
                                          Article 3
For the purposes of the first Directive and of this Directive ,         any permanent
presence of an undertaking in the territory of a Member State shall be treated
in the same way as an agency or branch , even if that presence does not take
the form of a branch or agency , but consists merely of an office managed by
the undertaking’s own staff or by a person who is independent but has
permanent authority to act for the undertaking as an agency would .
 ---pagebreak---                                           8
           TITLE II - PROVISIONS SUPPLEMENTARY TO THE FIRST DIRECTIVE
                                     Article 4
1. The law applicable to contracts relating to the activities referred to in
   the  first    Directive   shall  be   the  lau of  the  Member State   of  the
   commitment .    However ,  where the law of that State so allows , the parties
   may choose the law of another country .
2. Where ,   in one of the cases referred to in Article'' !?,   the policy-holder
   has his habitual residence in a Member State other than that of which he
   is a national , the parties may choose the lau of the Member State of which
   he is a national .
3. The Member State whose law governs the contract may not , in a case falling
   within Article 13 , seek to prevent the policyholder from entering into any
   contract relating to a commitment which may be lawfully undertaken in the
   Member State of establishment .
4. Where a State includes several territorial units ,     each of which has its
   own rules of law concerning contractual obligations ,      each unit shall be
   considered    a country for the purposes of identifying the lau applicable
   under this Directive .
   A Member State in which various territorial units have their own rules of
   lau concerning contractual obligations shall not be bound to apply the
   provisions of this Directive to conflicts which arise between the laws of
   those units .
5. Nothing in this Article shall restrict the application of the rules of the
   lau of the forum in a situation where they are mandatory ,     irrespective of
   the law otherwise applicable to the contract .
   If the law of a Member State so stipulates the mandatory rules of the law
   of the Member State of the commitment may be applied if and in so far as ,
   under the law of that Member State , those rules must be applied whatever
   the law applicable to the contract .
 ---pagebreak---                                               9
6.     Subject to the preceding paragraphs ,     the Member States shall apply to the
       assurance contracts referred to in this Directive their general rules of
       private international law concerning contractual obligations .
                                         Article 5
The following paragraph shall be added to Article 23 of the first Directive :
'3 .    Each Member State shall take all steps necessary to ensure that the
authorities responsible for supervising assurance undertakings have the powers
and means necessary for supervision of the activities of assurance
undertakings established within . .their territory , including activities engaged
in outside that territory , in accordance with the the Council Directives
governing those activities and for the purpose of ensuring that they are
implemented .
Those powers and means must , in particular , enable the supervisory authorities
to :
-    make detailed inquiries about the undertaking 's situation and the whole of
     its business , inter alia by :
     -   gathering   information      or  requiring   the  submission   of   documents
         concerning assurance business ,
     -   carrying out on - the - spot investigations at the undertaking 's premises ,
-    take any measures with regard to the undertaking which are appropriate and
     necessary   to ensure     that the    activities of  the undertaking remain in
     conformity with the laws , regulations and administrative provisions with
     which the undertaking has to comply in each Member State and in particular
     with the scheme of operations in so far as it remains mandatory , and to
     prevent or remove any irregularities prejudicial to the interests of
     policy-holders ;
     ensure that measures required by the supervisory authorities are carried
     out ,   if need be by enforcement ,         where appropriate through judicial
     channels .
 ---pagebreak---                                         10
Member States may also make provision for the supervisory authorities to
obtain any information regarding contracts which are held by intermediaries . *
                                     Artide 6
1.  Article 25 of the first Directive is hereby deleted .
2.  Each Member State shall ,  under the conditions laid down by national law ,
    authorize undertakings which are established within its territory to
    transfer all or part of their portfolios of contracts for which that State
    is the State of the commitment to an accepting office established in that
    same Member State if the supervisory authorities of the Member State in
    which the head office of the accepting office is situated certify that the
    latter possesses   the necessary     margin of  solvency after   taking the
    transfer into account .
3.  Each Member State shall ,  under the conditions laid down by national law ,
    authorize undertakings established within its territory to transfer all or
    part of their portofolios of contracts concluded in the circumstances
    referred to in Article 10 ( 1 ) to an accepting office established in the
    Member State of provision of services if the supervisory authorities of
    the Member State in which the head office of the accepting office is
    situated certify that the latter possesses the necessary margin of
    solvency after taking the transfer into account .
A.  Each Member State shall ,  under the conditions laid down by national law ,
    authorize undertakings established within its territory to transfer all or
    part of their portfolios of contracts       concluded in the circumstances
    referred to in Article 10(1) to an accepting office established in the same
    Member State if the supervisory authorities of the Member State in which
    the head office of the accepting office is situated certify that the
    accepting office possesses
    the necessary margin of solvency after taking the transfer into account
    and if it fulfils the conditions set out in Articles 11 , 12, '4   and 1£ in
    the Member State of provision of services .
 ---pagebreak---                                         -  11 -
5. In the cases referred to in paragraphs 3 and A ,                  the supervisory
   authorities of the Member State in which the transferring undertaking is
   established shall authorize the transfer after obtaining the agreement of
   the supervisory authorities of the Member State of provision of services .
6. If a Member State ,       under the conditions laid down by national law ,
   authorizes undertakings established within its territory to transfer all
   or  part    of   their   portfolios    of   contracts  to   an   accepting  office
   established    in  another Member State      which  is  not  the  Member State  of
   provision of services ,      it shall ensure that the following conditions are
   fulfilled :
   -  the supervisory      authorities of     the Member State    in which the head
      office of the accepting office is situated            certify that the latter
      possesses the necessary margin of solvency after taking the transfer
      into account :
   -  the Member State in which the accepting office is established agrees ,
   -  the accepting office fulfils the conditions set out in Articles
      14 and 16 in the Member State of provision of services , the law of that
      Member State provides for the possibility of such a transfer and that
      Member State agrees to the transfer .
7. A transfer authorized in accordance with this Article shall be published ,
   under the conditions laid down by national law , in the Member State of the
   commitment .       Such    transfer    shall   be  automatically    valid  against
   policy-holders , assured persons and any other person having rights or
   obligations arising out of the contracts transferred .
   This provision shall not affect the right of Member States to provide that
   policy-holders may cancel the contract within a given period after the
   transfer .
 ---pagebreak---                                        Artide 7
 Article CtiJ ) ef the first Directive shall be replaced by the following :
 The I id 1 . in Republic shall take all steps to ensure that the requirement that
 undertaking', established within its territory cede part of their underwriting
 to the I'-titulo Nazicnale di Assicurazioni is abolished within two years of
 the date of implementation of this Directive .
                                       Artide 8
1 . The heading of Title III of the first Directive shall he replaced
     the f ollov/ ing :
TIT1Z III A
Rules applicable to agencies or branches established within the :: ~rur:ty and
belonging to undertakings uhose head offices are outside the Co-nut ity .
2.     The fcllouing heading . shall be placed after Article          of : iie
first Directive :
Rules applicable to subsidiaries of parent undertakings governed by the laws
cf a third country and to acquisitions of participations by such parent
undertakings .
 ---pagebreak---                                         13 -
                                   Article 9
Title III B shall comprise an Article 32 A , the text of which shall
be as follows :
i.    Requests for authorisation of a subsidiary uhose parar.t undercak mg is
governed by the lavs of a third country or the acquisition of a participation
therein as provided for ir. paragraph 3 shall be subject to the p-: secure laid
dour, in this Article .
2.    The competent authorities of the relevant Member State shall inform the
compete~t authorities of the other Member States and the Commission of the
request for authorization .
3.    Member States shall provide that where an undertaking governed by the
laus of a third country is considering the acquisition of a. part iiipat ion in
an insurance undertaking established in the Community such that the latter
undertaking will    become  its subsidiary ,  it  shall   inform the  competent
authorities of the Member State concerned .     These authorities shall  inform
the competent authorities of the other Member States and the Commission .
■i .   The competent authorities of the Member State concerned must suspend
their decision regarding requests as referred to in paragraphs 2 and 3 until
the procedure provided for in paragraphs 5 and t is completed .
5.    The Commission shall , within three months of receiving the information
provided for in paragraphs 2 and 3 , examine whether ail undertakings of the
Community enjoy reciprocal treatment ,         in particular regarding the
establishment of subsidiaries or the acquisition of participations in
 insurance undertakings in the third country in question .
 6.   If the Commission finds that reciprocity is not ensured , it may extend
suspension of the decision referred to in paragraph 4 , after having consulted
the competent authorities of the ver>ber Staten under the collaboration
  procedure provided for in Article 33 .
7.    The Co"”"ission shall present suitable proposals to the Council
with a view to achieving reciprocity with, the third country in question .
 ---pagebreak--- TITLE III - PROVISIONS RELATING SPECIFICALLY TO FREEDOH TO PROVIDE SERVICES
                                         Artide 'IO
1.  This Title shall apply where an undertaking ,            through an establishment
    situated in a Member State , covers a commitment in another Member State .
2.  This Title shall not apply to operations , undertakings and institutions to
    which the first Directive does not apply .
3.  This Title shall likewise not apply to commitments ;
       entered into with persons other than natural persons acting on their
       own account ;
       entered     into    with    persons    having  a    commercial ,   business        or
       employment-based relationship with the person or persons in respect of
       whose    life    or   lives   the  assurance   is   taken   out ,  whether      such
       relationship be past ,         present or future ,     where the commitment is
       entered into by virtue of such relationship ;
    -  entered into with a person in respect of whose life the assurance is
       taken out ,     if it is taken out by virtue of the employment or business
       activities of that person ;
    -  relating     to   the   operations    referred   to   in   Article 1(2 ) ( a ), ( c ),
       ( d ), and < e ) and Article 1(3 ) of the first Directive .
4.  An undertaking shall not cover a commitment in another Member State unless
    it is authorized under       Article 6 of the first Directive to cover such a
    commitment in its Member State of establishment .
 ---pagebreak---                                     Article
Any undertaking which intends to provide services shall first inform the
competent authorities of the head office Member State , and , where appropriate ,
of the Member State of the establishment concerned ,      indicating the Member
State or Member States within whose territory it intends to provide services
and the nature of the commitments it proposes to cover .
                                   Article 1 2
1.  Each Member State within whose territory    an undertaking intends ,    under
    conditions of freedom to provide services , to cover commitments within the
    meaning of Article 1C of this Directive may make the taking-up of such
    activity conditional on official authorization in so far as the
    commitments are not commitments within the meaning of Article 'i .' ; to that
    end , it may require that the undertaking :
    (a)   produce a certificate issued by the competent authorities of the head
          office Member State certifying that it possesses for its activities
          as a whole the minimum solvency margin calculated in accordance with
          Article 19 of the first Directive and that ,       in accordance with
          Article 6(1 ) of the said Directive , the authorization enables the
          undertaking to operate outside the Member State of establishment ;
    (b)   produce a certificate issued by the competent authorities of the
          Member State of establishment indicating the classes in respect of
          which the undertaking is authorized to transact business and
          certifying that those authorities do not object to the undertaking 's
          transacting business by way of freedom to provide services ;
    (c)   submit a scheme of operations containing the following particulars :
          -  the nature of the commitments which the undertaking proposes to
             cover in the Member State of provision of services ;
             the general and special conditions of the assurance policies which
             it proposes to use there ,
 ---pagebreak---                                           16
    wJ.
        -    the premium rates which the undertaking envisages applying and the
             technical  bases which   it proposes  to   use   for  each class  of
             business ,
        -    the forms and other printed documents which it intends to use in
             its dealings with policy-holders ,
   in so far as these are also required of established undertakings .
2. The competent authorities of the Member State of provision of services may
   require that the particulars referred to in paragraph 1(c ) be supplied to
   them in the official language of that State .
3. The competent authorities of the Member State of provision of services
   shall have a period of six months from receipt of the documents referred
   to in paragraph 1 in which to grant or refuse authorization on the basis
   of the compliance or non-compliance of the particulars in the scheme of
   operations submitted by the undertaking with the laws ,        regulations and
   administrative provisions applicable in that State .
A. If the competent authorities of the Member State of provision of services
   have not     taken a decision by the end     of the   period referred    to in
   paragraph 3 , authorization shall be deemed to be refused .
5. Any decision to refuse authorization or to          refuse   a  certificate as
   referred to in paragraph 1(a ) or ( b ) shall be accompanied by the precise
   grounds therefore and communicated to the undertaking in question .
6. Each Member State shall make provision for a the right to apply to the
   courts in respect of a refusal of authorization or refusal to issue the
   certificate referred to in paragraph 1(a ) or ( b ).
                                   Article 13
1. Commitments covered by way of freedom to provide services shall be
   subject ,   not to Article 12 ,  but to Article ^ where the policy-holder
   takes the initiative in seeking a commitment from the undertaking .
 ---pagebreak---                                         17
   The policy-holder shall be deemed to have taken the initiative :
   -  where   the    initial   contact   between  the   policy-holder    and  the
      undertaking , regardless of the means used , is made by the policyholder ,
      or
   -  where the contract is concluded in the Member State in which the
      undertaking is established without there having been any prior contact
      between the policy-holder and the undertaking in the Member State in
      which the policy-holder has his habitual residence .
2. An undertaking which proposes to cover commitments in a Member State under
   the arrangements provided for in this Article shall not solicit business
   or engage in any advertising there relating to such activity apart from
   publishing notices indicating its address and the classes in respect of
   which  it    is authorized   to transact  business  in  the  Member  State  of
   establishment from which it proposes to cover commitments .
3. Where the policy-holder takes the initiative in seeking the commitment
   from the undertaking through a broker ,    he shall sign ,  before the contact
   with the undertaking takes place , a statement to the effect that he wishes
   the broker to make enquiries as to the assurance arrangements available in
   one or more Member States other than that       in which he has his habitual
   residence ; such broker shall be the person referred to in Article 2(1 Ha )
   of Directive 77 / 92 /EEC . The broker shall not engage in any advertising
   concerning the possibility of seeking commitments under the arrangements
   provided for in this Article .
A. Before entering into a commitment under the arrangements provided for in
   this Article , the policy-holder shall sign a statement to the effect that
   he takes note of the fact that the commitment is subject to the rules of
   supervision of    the country of the undertaking which is to cover the
   commitment .
 ---pagebreak---                                       -   15  -
                                    Artide 14
1.   Each Member State within whose territory     an undertaking intends ,  under
     conditions of freedom to provide services ,    to cover   commitments within
     the meaning of Article 13 of this Directive        shall   require that  the
     undertaking :
     (a)  produce a certificate issued by the competent authorities of the head
          office Member State certifying that it possesses for its activities
          as a whole the minimum solvency margin calculated in accordance with
          Article 19 of the first Directive and that ,        in accordance with
          Article 6(1 ) of the said Directive ,    the authorization enables the
          undertaking to operate outside the Member State of establishment ;
     (b)  produce a certificate issued by the competent authorities of the
          Member State of establishment indicating the classes in respect of
          which the undertaking is authorized to transact business and
          certifying that those authorities do not object to the undertaking 's
          transacting business by way of freedom to provide services ;
     (c)  state the nature of the commitments which it proposes to cover in the
          Member State of provision of services .
2.   Each Member State shall make provision of a right to apply to the courts
     in    respect of a refusal to issue the certificate referred to in
   . paragraph 1(a ) or ( b ).
3.   The undertaking may commence activities as from the certified date on
     which the authorities of the Member State of provision of services are in
     possession of the documents referred to in paragraph 1 .
A.   This Article shall also apply where the Member State in whose territory
     an undertaking intends , by way of freedom to provide services , to cover
     commitments other than those referred to in Article 13 of this Directive
     does not make the taking-up of such activity conditional on official
     authorization .
 ---pagebreak---                                    Artide 15
A policy-holder who concludes an individual life assurance contract under
conditions of freedom to provide services as set out in Article 13 shall have
a period of at least 30 days from the time when the parties entered into the
contract within which to cancel the contract .
The giving of notice of cancellation by the policy-holder shall have the
effect of releasing him from any obligation arising from the contract .
These provisions shall not apply to contracts of two months' duration or less .
The legal effects of cancellation shall be determined by the law applicable to
the contract as defined in Article A , notably as regards establishing the time
when the parties entered into the contract .
                                   Article 1 Q
Member States' legislation shall provide that an undertaking established in a
Member   State may   cover within  that  State  by way  of freedom   to provide
services from an establishment in another Member State at least :
-   commitments within the meaning of Article 13 of this Directive ,
    commitments within the meaning of Article 10 but not of Article 1 ? coming
    within classes in respect of which the undertaking established in the
    first Member State lacks authorization there in accordance with Article 6
    of the first Directive .
If , however , in the latter case that undertaking has such authorization , the
first Member State may prevent such provision of services .
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                                    Artide 'l 2
1.  Where  an undertaking referred     to   in Article 'll intends       to    amend  the
    information referred to in Article ^2 ( ■) ) ( C ) or Article 1^(1 )( c >,   it shall
    submit the amendments to the competent authorities of the Member State of
    provision  of   services .   Those   amendments       shall  be  subject      to  the
    provisions of Article 12(3 ) and 1^(1 ), as the case may be .
2.  Where the undertaking intends to extend its activities to commitments
    within the meaning of Article 10 but not of Article 13 of this Directive ,
    it shall follow the procedure laid down in Articles11 and 12 .
3.  Where the undertaking intends to extend its activities to commitments
    within the meaning of Article 13 or Article 14(4 ) of this Directive ,             it
    shall follow the procedure laid down in Articles 1 1 and 1 ^.
                                    Article
Undertakings which , by virtue of Article 13(3 ) of the first Directive , carry
on simultaneously the activities referred to in the Annex to the first
coordination Directive ( non-life insurance ) and those listed in Article 1 of
the first Directive shall not , by way of freedom to provide services , cover
any commitments in any of the classes referred to in the first Directive .
                                    Article 1 ^
1.  Member States of provision of services may maintain or introduce laws ,
    regulations or administrative provisions justified on policyholder
    protection grounds , concerning , in particular , approval of general and
    special policy conditions , of forms and other printed documents for use in
    dealings with policy-holders , of sccales of premiums and of any other
    document necessary for the normal exercise of supervision on condition
    that the rules of the Member State of establishment are            insufficient to
    achieve the necessary level of protection and the requirements of the
    Member State of provision of services do not go beyond what is necessary
    in that respect .
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2. However ,   with regard to commitments within the meaning of Article 11 of
   this Directive ,   Member States of provision of services shall not lay down
   provisions requiring approval or notification of general and special
   policy conditions , scales of premiums , forms and other printed documents
   which the undertaking intends to use in its dealings with policy-holders .
                                   Article
1. Any undertaking providing services shall submit to the competent
   authorities of the Member State of provision of services all documents
   requested of it for the purposes of implementing this Article , in so far
   as undertakings established there are also obliged to do so .
2. If   the   competent  authorities   of   a  Member   State establish  that  an
   undertaking providing services within its territory does not comply with
   the legal provisions applicable to it in that State , such authorities
   shall request the undertaking concerned to put an end to the irregular
   situation .
3. If the undertaking in question fails to comply with the request referred
   to in paragraph 2 ,     the competent authorities of the Member State of
   provision of services shall inform the competent authorities of the Member
   State of establishment accordingly .     The latter authorities shall take all
   appropriate steps to ensure that the undertaking concerned puts an end to
   the   irregular    situation .  The    nature  of   those  measures  shall  be
   communicated    to the authorities of the Member State of provision of
   services .
   The competent authorities of the Member State of provision of services may
   also apply to the competent authorities responsible for the head office of
   the assurance undertaking if the services are being provided by agencies
   or branches .
4. If , despite the steps thus taken by the Member State of establishment , or
   because such steps prove inadequate or are lacking in the Member State in
   question , the undertaking persists in violating the legal provisions in
   force in the Member State of provision of services , the latter Member
   State may , after informing the supervisory authorities of the Member State
 ---pagebreak---                                         22
   of    establishment ,    take  appropriate     steps   to   prevent    further
   irregularities , including ,   in so far as it is strictly necessary , the
   prevention of the further covering of commitments by the undertaking by
   way of freedom to provide of services within its territory . In the case of
   commitments covered by way of freedom to provide     services other thanthose
   within the meaning of Article 13 of this Directive ,         such steps shall
   include withdrawal of the authorization referred to in Article 12 .     Member
   States shall ensure that within their territory it is possible to effect
   the notifications necessary for such steps .
5. The foregoing provisions shall not affect the right of Member States to
   punish irregularities committed within their territory .
6. If   the   undertaking   which  has   committed   the   irregularity   has   an
   establishment or owns property in the Member State of provision of
   services , the supervisory authorities of the latter may ,       in accordance
   with national law , apply the administrative penalties prescribed for      such
   irregularity by way of enforcement against such establishment or property .
7. Any step taken under paragraphs 2 to 6 involving penalties or restrictions
   on the provision of services must be properly justified and communic<_ : ed
   to the undertaking concerned .    Even such measure shall be subject to the
   right to apply to the courts in the Member State in which the authorities
   adopted it .
8. Where   steps are   taken under Article 2 A of    the first Directive ,     the
   competent authorities of the Member State of provision of services shall
   be informed accordingly by the authority which takes them and , where the
   steps are taken under paragraphs 1 and 3 of the said Article ,             take
   whatever action is necessary to safeguard the interests of assured
   persons .
   In the event of withdrawal of authorization under     Article 26 of the first
   Directive , the competent authorities of the Member State of provision of
   services shall be informed accordingly and shall take appropriate steps to
   prevent the establishment concerned from continuing to conclude assurance
   contracts by way of freedom to provide      services within the territory of
   that Member State .
 ---pagebreak---                                          23
9.  Every two years the Commission shall submit to the Council a report
    summarizing the number and type of cases in which , in each Member State ,
    decisions refusing authorization have been communicated under Article 12
    or measures have    been  taken   under paragraph 4 .  Member    States  shall
    cooperate with the Commission       by providing  it with    the   information
    required for the report .
                                    Article 21
In the event of an assurance undertaking being wound up , commitments arising
from contracts underwritten by way of freedom to provide services shall be met
in the same way as those arising from that undertaking 's other assurance
contracts , no distinction being made on grounds of the nationality of assured
persons or   beneficiaries .
                                    Article 22.
1.  Where an operation is offered by way of freedom to provide of services ,
    the policy-holder shall ,    before any commitment is entered into ,        be
    informed of the Member State in which the head office ,     agency or branch
    with which the contract is to be concluded is established .
    Any document issued to the policy-holder shall contain the information
    referred to in the preceding subparagraph .
2.  The contract or      other document granting cover ,      together with the
    assurance proposal where it is binding upon the proposer , shall specify
    the address of the establishment which grants the cover and that of the
    head office .
                                    Article 23
1.  Where the provision of services is conditional upon authorization by the
    Member State of provision of services ,       the amount of the technical
    reserves , including mathematical reserves , and the rules on profit sharing
    and on the surrender and paid-up values of the contracts concerned shall
    be determined under the supervision of that Member State in accordance
    with the rules it has laid down or , failing such rules , in accordance with
 ---pagebreak---                                            24
    established practice in that Member State . The covering of those reserves
    by equivalent and matching assets , the location of those assets and the
    application of the rules on profit sharing and on surrender and paid-up
    values shall be under the supervision of that Member State in accordance
    with its rules or practice .
2.  In  all    other   cases ,  those   various   operations   shall   be   under   the
    supervision of the Member State of establishment ,        in accordance with its
    rules or practice .
3.  The Member State of establishment shall ensure that the reserves relating
    to  all    the   contracts   which   the   undertaking  concludes     through   the
    establishment concerned      are sufficient    and  covered   by  equivalent    and
    matching assets .
4.  In the circumstances referred to in paragraph 1 ,           the Member State of
    establishment and the Member State of provision of services shall exchange
    any information necessary for carrying out their respective duties under
    paragraphs i and 3 .
                                      Article
Every assurance contract concluded by way of freedom to provide                services
shall  be  subject    only   to the   indirect   taxes  and  parafiscal    charges   on
assurance premiums of the Member State of commitment within the meaning of
Article 2(e ).
The law applicable to the contract pursuant to Article 4 shall not affect the
tax arrangements applicable .
Each Member State shall ,       subject to    subsequent harmonization ,      apply to
undertakings which provide services in its territory its own national
provisions concerning measures to ensure the collection of indirect taxes and
parafiscal charges due under the first subparagraph .
 ---pagebreak---                                         25
                                     TITLE IV
                                F INAL PROVISIONS
                                    Article ?5
The Commission and the competent authorities of the Member States shall
collaborate closely with a view to facilitating the supervision of the kinds
of insurance and the operations referred to in the first Directive within the
Community .
Each Member State shall inform the Commission of any major difficulties to
which application of this Directive gives rise ,    inter alia  any arising if a
Member State becomes aware of an abnormal transfer of    business referred to in
the first   Directive to  the detriment     of undertakings  established in  its
territory and to the advantage of      agencies and branches located just beyond
its borders .
The Commission and the competent authorities of the Member States concerned
shall examine such difficulties as quickly as possible in order to find an
appropriate solution .
Where necessary ,   the Commission shall submit appropriate proposals to the
Council .
                                    Article ,26
The Commission shall forward to the Council and the European Parliament
regular reports , the first on . . on the development of the market in
assurance and operations transacted under conditions of freedom to provide
services .
                                    Article 27
Member States shall amend their national provisions to comply with this
Directive within 18 months of the date of its notification and shall forthwith
inform the Commission thereof .
 ---pagebreak---                                        26
The provisions amended in accordance with this Article shall be applied within
24 months of the date of notification of this Directive .
                                   Article 28
Upon notification of this Directive , Member States shall ensure that the texts
of the main laws , regulations or administrative provisions which they adopt in
the field covered by this Directive are communicated to the Commission .
                                   Article
This Directive is addressed to the Member States .