CELEX: 51974PC0641
Language: en
Date: 1974-05-08
Title: PROPOSAL FOR A Council Directive on the liberalization of co-insurance operations and the co-ordination of laws, regulations and administrative provisions relating to co-insurance (submitted to the Council by the Commission)

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                                                                        COM(74)641 Final
                                                                        Brussels , 8 Maj' 1974
                                                     PROPOSAL FOR A
                 Council Directive on the liberalization of co-insurance operations
                     and the co-ordination of latTs , regulations and administrative
                                       provisions relating to co-insurance
                                  ( submitted to the Council by the Commission )
                    C0îT(7/i ) 6/ 1 Final
 ---pagebreak---                           EXPLANATORY MSMORAEDUM
Reasons for and aims of the Directive
1 . Co-insurance is an operation which, enables several insurers acting in
    agreement "but without .joint and several liability to insure a risk
    on the conditions and in accordance with the tariffs laid down by
    one of them , who is known as the leading insurer .
    At present the laws of certain Member States forbid insurers established
    abroad to take part in such operations . Other Member States , on the
    other hand, have no restrictions .
    The aim of this Directive is to liberalize the provision of such
    services at Community level and at the same time to carry out the
    minimum of coordination that is necessary if such liberalization is
    to be achieved ,
2 . Prom the economic point of view , the need to carry out this liberalization
    arises from the constant increase in the number of units of production
    and the growth in the volume and value of the units produced . This
    tends to add to the risks which, increasingly, can no longer be covered
    simply by resorting to the domestic insurance market .
    In these circumstances , and without calling in question the importance
    of the role played by re-insurance , the liberalization of co-insurance
    at Community level is likely to facilitate the covering of certain risks .
3 . Although, in terms in practical importance , the liberalization of co­
    insurance can in no way be compared with the liberalization of insurance
    services , which will be the subject of special directives , for certain
    Member States this initial liberalization , however modest it may appear ,
    will provide a valuable foretaste of more complete freedom .
                                                                         /•
 ---pagebreak--- The legal basis of this draft is provided by Article 57(2 ) which
covers the coordination aspect and to which Article 66 refers , by-
Article 63(2 ) which concerns the liberalization of services and by
the second paragraph of Article 59 which concerns agencies and branches
established witfcin the Community and belonging to undertakings whose
head offices are outside the Community ,          '
 ---pagebreak--- II . Titles and Articles of the Directive
     TITLE I    :  GEIIERAL PROVISIONS
       Art . 1  s Object of the Directive
       Art .- 2 : Definitions
       Art . 3  s Liberalization of Community co-insurance
       Art . 4  J Third country undertakings
     TITLE II   s CONDITIONS AND PROCEDURES FOR COMMUNITY CO-INSURANCE
       Art . 5  ? Country of establishment of leading insurer
       Art . 6  : Minimum underwriting
       Art . 7  ' Law applicable to contract
       Art . 8  : Determination and representation of reserves
       Art . 9  5  Statistical data
       Art . 10 : Collaboration between supervisory authorities
       Art . 11 : Winding-up
     TITLS III  : FINAL PROVISIONS
       Art . 12 : Collaboration between Commission and Member States
       Art . 13 : Revision clause
       Art . 14 s Time-limits for application
       Art . 15 s Communication of implementing provisions
       Art . 16 : Addressees of the Directive
 ---pagebreak---                                                                      t
                                       - 4 -
III . Notos on the Titles and principal Articles
      Title I
      General provisions (Articles 1 to 4)
      Only the following points call for special comments :
      1 . The definition in Article 2 was drawn up so as to take account of
          the practical aspects of co-insurance .
          It was found that sometimes one object or event might be covered "by
          several co-insurance contracts , the risk covered by each of these
          contracts being one part or aspect of the object or event to be
          insured. In such a case the conditions and the tariffs might vary
          from one contract to another . However , there is only one kind of
          condition and one tariff only per contract . Accordingly the rule
          was adopted whereby there must be a single contract .
      2 . Motor vehicle liability was expressly excluded from the draft 's
          field of application because in most Member States the obligation
          to insure against this risk has been accompanied by the creation of
          special funds financed by a percentage of premiums collected .
          In the context of the freedom to provide co-insurance services , the
          levying of these percentages from co-insurers established in a
          Member State other than that of the leading insurer would raise
          serious difficulties ,     over , it was found that in practice motor
          vehicle liability rarftiy gave rise to the conclusion of co-insurance
          contracts .
          Certain other risks listed in the Annex to the first Council Directive
          of 24 July 1973 also rarely give rise to the conclusion of contracts
          of this nature .
          However , it was not considered desirable to exclude them expressly
          from the application of the Directive since the introduction of too
          many exceptions should be avoided as far as; .possible as it might
          prejudice the future development of Community co-insurance .
                                                                           ./
 ---pagebreak---                                       - 5 -
3 . The question of the field of application of the Directive arises also
    in connection with participation in Cocununity co-insurance operations
    "by head offices and "by their agencies and "branches .
    The solution adopted is literal in the sense that all vindertakings
    established in the Community may engage in Community co-insurance
    operations (Article 3 ).
    For legal and practical reasons , neither the exclusion of head offices
    where- an agency or branch is established in the country of the leading
    insurer nor the exclusion of agencies and branches in favour of their
    head office established in a Member State other than that of the leading
    insurer can be contemplated .
    Legally, it is inadmissible that the fact that an undertaking establishes
    itself in another Member State should deprive it of the right to benefit
    from the liberalization of services .
    In practice , the First Coordination Directive provides for the harmoni­
     zation of legislation as regards the conditions for the taking-up of the
    business of insurance , which means that at Community level undertakings
    are subject to an identical system of supervision .
    Lastly, certain statistics show that such restrictions would have the
    effect of depriving the envisaged liberalization of much of its effectiveness ,
    since most insurance companies have one or more agencies and branches in
    the various Member States . Therefore , in many cases head offices would be
    practically excluded from Community co-insurance , which is completely
    unjustified.
    Moreover , the obligation to use only the services of the head office
     situated in a Member State other than that of the leading insurer to the
    exclusion of its agencies and branches established in other Member States
    appears equally unjustified by reason of the organization of the insurance
    market in certain Member States which can result in agencies and branches
    acquiring in the course of time vast experience in the covering of certain
    risks .
 ---pagebreak--- 4* As regards the problem 01 third countries , the existence of Title III
    of the Ilrst Coordination Directive , which contains certain provisions
    applicable to agencies or branches established within the Community and
    belonging to undertakings whose head offices are outside the Community,
    justifies recourse to the provisions of the second paragraph of
    Article 59 in order to authorize these agencies and branches to engage
    in Community co-insurance on the same terms as those whose head offices
    are established within the Community (Article 4)«
    Title III of that Directive contains proper safeguards in respect of the
    financial situation of these undertakings , which are subject to regular
    supervision by the national authorities .
    On the other hand, Member States are for the moment free to continue to
    apply their own national legislation to their direct co-insurance business
    with undertakings established in third countries .
Title II
Conditions and procedures for Community co-insurance (Articles 5 "to 11 )
    The Member State in which the leading insurer must be established is not
    laid down categorically in the Directive ; this reflects the desire to
    take the existing situation into account .
    For those Member States which apply precise and sometimes differing
    criteria in this connection, provision has simply been made for a rule
    designed to prevent any conflict of laws . If such a conflict arises ,
    only the place where the risk is situated must be taken into consideration
    (Article 5).
2 . To take account of the wishes of certain Member States , provision has
    been made in the Directive for reserving a given percentage of the risk
    for co-insurers established in the country of the leading insurer .
    However , a maximum percentage has been laid down in order to prevent
    this device restricting excessively the scope of the Directive .
 ---pagebreak---                                    - 7 -
    The percentage adopted, 25      represents a reasonable margin which
    can "be abolished subsequently in the light of experience (Article 6).
3 . The law applicable to the insurance contract is that of the country
    where the leading insurer has his establishment (Article 7 ) •
    Purposely, mention is made merely of the law of the country of the
    leading insurer and not of its national law.
    This means that , depending on the legislation applicable in the
    various Member States, this law may either enforce the application
    of national law or , on the contrary, leave the parties complete
    freedom of choice . This is a temporary   solution since freedom of
    choice will probably become the rule , as part of the harmonization
    which is in progress with a view to the liberalization of services .
4. The technical reserves are calculated in accordance with the rules
    applicable in the Member States of the co-insurers (Article 8 ).
    The only restriction on this principle concerns reserves for pending
    claims , which must be at least equal to those determined by the leading
    insurer according to the rules of the country where he is established.
    This provision is based on the assumption that in all probability the
    leading insurer is in the best position to evaluate the amount of
    such reserves .
5 . Collaboration between the supervisory authorities is an important
    factor in the implementation of the Directive . Such collaboration
    calls for some laioirle&ge of developments in the field of Community
    co-insurance .
                                                                      •A
 ---pagebreak---     This is x«iy provision has been made for the competent authorities
    to ensure that the undertakings concerned have the necessary
    statistical data (Articles 9 and 10 ).
6 . As regards winding-up , it tfas considered desirable , even before the
    directive on the subject which is now being drawnup was adopted, to
    assert the principle of equality of treatment , irrespective of
    nationality, for creditors deriving their rights from co-insurance
    business and from other direct insurance business , (Article ll )«
Title III
Final provisions (arts . 12 to 16 )
These provisions are contained m the directives already adopted in the
insurance field and consequently, do not call for any special comment .
 ---pagebreak---                                       - 9 -
                                  PROPOSAL FOR A
     Council Directive on the liberalization of co-insurance operations
         and the co-ordination of la.?s , ro^ulations and administrative
                       provisions relating to c>-instir Jico
THE COUNCIL 0? THE EUROPEAN COMMUNITIES
Having regard to the Treaty establishing the European Economic Community,
and in particular Article 57(2 ), the second paragraph of Article 59t
Article 63(2 ) and Article 66 thereof;
Having regard to the proposal from the Commission ;
Having regard to the Opinion of the European Parliament ;
Having regard to the Opinion of the Economic and Social Committee ;
Whereas it is necessary to develop co-insurance between Member States
with a view to increasing the capacity of the insurers of the Community
to accept risks , by allowing insurers to call not only on co-insurers
established in their country but also on those established in other
Member States ;
Whereas the removal of restrictions in this matter is , as far as direct
insurance operations other than life assurance are concerned, dependent
on the achievement of freedom of establishment for these operations ;
whereas this liberalization has been achieved by the first Council Directive
 ( l ) on the coordination of provisions relating to insurance other than
life assuranoe and by the Directive ( 2 ) abolishing restrictions on freedom
of establishment ;
Whereas the removal of restrictions on the freedom to transact Community
co-insurance business must be accompanied by a minimum of coordination
so as to prevent distortions in competition and inequality of treatment ;,
whereas such coordination must > not affect the exi sting arrangements in
the Member States 1 which recognize the freedom to provide services in the
field o :? Community co -insurance ■
       r      _ _ _ _                                                     •
 (1 ) 0J No . L 228 , 16 A-agust 1973, p. 3 .
 ( 2 ) 0J No . L 223 , 16 Av.gust 1973 , p. 20 .
 ---pagebreak---                                  ..- 10 τ
Whereas the right to transact Community oo-insurance business should be
open to all insurance undertakings established in the various Member
States , including agencies and branches established within the Community
and belonging to undertakings whose head offices are outside the Community,
Whereas it is necessary to require the leading insurer to assume responsi­
bilities exceeding those of an intermediary between the person seeking
insurance and the co-insurer or co-insurers ;
Whereas the law applicable to the contract should be determined by the
laws of the country in whi'oh the leading insurer is established ;
Whereas Member States should be permitted to reserve a minimum percentage
of participation in the risk for the leading insurer and co-insurers
established in the leading insurer 's country ; whereas this percentage
can be fixed for an initial period at 25 $5
Whereas the leading insurer is better placed than the other co-insurers
to evaluate claims and to fix the minimum amount of reserves for pending
claims ;
Whereas work is in progress concerning the winding up of insurance under­
takings ; whereas provision must nevertheless be made now to ensure that in
the event of an insurance undertaking being wound up persons entitled
under Community co-insurance contracts enjoy equality of treatment with
those entitled in connection with the other insurance business of the
undertaking;
IJhereas special cooperation should be provided for in the co-insurance
field both between the supervisory authorities of the Member States and
between these authorities and the Commission;
                      HAS ADOPTED THIS DIIffiCTIVSi
 ---pagebreak---                                      - 11 -
TITLE I     :   GENERAL PROVISIONS
AflTICLS 1
This Directive has as its o"bject the setting up of a system of Community
rules on co-insurance in respect of the risks set out in the Annex to
the first Council Directive (l ) of 24 July 1973 on the coordination of
laws , regulations and administrative provisions relating to the taking
up and pursuit of the "business of direct insurance other than life
assurance , hereinafter called " the First Coordination Directive", with
the exception of the risks classified under No . 10 (Motor vehicle liability),
of point A of that Annex.
ARTICLE 2
Ptor the purpose of this Directive co-insurance means : the insuring by
two or more insurance undertakings , hereinafter referred to as " co-insurers ",
acting at the instigation of one of them, called the leading insurer , and
in agreement with each other but without joint and several liability, of
a single risk under a single contract at a single premium and for a single
period .
Co-insurance shall be called Community co-insurance where at least one
of the co-insurers is established, within the meaning of the first
Coordination Directive , in a Member State other than that of the
leading insurer .
The conditions of insurance and the tariffs shall be determined by the
leading insurer .
ΑΗΤΙΟΙΖϋ 3
The right ox undertakings having their head office in a Member State
 and vrhich are subject to and satisfy the requirements of the Pirst
Coordination Directive to participate in Community co-insurance shall
 not be made subject to any provisions other than those of this Directive .
 This right shall exist both for such head offices and for their agencies
 and branches .                                                           /
 ( l ) OJ No . L 228, 16 August 1973 » p. " 3 .
 ---pagebreak---                                   - 12 -
ARTICLE 4
This Directive shall apply to agencies and "branches established within the
Community "belonging to undertakings whose head offices are outside the
Community and which are subject to and comply with the rules of Title III
of the First Coordination Directive .
 ---pagebreak---                                     - 13 -
TITUBI : CONDITICI1TS MS PROCEDURES 0? COMUMTY C0-IP5URMGE
ARTI OLE 5
If the law in any country contains provisions concerning the place of
establishment of the leading insurer, and if svich provisions give rise
to a conflict of laws , the law applicable shall be that which requires
the leading insurer to be established in the country where the risk
is situated .
ARTICLE 6
Any Member State may require that part of the risk, up to a maximum of
25 % be underwritten by the leading insurer and other co-insurers
established in the country of the leading insurer .
ARTICLE 7
The contract of co-insurance shall be governed by the law of the country
where the leading insurer is established . Matters concerning intermediaries
and commission shall be subject to the provisions of the same law .
ARTICLE 8
                                                          ν
1 . The amount of technical reserves shall be determined by the different
     co-insurers according to the rules fixed by the State where they are
     established or , in default of such rules , according to the practices
     current in that State . However , the reserve for pending claims shall
     be at least equal to that determined by the leading insurer according
     to the rules or practices of the State where such leading insurer is
     established.
 2 . The technical reserves established by the different co-insurers shall
     be represented by matching assets localized in the Member States where
     they are respectively established . However , greater flexibility in the
     rules on matching assets and their localization may be allowed by the
     Member States .
 ---pagebreak---                                 - 14 -
ARTICLE 9
Every Member State shall ensure that co-insurers established on its
territory have available to them statistical data showing the extent
of Community co-insurance operations and the countries concerned.
ARTICLE 10
The supervisory authorities of the Member States shall cooperate closely
for the purpose of implementing the provisions of this Directive and    ,
shall provide each other with all the information necessary to this end.
ARTICLE 11
In the event of an insurance undertaking being wound up commitments to
the insured or to other persons entitled ariBifig under Community co­
insurance contracts shall be honoured in the same way as those arising
under other insurance contracts and without distinction as to nationality.
                                                                    ./•
 ---pagebreak---                                     - 15 -                       /-■
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' TITUS III :   EI1TAL PROVISIONS
  ARTICLE 12
  The Commission and the competent authorities of the Member States shall
  cooperate closely for the purpose of examining any difficulties which
  arise in implementing this Directive .
  ARTICLE 13
  The Commission shall submit to the Council , within six years of the date
  of notification of this Directive , a report on the development of the
  Community co-insurance market .
  The Commission shall also submit to the Council any proposal for a more
  complete liberalization of Community co-insurance , in particular by the
  reduction of the percentage referred to in Article 6 .
  ARTICLE 14
  Member States shall within eighteen months following notification of this
  Directive amend their national provisions so as to comply therewith and
  shall' inform the Commission thereof .
  The provisions so amended shall be applied within 24 months of the date
  of notification .
  ARTICLE 15
  Poll owing notification of the Directive Member States shall ensure that
  tho texts of tho main provisions by way of law, regulations or adraini strat?. ve
  actions which they adopt in tho field governed by this Directive are
  communicated to the Commission .
  ARTICLE 16
  This Directive is addressed to the Member States .