CELEX: 51992PC0063
Language: en
Date: 1992-02-24
Title: Proposal for a COUNCIL DIRECTIVE AMENDED PROPOSAL FOR A THIRD COUNCIL DIRECTIVE ON THE COORDINATION OF LAWS, REGULATIONS AND ADMINISTRATIVE PROVISIONS RELATING TO DIRECT INSURANCE OTHER THAN LIFE ASSURANCE AND AMENDING DIRECTIVES 73/239/EEC AND 88/357/EEC

COMMISSION OF THE EUROPEAN COMMUNITIES
                                          C0MC92) 63  final - SYN 291
                                          Brussels, 24 February 1992
                               Proposal for a
                             COUNCIL DIRECTIVE
                AMENDED PROPOSAL FOR A THIRD COUNCIL DIRECTIVE
                   ON THE COORDINATION OF LAWS, REGULATIONS
          AND ADMINISTRATIVE PROVISIONS RELATING TO DIRECT INSURANCE
              OTHER THAN LIFE ASSURANCE AND AMENDING DIRECTIVES
                           73/239/EEC AND 88/357/EEC
                       (presented by the Commission)
MiV
 ---pagebreak---                             EXPLANATORY MEMORANDUM
On the 27th of July 1990 the Commission sent to the Council the Proposal for
a Third Council Directive on the co-ordination of laws, regulations and
administrative provisions relating to direct insurance other than life
assurance and amending Directives 73/239/EEC and 88/357/EEC (proposal for a
Third Non-Life Insurance Directive)(1^.   The aim of this proposal is to
complete the single market In the area of direct insurance other than life
assurance.
The Economic and Social Committee gave its opinion on the 28th of February
1991(2).   The European Parliament gave its opinion on the 12th of February
1992, on the basis of a report from its Legal Committee, thus completing the
first reading of this proposal.   Both the European Parliament and the
Economic and Social Committee approved the general approach of the initial
proposal based on the principle of the single licence and single control.
The Commission has accepted a large number of the amendments proposed by the
European Parliament, at least in their intention, if not their exact
wording.   The same goes for several of the comments made by the Economic and
Social Committee.
 In accordance with Article 149, paragraph 3 of the Treaty, the Commission
has decided to amend its initial proposal.   The changes made take account,
not only of the amendments proposed by the European Parliament and the
comments of the Economic and Social Committee which it has accepted, but
 also of the current state of work in the Council.
Apart from the new provisions which aim to complete the system of control of
 insurance companies (confidentiality of information held by the supervisory
 authorities (Art.16), transfer of portfolios for branches of insurance
 companies whose head office is not situated within the Community (Art.53)),
 the main changes concern the rules for financial supervision, the rôle of
 the concept of the general good, the extension of the legal forms allowed
 for the creation of an insurance company and the transitional periods.
 (1) JO N* C 244 of 28.9.1990, p. 28
 (2) JO N* C 102 of 18.4.1991, p. 7.
 ---pagebreak--- For the prudential rules, the Commission can accept most of Parliament's
amendments concerning the investment rules, in so far as they are
compatible with the approach of the initial proposal which is to lay down
prudential rules allowing mutual recognition of the control systems
without obstructing the freedom of action of insurance companies more than
is necessary for consumer protection (Arts 21 and 22). At the same time
the structure of these articles has been changed in the interests of
clarity and precision.
Further, in as far as the elements making up the solvency margin are
concerned, the amended proposal adds to subordinated loans, subordinated
securities and cumulative preference shares, with these three categories
together being able to represent up to 50% of the margin (Art. 2 4 ) .
Article 28 has been changed to highlight more clearly the rôle of
'community filter' which must be played by the concept of the general good
 in order to avoid the free choice of policyholders being restricted by
national legislation for reasons other than the needs of consumer
protection.   The conditions of application of this concept have been made
more precise in a new recital (No.19) which takes account of the case law
of the Court of Justice.   Going further, the extent of the general good
has been defined in two areas - health insurance as a substitute for
social security and insurance against accidents at work - where the
protection of the persons insured is particularly important (recitals No.
23 to 26 and Articles 54 and 55).
Article 6 has also been reviewed to update the legal forms that can be
used in France by insurance companies.    This amendment results from the
fact that French provident   institutions and mutuals have recently been
brought under the supervisory rules of the insurance directives.     For the
different forms of European company which may be adopted in future,
Article 51 as amended will allow the Commission to include them directly
after taking the opinion of the Insurance Committee.
 ---pagebreak--- - Finally, Article 50 adapts the transitional provisions of the Second
  Directive 88/357/EEC to the conditions laid down by this proposal for
  those Member States who must make a great effort to adapt to the creation
  of a single market.
On the other hand the Commission has not considered it appropriate to take
up certain other amendments, particularly in the three following areas,
which would reduce the impact of the creation of the single market.
- Amendments 10, 12 and 29 would replace non-systematic a posteriori control
  of policy conditions and tariffs by periodic or systematic communication.
  The Commission considers that the system of a posteriori control, already
   implemented for large risks in the second directive, is the most
  appropriate for the conditions of the single market.
  This is a key element of the proposal for a third directive;    not to
  restrict the free provision of innovative and competitive products, whilst
  still allowing Member states to maintain their legal provisions for the
  protection of the general good.
- In the same way the Commission considers that the amendments which aim to
  maintain the exclusive right of certain bodies referred to in Article 4 of
   the first directive (amendment No. 32), even if only for a transitional
  period (amendment No. 6 ) , go beyond the criteria of necessity and
  proportionality fixed by the Court of Justice to Justify restrictions on
   the freedoms of establishment and of provision of services.
- Finally, given the guarantees already provided by recitals 23 to 25 and
   the new article 54, the same reasoning leads to the rejection of
   amendments No. 8 and 44 which aim to maintain the principle of
   specialisation or the restriction of separate accounting for health
   insurance which is a substitute for social security.
 ---pagebreak---  ---pagebreak---                                         v.
                AMENDED PROPOSAL FOR A THIRD COUNCIL DIRECTIVE
                   ON THE COORDINATION OF LAWS, REGULATIONS
         AND ADMINISTRATIVE PROVISIONS RELATING TO DIRECT INSURANCE
              OTHER THAN LIFE ASSURANCE AND AMENDING DIRECTIVES
                        .  73/239/EEC AND 88/357/EEC
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
                                              (2)
In co-operation with the European Parliament
                                                                   (3)
Having regard to the Opinion of the Economic and Social Committee
 (1) OJ No C 244, 28.9.1990, p. 28.
 (2) Opinion delivered on 12 February 1992 (not yet published in the Official
     Journal) and Decision of                  (not yet published in the Official
     Journal).
 (3) OJ No C 102, 18.4.1991, p. 7.
 ---pagebreak---  ---pagebreak--- (1) Whereas it is necessary to complete the internal market in direct insurance
    other than life assurance from the point of view both of the right of
    establishment and of the freedom to provide services, to make it easier for
    insurance undertakings with head offices in the Community to cover risks
    situated within the Community;
(2) Whereas the Second Council Directive of 22 June 1988 on the co-ordination of
     laws, regulations and administrative provisions relating to direct insurance
    other than life assurance and laying down provisions to facilitate the
    effective exercise of freedom to provide services and amending
    Directive 73/239/EEC (88/357/EEC)          has already contributed substantially to
    the achievement of the internal market in direct insurance other than life
    assurance by granting policy-holders who, by virtue of their status, iheir
    size or the nature of the risks to be insured, do not require special
    protection in the Member State in which a risk is situated complete freedom to
    avail themselves of the widest possible insurance market;
(3) Whereas Directive 88/357/EEC therefore represents an important stage in the
    merging of national markets into an integrated market and that stage must be
    supplemented by other Community instruments with a view to enabling all
    policy-holders, irrespective of their status, their size or the nature of the
    risks to be insured, to have recourse to any insurer with a head office in the
    Community who carries on business there, under the right of establishment or
    the freedom to provide services, while guaranteeing them adequate protection;
(1) OJ No L 172. 4.7.1988, p. 1.      Directive as 1-isf .-wnt»*-^ Uy
    Direct ivp 90/018/KKC <<».J No !. 330  2° . 1 1 1'-»°0 t
 ---pagebreak--- (4) Whereas this Directive forms part of the body of Community legislation already
    enacted which includes the First Council Directive of 24 July 1973 on the
    co-ordination of laws, regulations and administrative provisions relating to
    the taking up and pursuit of the business of direct insurance other than life
    assurance (73/239/EEC)     and the Council Directive of 19 December 1991 on
    the annual accounts and consolidated accounts of insurance undertakings
                 (2)
    (91/674/EEC)     ;
(5) Whereas the approach adopted consists in bringing about such harmonization as
    is essential, necessary and sufficient to achieve the mutual recognition of
    authorizations and prudential control systems, thereby making it possible to
    grant a single authorization valid throughout the Community and apply the
    principle of supervision by the home Member State;
(6) Whereas, as a result, the taking up and the pursuit of the business of
    insurance are henceforth to be subject to the grant of a single official
    authorization issued by the competent authorities of the Member State in which
    an insurance undertaking has its head office; whereas such authorization
    enables an undertaking to carry on business throughout the Community, under
    the right of establishment or the freedom to provide services; whereas the
    Member State of the branch or of the provision of services may no longer
    require insurance undertakings which wish to carry on insurance business there
    and which have already been authorized in their home Member State to seek
    fresh authorization; whereas Directives 73/239/EEC and 88/357/EEC should
    therefore be amended along those lines;
(1) OJ No L 228, 16. 8.1973, p. 3. Directive as last amended by
    Directive 88/357/EEC (OJ No L 172. 4.7.^988. p. 1).
(2) OJ No L 374, 31.12.1991. p. 7.
 ---pagebreak---                                      7.
 (7) Whereas the competent authorities of home Member States will henceforth be
     responsible for monitoring the financial health of insurance undertakings,
     including their state of solvency, the establishment of adequate technical
     provisions and the covering of those provisions by matching assets;
 (8) Whereas certain provisions of this Directive define minimum standards;
     whereas a home Member State may lay down stricter rules for insurance
     undertakings authorized by its own competent authorities:
 (9) Whereas the competent authorities of the Member States must have at their
     disposal such means of supervision as are necessary to ensure the orderly
     pursuit of business by insurance undertakings throughout the Community
     whether carried on under the right of establishment or the freedom to provide
     services; whereas, in particular, they must be able to introduce appropriate
     safeguards or impose sanctions aimed at preventing irregularities and
     infringements of the provisions on insurance supervision;
(10) Whereas the internal market comprises an area without internal frontiers and
     involves access to all insurance business other than life assurance
     throughout the Community and, hence, the possibility for any duly authorized
     insurer to cover any of the risks referred to in the Annex to
     Directive 73/239/EEC; whereas, to that end, the monopoly enjoyed by certain
     bodies in certain Member States in respect of the coverage of certain risks
     must be abolished;
(11) Whereas the provisions on transfers of portfolios must be adapted to bring
     them into line with the single authorization system introduced by this
     Direct ive:
 ---pagebreak--- (12) Whereas Directive 91/674/EEC has already effected the necessary harmonization
      of the Member States' rules on the technical provisions which insurers are
      required to establish to cover their commitments, and that harmonization
     makes it possible to grant mutual recognition of those provisions;
(13) Whereas the rules governing the spread, localization and matching of the
      assets used to cover technical provisions must be co-ordinated in order to
      facilitate the mutual recognition of Member States' rules; whereas that
      co-ordination must take account of the measures on the liberalization of
      capital movements provided for in the Council Directive of 24 June 1988 for
     the implementation of Article 67 of the Treaty (88/361/EEC)      and the
     progress made by the Community towards economic and monetary union;
(14) Whereas, however, the home Member State may not require insurance
     undertakings to invest the assets covering their technical provisions in
     particular categories of assets, as such a requirement would be incompatible
     with the measures on the liberalization of capital movements provided for in
     Directive 88/361/EEC;
(15) Whereas, pending the adoption of a Directive on investment services
     harmonizing inter alia the definition of the concept of regulated market, for
     the purposes of this Directive and without prejudice to such future
     harmonization that concept must be defined provisionally; whereas that
     definition will be replaced by that harmonized at Community level which will
     give the home Member State of the market the responsibilities for these
     matters which this Directive transitionally gives to the insurance
     undertaking's home Member State;
(1) OJ No L 178, 8.7.1988, p. 5
 ---pagebreak---                                         â.
(16) Whereas the list of items of which the solvency margin required by
      Directive 73/239/EEC may be made up must be supplemented to take account of
     new financial instruments and of the facilities granted to other financial
      institutions for the constitution of their own funds;
(17) Whereas within the framework of an integrated insurance market policy-holders
     who. by virtue of their status, their size or the nature of the risks to be
      insured, do not require special protection in the Member State in which a
     risk is situated should be granted complete freedom to choose the law
     applicable to their insurance contracts;
(18) Whereas the harmonization of insurance contract law is not a prior rendition
     for the achievement of the internal market in insurance; whereas, therefore,
     the opportunity afforded to the Member States of imposing the application of
     their law to insurance contracts covering risks situated within their
     territories is likely to provide adequate safeguards for policy-holders who
     require special protection;
(19) Whereas within the framework of an internal market it is in the
     policy-holder's interest that he should have access to the widest possible
     range of insurance products available in the Community so that he can choose
     that which is best suited to his needs; whereas it is for the Member State in
     which the risk is situated to ensure that there is nothing to prevent the
     marketing within its territory of all the insurance products offered for sale
     in the Community as long as they do not conflict with the legal provisions
     protecting the general good in force in the Member State in which the v\n\  is
     situated, and insofar as the general good is not safeguarded by the rules of
     the home Member State, provided that such provisions must be applied without
     discrimination to all undertakings operating in that Member State and be
     objectively necessary and in proportion to the objective pursued;
 ---pagebreak---                                        A*.
(20) Whereas the Member States must be able to ensure that the insurance products
     and contract documents used, under the right of establishment or the freedom
     to provide services, to cover risks situated within their territories comply
     with such specific legal provisions protecting the general good as are
     applicable; whereas the systems of supervision to be employed must meet the
     requirements of an integrated market but their employment may not constitute
     a prior condition for carrying on insurance business; whereas from this
     standpoint systems for the prior approval of policy conditions do not appear
     to be justified; whereas it is therefore necessary to provide for other
     systems better suited to the requirements of an internal market which enable
     every Member State to guarantee policy-holders adequate protection;
(21) Whereas if a policy-holder is a natural person, he should be informed by the
     insurance undertaking of the law which will apply to the contract and of the
     arrangements for handling policy-holders* complaints concerning contracts;
(22) Whereas Member States may provide that private health cover or health cover
     taken out on a voluntary basis may serve as a partial or complete alternative
     to the health cover provided by the social security systems;
(23) Whereas the nature and social consequences of health insurance contracts
     justify the competent authorities of the Member State in which a risk is
     situated in requiring systematic notification of the general and special
     policy conditions in order to verify that such contracts are a partial or
     complete alternative to the health cover provided by the social security
     system; whereas such verification must not be a prior condition for the
     marketing of the products; whereas the particular nature of health insurance,
     serving as a partial or complete alternative to the health cover provided
 ---pagebreak---                                         44
     by the social security system, distinguishes it from other classes of
     indemnity insurance and life assurance insofar as it is necessary to ensure
     that policy-holders have effective access to private health cover or health
     cover taken out on a voluntary basis regardless of their age or risk profile;
(24) Whereas to this end some Member States have adopted specific legal
     provisions; whereas, to protect the general good, it is possible to adopt or
     maintain such legal provisions insofar as they do not unduly restrict the
     right of establishment or the freedom to provide services, it being
     understood that such provisions must apply in an identical manner whatever
     the home Member State of the undertaking may be; whereas these legal
     provisions may differ in nature according to the conditions in each Member
     State; whereas these measures may provide for open enrolment, rating on a
     uniform basis according to the type of policy and lifetime cover; whereas
     that objective may also be achieved by requiring undertakings offering
     private health cover or health cover taken out on a voluntary basis to offer
     standard policies in line with the cover provided by statutory social
     security schemes at a premium rate at or below a prescribed maximum and to
     participate in loss compensation schemes; whereas, as a further possibility,
     it may be required that the technical basis of private health cover or health
     cover taken out on a voluntary basis be similar to that of life assurance;
(2b) Whereas, because of the co-ordination effected by Directive 73/239/EEC as
     amended by this Directive, the possibility, afforded to the Federal Republic
     of Germany under Article 7(2)(c) of the same Directive, of prohibiting the
     simultaneous transaction of health insurance and other classes is no longer
     justified and must therefore be abolished;
 ---pagebreak---                                        It-
(26) Whereas Member States may require any insurance undertakings offering
     compulsory insurance against accidents at work at their own risk within their
     territories to comply with the specific provisions laid down in their
     national law on such insurance; whereas, however, this requirement may not
     apply to the provisions concerning financial supervision, which are the
     exclusive responsibility of the home Member State;
(27) Whereas exercise of the right of establishment requires an undertaking to
     maintain a permanent presence in the Member State of the branch; whereas
     responsibility for the specific interests of insured persons and victims in
     the case of third-party-liability motor insurance requires adequate
     structures in the Member State of the branch for the collection of all the
     necessary information on compensation claims relating to that risk, with
     sufficient powers to represent the undertaking vis-à-vis injured parties who
     could claim compensation, including powers to pay such compensation, and to
     represent the undertaking or, if necessary, to arrange for it to be
     represented in the courts and before the competent authorities of that Member
     State in connection with claims for compensation;
(28) Whereas within the framework of the internal market no Member State may
     continue to prohibit the simultaneous carrying on of insurance business
     within its territory under the right of establishment and the freedom to
     provide services; whereas the option granted to Member States in this
     connection by Directive 88/357/EEC should therefore be abolished;
(29) Whereas provision should be made for a system of penalties to be imposed
     when, in the Member State in which a risk is situated, an insurance
     undertaking does not comply with those provisions protecting the general good
     that are applicable to it;
 ---pagebreak---                                        /13.
(30) Whereas some Member States do not subject insurance transactions to any form
     of indirect taxation, while the majority apply special taxes and other forms
     of contribution, including surcharges intended for compensation bodies;
     whereas the structures and rates of such taxes and contributions vary
     considerably between the Member States in which they are applied; whereas it
      is desirable to prevent existing differences* leading to distortions of
     competition in insurance services between Member States; whereas, pending
     subsequent harmonization, application of the tax systems and other forms of
     contribution provided for by the Member States in which risks are situated is
      likely to remedy that problem and it is for the Member States to make
     arrangements to ensure that such taxes and contributions are collected;
(31) Whereas technical adjustments to the detailed rules laid down in this
     Directive may be necessary from time to time to take account of the future
     development of the insurance industry; whereas the Commission will make such
     adjustments as and when necessary, after consulting the Insurance Committee
     set up by Directive 91/675/EEC     , in the exercise of the implementing
     powers conferred on it by the Treaty;
(32) Whereas it is necessary to adopt specific provisions intended to ensure
     smooth transition from the legal regime in existence when this Directive
     becomes applicable to the regime that it introduces, taking care not to place
     an additional workload on Member States' competent authorities;
(1) 0J No 1. 174  11.1?. 199 1 n 3?
 ---pagebreak---                                         /y.
(33) Whereas under Article 8c of the Treaty account should be taken of the extent
     of the effort which must be made by certain economies at different stages of
     development: whereas, therefore, transitional arrangements should be adopted
     for the gradual application of this Directive by certain Member States,
HAS ADOPTED THIS DIRECTIVE:
                                      TITLE I
                               DEFINITIONS AND SCOPE
                                     Article 1
For the purposes of this Directive:
(a) "insurance undertaking" shall mean an undertaking which has received official
    authorization in accordance with Article 6 of Directive 73/239/EEC;
(b) "branch" shall mean an agency or branch of an insurance undertaking, having
    regard to Article 3 of Directive 88/357/EEC;
(c) "home Member State" shall mean the Member State in which the head office of
    the insurance undertaking covering a risk is situated;
(d) "Member State of the branch" shall mean the Member State in which the branch
    covering a risk is situated;
 ---pagebreak---                                            It-
(e) "Member State of the provision of services" shall mean the Member State in
       which a risk is situated, as defined in Article 2(d) of Directive 88/357/EEC,
        if it is covered by an insurance undertaking or a branch situated in another
       Member State;
(f) "control" shall mean the relationship between a parent undertaking and a
       subsidiary, as defined in Article 1 of Directive 83/349/EEC     , or a similar
        relationship between any natural or legal person and an undertaking;
(g) "qualifying holding" shall mean a direct or indirect holding in an undertaking
       which represents 10% or more of the capital or of the voting rights or which
       makes it possible to exercise a significant influence over the management of
       the undertaking in which a holding subsists.
       For the purposes of this definition, in the context of Articles 8 and 15 and
       of the other levels of holding referred to in Article 15, the voting rights
                                                         (2)
       referred to in Article 7 of Directive 88/627/EEC      shall be taken into
       account ;
(h) "parent undertaking" shall mean a parent undertaking as defined in Articles 1
       and 2 of Directive 83/349/EEC;
(i) "subsidiary" shall mean a subsidiary undertaking as defined in Articles 1
       and 2 of Directive 83/349/EEC; any subsidiary of a subsidiary undertaking
       shall also be regarded as a subsidiary of the undertaking which is those
       undertakings' ultimate parent undertaking;
(I) OJ No L 193. 10. 7.1983. p. 1.
<'.?.) 0 1 No I, MM. 17.12 1908. p. 02.
 ---pagebreak---                                       46.
(j) "regulated market" shall mean a financial market regarded by an undertaking's
    home Member State as a regulated market pending the adoption of a definition
     in a Directive on investment services and characterized by:
     - regular operation, and
    - the fact that regulations issued or approved by the appropriate authorities
       define the conditions for the operation of the market, the conditions for
       access to the market and, where the Council Directive of 5 March 1979
       co-ordinating the conditions for the admission of securities to official
       stock-exchange listing (79/279/EEC)      applies, the conditions for
       admission to listing imposed in that Directive or, where that Directive does
       not apply, the conditions to be satisfied by a financial instrument in order
       to be effectively dealt in on the market.
    For the purposes of this Directive, a regulated market may be situated in a
    Member State or in a third country.    In the latter event, the market must be
    recognized by the home Member State and meet comparable requirements.    Any
    financial instruments dealt in must be of a quality comparable to that of the
    instruments dealt in on the regulated market or markets of the Member State in
    question;
(k) "competent authorities" shall mean the national authorities which are
    empowered by law or regulation to supervise insurance undertakings.
(1) OJ No L 66, 13.3.1979. p. 21. Directive as last amended by
    Directive 82/148/EEC (OJ No L 62. 5.3.1982. p. 22).
 ---pagebreak---                                       4?.
                                     Article 2
1.  This Directive shall apply to the types of insurance and undertakings referred
to in Article 1 of Directive 73/239/EEC.
2.  This Directive shall apply neither to classes of insurance or operations, nor
to undertakings or institutions to which Directive 73/239/EEC does not apply, nor
to the bodies referred to in Article 4 of that Directive.
                                     Article 3
Notwithstanding Article 2(2), Member States shall take every step to ensure that
monopolies in respect of the taking up of the business of certain classes of
insurance, granted to bodies established within their territories and referred to
in Article 4 of Directive 73/239/EEC, are abolished by 1 July 1994.
                                     TITLE II
                    THE TAKING UP OF THE BUSINESS OF INSURANCE
                                     Article 4
Article 6 of Directive 73/239/EEC shall be replaced by the following:
"Article 6
 The taking up of the business of direct insurance shall be subject to prior
 official authorization.
 ---pagebreak---  Such authorization shall be sought from the competent authorities of the home
 Member State by:
 (a) any undertaking which establishes its head office within the territory of
     that State;
 (b) any undertaking which, having received the authorization referred to in the
     first subparagraph, extends its'business to an entire class or to other
     classes".
                                     Article 5
Article 7 of Directive 73/239/EEC shall be replaced by the following:
"Article 7
 1.  Authorization shall be valid for the entire Community.  It shall permit an
 undertaking to carry on business there, under either the right of establishment
 or the freedom to provide services.
 2.  Authorization shall be granted for a particular class of insurance.   It shall
 cover the entire class, unless the applicant wishes to cover only some of the
 risks pertaining to that class, as listed in point A of the Annex.
 However:
 (a) Member States may grant authorization for the groups of classes listed in
     point B of the Annex, attaching to them the appropriate denominations
     specified therein;
 (b) authorization granted for one class or a group of classes shall also be valid
     for the purpose of covering ancillary risks included in another class if the
     conditions imposed in point C of the Annex are fulfilled".
 ---pagebreak---                                        M.
                                     Article 6
Article 8 of Directive 73/239/EEC shall be replaced by the following:
"Article 8
 1.  The home Member State shall require every insurance undertaking for which
 authorization is sought to:
 (a) adopt one of the following forms:
     - in the case of the Kingdom of Belgium: "société anonyme/naamloze
       vennootschap", "société en commandite par actions/commanditaire
       vennootschap op aandelen", "association d'assurance mutuelle/onderlinge
       verzekeringmaatschappij". "société coopérâtive/cobperatieve vennootschap";
     - in the case of the Kingdom of Denmark: "aktieselskaber", "gensidige
       selskaber";
     - in the case of the Federal Republic of Germany: "Aktiengesellschaft",
       "Versicherungsverein auf Gegenseitigkeit", "Offentlich-rechtlichcs
       Wettbewerbsversicherungsunternehmen";
     - in the case of the French Republic: "société anonyme", "société d'assurance
       mutuelle", "institution de prévoyance régie par le code de la sécurité
       sociale", "institution de prévoyance régie par le code rural" and
       "mutuelles régies par le code de la mutualité";
     - in the case of Ireland: incorporated companies limited by shares or by
       guarantee or unlimited;
 ---pagebreak---                                     ZP.
 - in the case of the Italian Republic: "società per azioni", "società
   cooperativa", "mutua di assicurazione";
 - in the case of the Grand Duchy of Luxembourg: "société anonyme", "société
   en commandite par actions", "association d'assurances mutuelles", "société
   coopérative";
 - in the case of the Kingdom of the Netherlands: "naamloze vennootschap",
   "onderlinge waarborgmaatschappij";
 - in the case of the United Kingdom: incorporated companies limited by shares
   or by guarantee or unlimited, societies registered under the Industrial and
   Provident Societies Acts, societies registered under the Friendly Societies
   Acts, the association of underwriters known as Lloyd's;
 - in the case of the Hellenic Republic: "Avovupn etatpeta".
   "A\kr)kaa<pakLOT Ixoq OUVETOiplopoç" ;
 - in the case of the Kingdom of Spain: "sociedad anônima", "sociedad mutua",
   "sociedad cooperativa";
 - in the case of the Portuguese Republic: "sociedade anônima", "mûtua de
   seguros".
An insurance undertaking may also adopt the form of a European Company (SE)
when that has been established.
Furthermore, Member States may, where appropriate, set up undertakings in any
public-law form provided that such bodies have as their objects insurance
operations under conditions equivalent to those under which private-law
undertakings operate;
 ---pagebreak---                                      tA.
(b) limit its objects to the business of insurance and operations arising
    directly therefrom, to the exclusion of all other commercial business;
(c) submit a scheme of operations in accordance with Article 9;
(d) possess the minimum guarantee fund provided for in Article 17(2);
(e) be effectively run by persons of good repute with appropriate professional
    qualifications or experience.
2.  An undertaking seeking authorization to extend its business to other classes
or to extend an authorization covering only some of the risks pertaining to one
class shall be required to submit a scheme of operations in accordance with
Article 9.
It shall, furthermore, be required to show proof that it possesses the solvency
margin provided for in Article 16 and, if with regard to such other classes
Article 17(2) requires a higher minimum guarantee fund than before, that it
possesses that minimum.
3.  Nothing in this Directive shall prevent Member States from maintaining in
force or introducing laws, regulations or administrative provisions requiring
approval of the memorandum and articles of association and communication of any
other documents necessary for the normal exercise of supervision.
Member States shall not, however, adopt provisions requiring the prior approval
or systematic notification of general and special policy conditions, scales of
premiums and forms and other printed documents which an undertaking intends to
use in its dealings with policy-holders.
 ---pagebreak---  Member States may not retain or introduce prior notification or approval of
 proposed increases in premium rates except as part of general price-control
 systems.
 Nothing in this Directive shall prevent Member States from subjecting
 undertakings seeking or having obtained authorization for class 18 in point A of
 the Annex to checks on their direct or indirect resources in staff and equipment,
 including the qualification of their medical teams and the quality of the
 equipment available to such undertakings to meet their commitments arising out of
 this class of insurance.
 4.  The abovementioned provisions may not require that any application for
 authorization be considered in the light of the economic requirements of the
 market".
                                     Article 7
Article 9 of Directive 73/239/EEC shall be replaced by the following:
"Article 9
 The scheme of operations referred to in Article 8(1)(c) shall include particulars
 or proof concerning:
 (a) the nature of the risks which the undertaking proposes to cover;
 (b) the guiding principles as to reinsurance;
 (c) the items constituting the minimum guarantee fund;
 ---pagebreak---                                      Zi.
  (d) estimates of the costs of setting up the administrative services and the
      organization for securing business; the financial resources intended to meet
      those costs and, if the risks to be covered are classified in class 18 in
      point A of the Annex, the resources at the undertaking's disposal for the
      provision of the assistance promised
 and, in addition, for the first three financial years:
  (e) estimates of management expenses other than installation costs, in particular
      current general expenses and commissions;
  (f) estimates of premiums or contributions and claims;
  (g) a forecast balance sheet;
 (h) estimates of the financial resources intended to cover underwriting
      liabilities and the solvency margin".
                                      Article 8
                                      _______                               f
The competent authorities of the home Member State shall not grant an undertaking
authorization to take up the business of insurance before they have been informed
of the identities of the shareholders or members, direct or indirect, whether
natural or legal persons, who have qualifying holdings in that undertaking and of
the amounts of those holdings.
The same authorities shall refuse authorization if, taking into account the need
to ensure the sound and prudent management of an insurance undertaking, they are
not satisfied as to the qualifications of the shareholders or members.
 ---pagebreak---                                      TITLE III
        HARMONIZATION OF THE CONDITIONS GOVERNING THE BUSINESS OF INSURANCE
                                     Chapter 1
                                     Article 9
Article 13 of Directive 73/239/EEC shall be replaced by the following:
"Article 13
 1.  The financial supervision of an insurance undertaking, including that of the
 business it carries on either through branches or under the freedom to provide
 services, shall be the sole responsibility of the home Member State.
 2.  That financial supervision shall include verification, with respect to the
 insurance undertaking's entire business, of its state of solvency, of the
 establishment of technical provisions and of the assets covering them in
 accordance with the rules laid down or practices followed in the home Member
 State under provisions adopted at Community level.
 Where the undertaking in question is authorized to cover the risks classified in
 class 18 in point A of the Annex, supervision shall extend to monitoring of the
 technical resources which the undertaking has at its disposal for the purpose of
 carrying out the assistance operations it has undertaken to perform, where the
 law of the home Member State provides for the monitoring of such resources.
 3.  The competent authorities of the home Member State shall require every
 insurance undertaking to have sound administrative and accounting procedures and
 adequate internal control mechanisms".
 ---pagebreak---                                        t*.
                                    Article 10
APticle 14 of Directive 73/239/EEC shall be replaced by the following:
"Article 14
 The Member State of the branch shall provide that where an insurance undertaking
 authorized in another Member State carries on business through a branch the
 competent authorities of the home Member State may, after having informed the
 competent authorities of the Member State of the branch, carry out themselves or
 through the intermediary of persons they appoint for that purpose on-the-spot
 verification of the information necessary to ensure the financial supervision of
 the undertaking.  The authorities of the Member State of the branch may
 participate in that verification".
                                    Article 11
Article 19(2) and (3) of Directive 73/239/EEC shall be replaced by the following:
"2.  Member States shall require insurance undertakings with head offices within
 their territories to render periodically the returns, together with statistical
 documents, which are necessary for the purposes of supervision.  The competent
 authorities shall provide each other with any documents and information that are
 useful for the purposes of supervision.
 3.  Every Member State shall take all steps necessary to ensure that the
 competent authorities have the powers and means necessary for the supervision of
 the business of insurance undertakings with head offices within their
 territories, including business carried on outwith those territories, in
 accordance with the Council Directives governing such business and for the
 purpose of seeing that they are implemented.
 ---pagebreak--- These powers and means must, in particular, enable the competent authorities to:
(a) make detailed enquiries regarding an undertaking's situation and the whole of
    its business, inter alia by:
    - gathering information or requiring the submission of documents concerning
      its insurance business;
    - carrying out on-the-spot investigations at the undertaking's premises;
(b) take any measures with regard to an undertaking, its directors or managers or
    the persons who control it. that are appropriate and necessary to ensure that
    that undertaking's business continues to comply with the laws, regulations
    and administrative provisions with which the undertaking must comply in each
    Member State and in particular with the scheme of operations insofar as it
    remains mandatory, and to prevent or remedy any irregularities prejudicial to
    the interests of insured persons;
(c) ensure that those measures are carried out, if need be by enforcement and
    where appropriate through judicial channels.
Member States may also make provision for the competent authorities to obtain any
information regarding contracts which are held by intermediaries".
 ---pagebreak---                                            Vf.
                                       Article 12
 1.    Article 11(2) to (7) of Directive 88/357/EEC is hereby repealed.
2.     Under the conditions laid down by national law, each Member State shall
authorize insurance undertakings with head offices within its territory to
transfer all or part of their portfolios of contracts, concluded either under the
 right of establishment or the freedom to provide services, to an accepting office
established within the Community, if the competent authorities of the home Member
State of the accepting office certify that after taking the transfer into account
the latter possesses the necessary solvency margin.
3.     Where a branch proposes to transfer all or part of its portfolio of contracts,
concluded either under the right of establishment or the freedom to provide
services, the Member State of the branch shall be consulted.
4.     In the circumstances referred to in paragraphs 2 and 3, the competent
authorities of the home Member State of the transferring undertaking shall
authorize the transfer after obtaining the agreement of the competent authorities
of the Member States in which the risks are situated.
V      The competent authorities of the Member States consulted shall give their
opinion or consent to the competent authorities of the home Member State of the
transferring insurance undertaking within three months of receiving a request; the
absence of any response within that period from the authorities consulted shall be
considered equivalent to a favourable opinion or tacit consent.
f>     A transfer authorized in accordance with this Article shall be published as
 laid down by national law in the Member State in which the risk is situated.    Such,
transfers shall automatically be valid against policy-holders, insured persons and
any other persons having rights or obligations arising out of the contracts
t r «M»'; f o r t o d .
 ---pagebreak---                                     ti.
This provision shall not affect the Member States' rights to give policy-holders
the option of cancelling contracts within a fixed period after a transfer.
                                    Article 13
Article 20 of Directive 73/239/EEC shall be replaced by the following:
"Article 20
 1.  If an undertaking does not comply with Article 15, the competent authority of
 its home Member State may prohibit the free disposal of its assets after having
 communicated its intention to the competent authorities of the Member States in
 which the risks are situated.
 2.  For the purposes of restoring the financial situation of an undertaking the
 solvency margin of which has fallen below the minimum required under
 Article 16(3), the competent authority of the home Member State shall require
 that a plan for the restoration of a sound financial situation be submitted for
 its approval.
 In exceptional circumstances, if the competent authority is of the opinion that
 the financial situation of the undertaking will deteriorate further, it may also
 restrict or prohibit the free disposal of the undertaking's assets.   It shall
 inform the authorities of other Member States within the territories of which the
 undertaking carries on business of any measures it has taken and the latter
 shall, at the request of the former, take the same measures.
 3.  If the solvency margin falls below the guarantee fund as defined in
 Article 17, the competent authority of the home Member State shall require the
 undertaking to submit a short-term finance scheme for its approval.
 ---pagebreak---                                        « .
 It may also restrict or prohibit the free disposal of the undertaking's assets.
 It shall inform the authorities of other Member States within the territories of
 which the undertaking carries on business accordingly and the latter shall, at
 the request of the former, take the same measures.
 4.  The competent authorities may further take all measures necessary to
 safeguard the interests of insured persons in the cases provided for in
 paragraphs 1, 2 and 3.
 5.  Each Member State shall take the measures necessary to be able, in accordance
 with its national law, to prohibit the free disposal of assets located within its
 territory at the request, in the cases provided for in paragraphs 1, 2 and 3, of
 the undertaking's home Member State, which shall designate the assets to be
 covered by such measures".
                                    Article 14
Article 22 of Directive 73/239/EEC shall be replaced by the following:
"Article 22
 1.  Authorization granted to an insurance undertaking by the competent authority
 of its home Member State may be withdrawn by that authority if that undertaking:
 (a) does not make use of that authorization within twelve months, expressly
     renounces it or ceases to carry on business for more than six months, unless
     the Member State concerned has made provision for authorization to lapse in
     such cases;
 ---pagebreak---  (b) no longer fulfils the conditions for admission;
 (c) has been unable, within the time allowed, to take the measures specified in
     the restoration plan or finance scheme referred to in Article 20;
 (d) fails seriously in its obligations under the regulations to which it is
     subject.
 In the event of the withdrawal or lapse of authorization, the competent authority
 of the home Member State shall notify the competent authorities of the other
 Member States accordingly, and they shall take appropriate measures to prevent
 the undertaking from commencing new operations within their territories, under
 either the right of establishment or the freedom to provide services.   The home
 Member State's competent authority shall, in conjunction with those authorities,
 take all measures necessary to safeguard the interests of insured persons and, in
 particular, shall restrict the free disposal of the undertaking's assets in
 accordance with Article 20(1), (2), second subparagraph, or (3), second
 subparagraph.
 2.  Any decision to withdraw authorization shall be supported by precise reasons
 and communicated to the undertaking in question".
                                    Article 15
1.  Member States shall require any natural or legal person who proposes to
acquire, directly or indirectly, a qualifying holding in an insurance undertaking
first to inform the competent authorities of the home Member State, indicating the
size of his intended holding.  Such a person must likewise inform the competent
authorities of the home Member State if he proposes to increase his qualifying
holding so that the proportion of the voting rights or of the capital he holds
would reach or exceed 20%. 33% or 50% or so that the insurance undertaking would
become his subsidiary.
 ---pagebreak---                                         H
The competent authorities of the home Member State shall have up to three months
from the date of the notification provided for in the first subparagraph to oppose
such a plan if, in view of the need to ensure sound and prudent management of the
insurance undertaking in question, they are not satisfied as to the qualification
of the person referred to in the first subparagraph.   If they do not oppose the
plan in question, they may fix a maximum period for its implementation.
2.  Member States shall require any natural or legal person who proposes to
dispose, directly or indirectly, of a qualifying holding in an insurance
undertaking first to inform the competent authorities of the home Member State,
indicating the size of his intended holding.  Such a person must likewise inform
the competent authorities if he proposes to reduce his qualifying holding so that
the proportion of the voting rights or of the capital he holds would fall below
20%. 33% or 50% or so that the insurance undertaking would cease to be his
subsidiary.
3.  On becoming aware of them, insurance undertakings shall inform the competent
authorities of their home Member States of any acquisitions or disposals of
holdings in their capital that cause holdings to exceed or fall below any of the
thresholds referred to in paragraphs 1 and 2.
They shall also, at least once a year, inform them of the names of shareholders
and members possessing qualifying holdings and the sizes of such holdings as
shown, for example, by the information received at annual general meetings of
shareholders or members or as a result of compliance with the regulations relating
to companies listed on stock exchanges.
 ---pagebreak--- A.   Member States shall require that, where the influence exercised by the persons
referred to in paragraph 1 is likely to operate against the prudent and sound
management of an insurance undertaking, the competent authorities of the home
Member State shall take appropriate measures to put an end to that situation.
Such measures may consist, for example, in injunctions, sanctions against
directors and managers, or suspension of the exercise of the voting rights
attaching to the shares held by the shareholders or members in question.
Similar measures shall apply to natural or legal persons failing to comply with
the obligation to provide prior information imposed in paragraph 1.   If a holding
is acquired despite the opposition of the competent authorities, the Member States
shall, regardless of any other sanctions to be adopted, provide either for
exercise of the corresponding voting rights to be suspended, or for the nullity of
votes cast or for the possibility of their annulment.
                                     Article 16
1.  The Member States shall provide that all persons working or who have worked
for the competent authorities, as well as auditors and experts acting on behalf of
the competent authorities, shall be bound by the obligation of professional
secrecy.   This means that no confidential information which they may receive while
performing their duties may be divulged to any person or authority whatsoever,
except in summary or aggregate form, such that individual insurance undertakings
cannot be identified, without prejudice to cases covered by criminal law.
 ---pagebreak---                                         31.
Nevertheless, -where an insurance undertaking has been declared bankrupt or is
being compulsorily wound up. confidential information which does not concern third
parties involved in attempts to rescue that undertaking may be divulged in civil
or commercial proceedings.
2.   Paragraph 1 shall not prevent the competent authorities of different Member
States from exchanging information in accordance with the Directives applicable to
insurance undertakings.   Such information shall be subject to the conditions of
professional secrecy laid down in paragraph 1.
3.   Member States may conclude co-operation agreements providing for exchanges of
information with the competent authorities of third countries only if the
information disclosed is subject to guarantees of professional secrecy at least
equivalent to those provided for in this Article.
4.   Competent authorities receiving confidential information under paragraph 1
or 2 may use it only in the course of their duties:
- to check that the conditions governing the taking up of the business of
   insurance are met and to facilitate monitoring of the conduct of such business,
  especially with regard to the monitoring of technical provisions, solvency
  margins, and administrative and accounting procedures and internal control
  mechanisms,
- to impose sanctions,
- in administrative appeals against decisions of the competent authorities, or
 ---pagebreak--- - in court proceedings initiated under Article 55 or under special provisions
   provided for in the Directives adopted in the field of insurance undertakings.
5.   Paragraphs 1 and 4 shall not preclude the exchange of information within a
Member State, where there are two or more competent authorities in the same Member
State, or between Member States, between competent authorities and:
- authorities responsible for the official supervision of credit institutions and
   other financial organizations and the authorities responsible for the
   supervision of financial markets,
- bodies involved in the liquidation and bankruptcy of insurance undertakings and
   in other similar procedures, and
- persons responsible for carrying out statutory audits of the accounts of
   insurance undertakings and other financial institutions,
in the discharge of their supervisory functions, or the disclosure to bodies which
administer compulsory winding-up proceedings or guarantee funds of information
necessary to the performance of their duties.   The information received by those
authorities, bodies and persons shall be subject to the conditions of professional
secrecy laid down in paragraph 1.
6.   In addition, notwithstanding paragraphs 1 and 4, the Member States may, under
provisions laid down by law, authorize the disclosure of certain information to
other departments of their central government administrations responsible for
legislation on the supervision of credit institutions, financial institutions,
investment services and insurance companies and to inspectors acting on behalf of
those departments.
 ---pagebreak---                                       jr.
However, such disclosures may be made only where necessary for reasons of
prudential control.
The Member States shall, however, provide that information received under
paragraphs 2 and 5 and that obtained by means of the on-the-spot verification
referred to in Article 14 of Directive 73/239/EEC may never be disclosed in the
cases referred to in this paragraph except with the express consent of the
competent authorities which disclosed the information or of the competent
authorities of the Member State in which the on-the-spot verification was carried
out.
                                     Chapter 2
                                    Article 17
Article 15 of Directive 73/239/EEC shall be replaced by the following:
"Article 15
 1.  The home Member State shall require every insurance undertaking to establish
 adequate technical provisions in respect of its entire business.
'The amount of such technical provisions shall be determined in accordance with
 the rules laid down in Directive 91/674/EEC.
 2.  The home Member State shall require every insurance undertaking to cover the
 technical provisions in respect of its entire business by matching assets in
 accordance with Article 6 of Directive 88/357/EEC.  In respect of risks situated
 within the European Community, those assets must be localized within the
 ---pagebreak---  Community.  Member States shall not require insurance undertakings to localize
 their assets in any particular Member State.  The home Member State may, however,
 permit relaxations in the rules on the localization of assets.
 3.  If the home Member State allows any technical provisions to be covered by
 claims against reinsurers, it shall fix the percentage so allowed.  In such
 cases, it may not specify the localization of the assets representing such
 claims".
                                    Article 18
Article 15a of Directive 73/239/EEC shall be replaced by the following:
"Article 15a
 1.  Member States shall require every insurance undertaking with a head office
 within their territories which underwrites risks included in class 14 in point A
 of the Annex (hereinafter referred to as "credit insurance") to set up an
 equalization reserve for the purpose of offsetting any technical deficit or
 above-average claims ratio arising in that class in any financial year.
 2.  The equalization reserve shall be calculated in accordance with the rules
 laid down by the home Member State in accordance with one of the four methods set
 out in point D of the Annex, which shall be regarded as equivalent.
 3.  Up to the amount calculated in accordance with the methods set out in point D
 of the Annex, the equalization reserve shall be disregarded for the purpose of
 calculating the solvency margin.
 ---pagebreak---                                       3?.
 4.   Member States may exempt insurance undertakings with head offices within
 their territories from the obligation to set up equalization reserves for credit,
 insurance business where the premiums or contributions receivable in respect of
 credit insurance are less than 4% of the total premiums or contributions
 receivable by them and less than ECU 2 500 000".
                                     Article 19
Article 23 of Directive 88/357/EEC is hereby repealed.
                                     Article 20
The assets covering the technical provisions shall take account of the type of
business carried on by an undertaking in such a way as to secure the safety, yield
and marketability of its investments, which the undertaking shall ensure are
diversified and adequately spread.
                                     Article 21
1. The home Member State may not authorize insurance undertakings to cover their
technical provisions with any but the following categories of assets:
A. Investments
    (a) debt securities, bonds and other money and capital market instruments;
   (b) loans;
   (c) shares and other variable-yield participations;
 ---pagebreak---                                       n-
   (d) units in undertakings for collective investment in transferable securities
       and other investment funds;
   (e) land, buildings and immovable property rights;
B. Debts and claims
   (f) debts owed by reinsurers, including reinsurers' shares of technical
       provisions;
   (g) deposits with and debts owed by ceding undertakings;
   (h) debts owed by policy-holders and intermediaries arising out of direct and
       reinsurance operations;
   (i) claims arising out of salvage and subrogation;
   (j) tax recoveries;
   (k) claims against guarantee funds;
C. Others
   (1) tangible fixed assets, other than land and buildings, valued on the basis
       of prudent amortization;
   (m) cash at bank and in hand, deposits with credit institutions and any other
       bodies authorized to receive deposits;
   (n) deferred acquisition costs;
   (o) accrued interest and rent, other accrued income and prepayments.
 ---pagebreak---                                         # .
In the case of the association of underwriters known as Lloyd's, asset categories
shall also include guarantees and letters of credit issued by credit institutions
within the meaning of Directive 77/780/EEC      or by insurance undertakings,
together with verifiable sums arising out of life assurance policies, to the
extent that they represent funds belonging to members.
The inclusion of any asset or category of assets listed in this paragraph shall
not mean that all categories of assets must automatically be accepted as cover for
technical provisions.   The home Member State shall lay down more detailed rules
fixing the conditions for the use of acceptable assets; in this connection, it may
require valuable security or guarantees, particularly in the case of debts owed by
reinsurers.
In the determination and the application of the rules which it lays down, the home
Member State shall, in particular, ensure that the following principles are
complied with:
   (i) assets covering technical provisions must be valued net of any debts arising
       out of their acquisition;
  (ii) all assets must be valued on a prudent basis, allowing for the risk of any
       amounts' not being realizable.  In particular, tangible fixed assets other
       than land and buildings may be accepted as cover for technical provisions
       only if they are valued on the basis of prudent amortization;
M I o.j No L 322, 17.12.1977, p. 30. Directive as last amended by
     Directive 89/646/EEC (OJ No L 386. 30.12.1989. p. I).
 ---pagebreak---                                       *0
(iii) loans, whether to undertakings, to State authorities or international
      organizations, to local or regional authorities or to natural persons, may
      be accepted as cover for technical provisions only if there are sufficient
      guarantees as to their security, whether these are based on the status of
       the borrower, mortgages, bank guarantees or guarantees granted by insurance
      undertakings or other forms of security;
 (iv) derivative instruments such as options, futures and swaps in connection
      with assets covering technical provisions may be used insofar as they
      contribute to a reduction of investment risks or facilitate efficient
      portfolio management.   They must be valued on a prudent basis and may be
       taken into account in the valuation of the underlying assets;
   (v) transferable securities which are not dealt in on a regulated market may be
       accepted as cover for technical provisions only if they can be realized in
       the short term;
 (vi) debts owed by and claims against a third party may be accepted as cover for
       technical provisions only after deduction of all amounts owed to the same
       third party;
(vii) the value of any debts and claims accepted as cover for technical provisions
      must be calculated on a prudent basis, with due allowance for the risk of
       any amounts not being realizable.   In particular, debts owed by
       policy-holders and intermediaries arising out of insurance and reinsurance
       operations may be accepted only insofar as they have been outstanding for
       not more than three months;
 ---pagebreak---                                         f1.
(vin) where the assets held include an investment in a subsidiary undertaking
         which manages all or part of the insurance undertaking's investments on its
         behalf, the home Member State must, when applying the rules and principles
         laid down in this Article, take into account the underlying assets held by
         the subsidiary undertaking; the home Member State may treat the assets of
         other subsidiaries in the same way;
   d x ) deferred acquisition costs may be accepted as cover for technical
         provisions only to the extent that that is consistent with the calculation
         of the technical provision for unearned premiums.
2.   Notwithstanding paragraph 1, in exceptional circumstances and at an insurance
undertaking's request, the home Member State may. temporarily and under a properly
reasoned decision, accept other categories of assets as cover for technical
provisions, subject to Article 20.
                                      Article 22
1.   As regards the assets covering technical provisions, the home Member State
shall require every insurance undertaking to invest no more than:
(a) 10%,of its total gross technical provisions in any one piece of land or
     building, or a number of pieces of land or buildings close enough to each
     other to be effectively considered as one investment;
 ---pagebreak---                                      ftz.
(b) 5% of its total gross technical provisions in shares and other negotiable
    securities treated as shares, bonds, debt securities and other money and
    capital market instruments from the same undertaking, or in loans granted to
    the same borrower, taken together, the loans being loans other than those
    granted to a State, regional or local authority or to an international
    organization of which one or more Member States are members.  This limit may
    be raised to 10% if an undertaking does not invest more than 40% of its gross
    technical provisions in the loans or securities of issuing bodies and
    borrowers in each of which it invests more than 5% of its assets;
(c) 5% of its total gross technical provisions in unsecured loans, including 1%
    for any single unsecured loan, other than loans granted to credit
    institutions, insurance undertakings - insofar as Article 8 of Directive
    73/239/EEC allows it - and investment undertakings established in a Member
    State;
(d) 3% of its total gross technical provisions in the form of cash in hand;
(e) 10% of its total gross technical provisions in shares, other securities
    treated as shares and debt securities, which are not dealt in on a regulated
    market.
2.  The absence of a limit in paragraph 1 on investment in any particular category
does not imply that assets in that category should be accepted as cover for
technical provisions without limit.  The home Member State shall lay down more
 ---pagebreak---                                         n.
detailed rules fixing the conditions for the use of acceptable assets. In
particular it shall ensure, in the determination and the application of those
rules, that the following principles are complied with:
  (i) assets covering technical provisions must be diversified and spread in such
       a way as to ensure that there is no excessive reliance on any particular
       category of asset, investment market or investment;
 (ii) investment in particular types of asset which show high levels of risk,
       whether because of the nature of the asset or the quality of the issuer,
       must be restricted to prudent levels;
(iii) limitations on particular categories of asset must take account of the
       treatment of reinsurance in the calculation of technical provisions;
 d v ) where the assets held include an investment in a subsidiary undertaking
       which manages all or part of the insurance undertaking's investments on its
       behalf, the home Member State must, when applying the rules and principles
       laid down in this Article, take into account the underlying assets held by
       the subsidiary undertaking; the home Member State may treat the assets of
       other subsidiaries in the same way;
  (v) the percentage of assets covering technical provisions which are the
       subject of non-liquid investments must be kept to a prudent level;
 ---pagebreak---                                         V-Y
 (vi) where the assets held include loans to or debt securities issued by certain
       credit institutions, the home Member State may, when applying the rules and
       principles laid down in this Article, take into account the underlying
       assets held by such credit institutions.  This treatment may be applied only
       where the credit institution has its head office in a Member State, is
       entirely owned by that Member State and/or that State's local authorities
       and its business, according to its memorandum and articles of association,
       consists of extending, through its intermediaries, loans to or guaranteed by
       the State or local authorities, or loans to bodies closely linked to the
       State or to local authorities.
3.   In the context of the detailed rules laying down the conditions for the use of
acceptable assets, the Member State shall give more limitative treatment to:
- any loan unaccompanied by a bank guarantee, a guarantee issued by an insurance
  undertaking, a mortgage or any other form of security, as compared with loans
  accompanied by such collateral;
- UCITS not co-ordinated within the meaning of Directive 85/611/EEC      and other
   investment funds, as compared with UCITS co-ordinated within the meaning of that
  Directive;
- securities which are not dealt in on a regulated market, as compared with those
  which are;
(1) OJ No L 375, 31.12.1985, p. 3. Directive as amended by Directive 88/220/EEC
     (OJ No L 100, 19.4.1988. p. 31).
 ---pagebreak---                                         V5
- bonds, oebt securities and other money and capital market instruments not issued
   by States, local or regional authorities or undertakings belonging to Zone A as
   defined in Directive 89/647/EEC    , or the issuers of which are international
   organizations not numbering at least one Community Member State among their
   members, as compared with the same financial instruments issued by such bodies.
4.   Member States may raise the limit laid down in paragraph K b ) to 40% in the
case of certain debt securities when these are issued by a credit institution
which has its head office in a Member State and is subject by law to special
official supervision designed to protect the holders of those debt securities.    In
particular, sums deriving from the issue of such debt securities must be invested
in accordance with the law in assets which, during the whole period of validity of
the debt securities, are capable of covering claims attaching to the debt
securities and which would be used on a priority basis for the reimbursement of
the principal and payment of the accrued interest.
5.   Member States shall not require insurance undertakings to invest in particular
categories of assets.
6.   Notwithstanding paragraph 1, in exceptional circumstances and at an insurance
undertaking's request, the home Member State may, temporarily and under a properly
reasoned decision, allow exceptions to the rules laid down in paragraph 1(a)
to (e). subject to Article 20.
(I) OJ No I, 386. 30.12.1989. p. 14.
 ---pagebreak---                                         fir.
                                     Article 23
Points 8 and 9 of Annex 1 to Directive 88/357/EEC shall be replaced by the
following:
"8.   Insurance undertakings may hold non-matching assets to cover an amount not
 exceeding 20% of their commitments in a particular currency.
 9.   A Member State may provide that when under the preceding procedures a
 commitment must be covered by assets expressed in a Member State's currency that
 requirement shall also be considered as satisfied when the assets are expressed
 in ecus".
                                     Article 24
Article 16(1) of Directive 73/239/EEC shall be replaced by the following:
"1.   The home Member State shall require every insurance undertaking to establish
 an adequate solvency margin in respect of its entire business.
 The solvency margin shall correspond to the assets of the undertaking free of any
 foreseeable liabilities less any intangible items.   In particular the following
 shall be included:
 - the paid-up share capital or, in the case of a mutual insurance undertaking,
    the effective initial fund plus any members' accounts which meet all the
    following criteria:
    (a) the memorandum and articles of association must stipulate that payments may
        be made from these accounts to members only insofar as that does not cause
        the solvency margin to fall below the required level, or, after the
        dissolution of the undertaking, if all of the undertaking's other debts
        have been settled;
 ---pagebreak---                                      <?
  (b) the memorandum and articles of association must stipulate, with respect   to
      any such payments for reasons other than the individual termination of
      membership, that the competent authorities must be notified at least one
      month in advance and can prohibit the payment within that period and
  (c) the relevant provisions of the memorandum and articles of association may
      be amended only after the competent authorities have declared that they
      have no objection to the amendment, without prejudice to the criteria
      stated in (a) and (b);
- one-half of the unpaid share capital or initial fund, once the paid-up part
  amounts to 25% of that share capital or fund:
- reserves (statutory reserves and free reserves) not corresponding to
  underwriting liabilities;
- any profits brought forward;
- in the case of a mutual or mutual-type association with variable contributions,
  any claim which it has against its members by way of a call for supplementary
  contribution, within the financial year, up to one-half of the difference
  between the maximum contributions and the contributions actually called in, and
  subject to a limit of 50% of the margin;
- at the request of and on the production of proof by the insurance undertaking,
  any hidden reserves arising out of the undervaluation of assets, insofar ar*
  those hidden reserves are not of an exceptional nature;
 ---pagebreak---                                       Ht
cumulative preferential share capital and subordinated loan capital, up to 50%
of the margin, no more than 25% of which shall consist of subordinated loans
with a fixed maturity, or fixed-term cumulative preferential share capital, if
the following minimum criteria are met:
(a) in the event of the bankruptcy or liquidation of the insurance undertaking,
    binding agreements must exist under which the subordinated loan capital or
    preferential share capital ranks after the claims of all other creditors
    and is not to be repaid until all other debts outstanding at the time have
    been settled.
Subordinated loan capital must fulfil the following additional conditions:
(b) only fully paid-up funds may be taken into account;
(c) for loans with a fixed maturity the original maturity must be at least five
    years.  No later than one year before the repayment date the insurance
    undertaking must submit to the competent authorities for their approval a
    plan showing how the solvency margin will be kept at or brought to the
    required level at maturity, unless the extent to which the loan may rank as
    a component of the solvency margin is gradually reduced during at least the
    last five years before the repayment date.  The competent authorities may
    authorize the early repayment of such loans provided application is made by
    the issuing insurance undertaking and its solvency margin will not fall
    below the required level;
 ---pagebreak---                                     H.
(d) loans the maturity of which is not fixed must be repayable only subject to
    five years' notice unless the loans are no longer considered a component of
    the solvency margin or unless the prior consent of the competent
    authorities is specifically required for early repayment.   In the latter
    event the insurance undertaking must notify the competent authorities at
    least six months before the date of the proposed repayment, specifying the
    actual and required solvency margins both before and after that repayment.
    The competent authorities shall authorize repayment only if the insurance
    undertaking's solvency margin will not fall below the required level;
(e) the loan agreement must not include any clause providing that in specified
    circumstances, other than the winding-up of the insurance undertaking, the
    debt will become repayable before the agreed repayment date;
(f) the loan agreement may be amended only after the competent authorities have
    declared that they have no objection to the amendment;
securities with no specified maturity date and other instruments that fulfil
the following conditions, including cumulative preferential shares other than
those mentioned in the preceding indent, up to 50% of the margin for the total
of such securities and the subordinated loan capital referred to in the
preceding indent :
(a) they may not be repaid on the initiative of the bearer or without the prior
    consent of the competent authority;
(b) the contract of issue must enable the insurance undertaking to deter the
    payment of interest on the loan;
 ---pagebreak---                                          r<>
    (c) the lender's claims on the insurance undertaking must rank entirely after
         those of all non-subordinated creditors;
    (d) the documents governing the issue of the securities must provide for the
         loss-absorption capacity of the debt and unpaid interest, while enabling
         the insurance undertaking to continue its business;
    (e) only fully paid-up amounts may be taken into account".
                                      Article 25
No more than three years after the date of application of this Directive the
Commission shall submit a report to the Insurance Committee on the need for
further harmonization of the solvency margin.
                                      Article 26
Article 18 of Directive 73/239/EEC shall be replaced by the following:
"Article 18
 1.   Member States shall not prescribe any rules as to the choice of assets that
 need not be used as cover for the technical provisions referred to in Article 15.
 2.   Subject to Article 15(2), Article 20(1). (2). (3) and (5) and the last
 subparagraph of Article 22(1), Member States shall not restrain the free disposal
 of those assets, whether movable or immovable, that form part of the assets of
 authorized insurance undertakings.
 ---pagebreak---                                         •ri.
 3.  Psraeraohs 1 and 2 shall not preclude any measures which Member States, while
 safeguarding the interests of insured persons, are entitled to take as owners or
 members of or partners in the undertakings in question".
                                     Chapter 3
                                    Article 27
Article 7(1)(f) of Directive 88/357/EEC shall be replaced by the following:
"(f) in the case of the risks referred to in Article 5(d) of Directive 73/239/EEC,
     the parties to the contract may choose any law".
                                    Article 28
The Member State in which a risk is situated shall not prevent a policy-holder
from concluding a contract with an insurance undertaking authorized under the
conditions of Article 6 of Directive 73/239/EEC, as long as that does not conflict
with legal provisions protecting the general good in the Member State in which the
risk is situated.
                                    Article 29
Member States shall not adopt provisions requiring the prior approval or
systematic notification of general and special policy conditions, scales of
premiums, or forms and other printed documents which an insurance undertaking
intends to use in its dealings with policy-holders.  They may only require
non-systematic notification of those policy conditions and other documents for the
 ---pagebreak---                                        J%.
purpose of verifying compliance with national provisions concerning insurance
contracts, and that requirement may not constitute a prior condition for an
undertaking's carrying on its business.
Member States may not retain or introduce prior notification or approval of
proposed increases in premium rates except as part of general price-control
systems.
                                     Article 30
1.   Article 8(4)(b) of Directive 88/357/EEC shall be deleted.   Article 8(4)(a)of
that Directive shall therefore be amended to read as follows:
"(a) Subject to subparagraph (c), the third subparagraph of Article 7(2) shall
      apply where the insurance contract provides cover in two or more Member
      States, at least one of which makes insurance compulsory".
2.   Notwithstanding any provision to the contrary, a Member State which makes
insurance compulsory may require that the general and special conditions of the
compulsory insurance be communicated to its competent authority before being
circulated.
                                     Article 31
1.   Before an insurance contract is concluded the insurance undertaking shall
inform the policy-holder of:
- the law applicable to the contract where the parties do not have a free choice
   or the fact that the parties are free to choose the law applicable and, in the
   latter case, the law the insurer proposes to choose;
 ---pagebreak---                                          *3.
- the arrangements for handling policy-holders* complaints concerning contracts
   including, where appropriate, the existence of a complaints body, -without
   prejudice to the policy-holder's right to take legal proceedings.
2.   The obligation referred to in paragraph 1 shall apply only where the
policy-holder is a natural person.
3.   The rules for implementing this Article shall be determined in accordance with
the law of the Member State in which the risk is situated.
                                       TITLE IV
                  PROVISIONS RELATING TO THE RIGHT OF ESTABLISHMENT
                         AND THE FREEDOM TO PROVIDE SERVICES
                                     Article 32
Article 10 of Directive 73/239/EEC shall be replaced by the following:
"Article 10
 1.   An insurance undertaking that proposes to establish a branch within the
 territory of another Member State shall notify the competent authorities of its
 home Member State.
 2.   The Member States shall require every insurance undertaking that propose:- to
 establish a branch within the territory of another Member State to provide the
 following information when effecting the notification provided for in
 paragraph 1 :
 (n)  the Member State within the territory of which it proposes to establish n
      branch;
 ---pagebreak---                                        *¥•
 (b) a scheme of operations setting out inter alia the types of business envisaged
     and the structural organization of the branch;
 (c) the address in the Member State of the branch from which documents may be
     obtained and to which they may be delivered, it being understood that that
     address shall be the one to which communications to the authorized agent are
     sent;
(d) the name of the branch's authorized agent, who must possess sufficient powers
     to bind the undertaking in relation to third parties and to represent it in
     relations with the authorities and courts of the Member State of the branch.
     With regard to Lloyd's, in the event of any litigation in the Member State of
     the branch arising out of underwritten commitments, insured persons must not
     be treated less favourably than if the litigation had been brought against
     businesses of a conventional type.  The authorized agent must, therefore,
     possess sufficient powers for proceedings to be taken against him and must in
     that capacity be able to bind the Lloyd's underwriters concerned.
Where the undertaking intends its branch to cover risks in class 10 of point A of
the Annex to Directive 73/239/EEC, not including carrier's liability, it must
produce a declaration that it has become a member of the national bureau and the
national guarantee fund of the Member State of the branch.
 ---pagebreak---                                        ff.
3.  unless tne competent authorities of the home Member State have reason to
doubt tne aoequacy 01 the administrative structure or the financial situation of
the insurance undertaking or the good repute and professional qualifications or
experience of the directors or managers or the authorized agent, taking into
account the business planned, they shall within three months of receiving all the
information referred to in paragraph 2 communicate that information to the
competent authorities of the Member State of the branch and shall inform the
undertaking concerned accordingly.
The competent authorities of the home Member State shall also attest that the
insurance undertaking has the minimum solvency margin calculated in accordance
with Articles 16 and 17.
Where the competent authorities of the home Member State refuse to communicate
the information referred to in paragraph 2 to the competent authorities of the
Member State of the branch they shall give the reasons for their refusal to the
undertaking concerned within three months of receiving all the information in
question.  That refusal or failure to act may be subject to a right to apply to
the courts in the home Member State.
4.  Before the branch of an insurance undertaking starts business, the competent
authorities of the Member State of the branch shall, within two months of
receiving the information referred to in paragraph 3. inform the competent
authority of the home Member State, if appropriate, of the conditions under
winch, in the interest oi the general good, that business must be carried on in
the Member State of the branch.
 ---pagebreak---                                       ft
   5.  On receiving a communication from the competent authorities of the Member
   State of the branch or, if no communication is received from them, on expiry of
   the period provided for in paragraph 4, the branch may be established and start
   business.
   6.  In the event of a change in any of the particulars communicated under
   paragraph 2(b), (c) or (d), an insurance undertaking shall give written notice of
   the change to the competent authorities of the home Member State and of the
   Member State of the branch at least one month before making the change so that
   the competent authorities of the home Member State and the competent authorities
   of the Member State of the branch may fulfil their respective roles under
   paragraphs 3 and 4".
                                       Article 33
- Article 11 of Directive 73/239/EEC is hereby repealed.
                                      Article 34
  Article 14 of Directive 88/357/EEC shall be replaced by the following:
  "Article 14
   Any undertaking that intends to carry on business for the first time in one or
   more Member States under the freedom to provide services shall first inform the
   competent authorities of the home Member State, indicating the nature of the
   risks it proposes to cover".
 ---pagebreak---                                        *?•
                                    Article 35
Article 16 of Directive 88/357/EEC shall be replaced by the following:
"Article 16
 1.  Within one month of the notification provided for in Article 14, the
 competent authorities of the home Member State shall communicate to the Member
 State or Member States within the territories of which an undertaking intends to
 carry on business under the freedom to provide services:
 (a) a certificate attesting that the undertaking has the minimum solvency margin
     calculated in accordance with Articles 16 and 17 of Directive 73/239/EEC;
 (b) the classes of insurance which the undertaking has been authorized to offer;
 (c) the nature of the risks which the undertaking proposes to cover in the
     Member State of the provision of services.
 At the same time, they shall inform the undertaking concerned accordingly.
 fcach Member State within the territory of which an undertaking intends, under
 the freedom to provide services, to cover risks in class 10 of point A of the
 Annex to Directive 73/239/EEC other than carrier's liability may require that
 the undertaking:
 - communicate the name and address of the representative referred to in
   Article 12a(4) of this Directive.
 - produce a declaration that the undertaking has become a member of the national
   bureau and national guarantee fund of the Member State of the provision of
   servi ces.
 ---pagebreak---                                         Si.
 2.  Where the competent authorities of the home Member State do not communicate
 the information referred to in paragraph 1 within the period laid down, they shall
give the reasons for their refusal to the undertaking within that same period.
That refusal shall be subject to a right to apply to the courts in the home Member
State.
3.   The undertaking may start business on the certified date on which it is
informed of the communication provided for in the first subparagraph of
paragraph 1".
                                     Article 36
Article 17 of Directive 88/357/EEC shall be replaced by the following:
"Article 17
  Any change which an undertaking intends to make in the information referred to
  in Article 14 shall be subject to the procedure provided for in Articles 14
  and 16".
                                      Article 37
Article 12(2), second and third subparagraphs. Article 12(3) and Articles 13
and 15 of Directive 88/357/EEC are hereby repealed.
                                     Article 38
The competent authorities of the Member State of the branch or the Member State of
the provision of services may require that the information which they are
authorized under this Directive to request with regard to the business of
insurance undertakings operating within the territory of that State shall be
supplied to them in the official language or languages of that State.
 ---pagebreak---                                        a
                                    Article 39
1.  Article 18 of Directive 88/357/EEC is hereby repealed.
2.  The Member State of the branch or of the provision of services shall not adopt
provisions requiring the prior approval or systematic notification of general and
special policy conditions, scales of premiums, or forms and other printed
documents which an undertaking intends to use in its dealings with policy-holders.
It may only require an undertaking that proposes to carry on insurance business
within its territory, under the right of establishment or the freedom to provide
services, to effect non-systematic notification of those policy conditions and
other documents for the purpose of verifying compliance with its national
provisions concerning insurance contracts, and that requirement may not constitute
a prior condition for an undertaking's carrying on its business.
3.  The Member State of the branch or of the provision of services may not retain
or introduce prior notification or approval of proposed increases in premium rates
except as part of general price-control systems.
                                    Article 40
1   Article 19 of Directive 88/357/EEC is hereby repealed.
2.  Any undertaking carrying on business under the right of establishment or the
freedom to provide services shall submit to the competent authorities of the
Member State of the branch and/or the Member State of the provision of service
all documents requested of it for the purposes of this Article insofar as
undertakings with head offices in those Member States are also obliged to do so
 ---pagebreak---                                     to
3.  If the competent authorities of a Member State establish that an undertaking
with a branch or carrying on business under the freedom to provide services within
its territory is not complying with the legal provisions applicable to it in that
State, they shall require the undertaking concerned to remedy that irregular
situation.
4.  If the undertaking in question fails to take the necessary action, the
competent authorities of the Member State concerned shall inform the competent
authorities of the home Member State accordingly.  The latter authorities shall,
at the earliest opportunity, take all appropriate measures to ensure that the
undertaking concerned remedies that irregular situation.   The nature of those
measures shall be communicated to the competent authorities of the Member State
concerned.
5.  If, despite the measures taken by the home Member State or because those
measures prove inadequate or are lacking in that State, the undertaking persists
in infringing the legal provisions in force in the Member State concerned, the
latter may, after informing the competent authorities of the home Member State,
take appropriate measures to prevent or penalize further infringements, including,
insofar as is strictly necessary, preventing that undertaking from continuing to
conclude new insurance contracts within its territory.   Member States shall ensure
that within their territories it is possible to serve the legal documents
necessary for such measures on insurance undertakings.
6.  Paragraphs 3, 4 and 5 shall not affect the emergency powers of the Member
States concerned to take appropriate measures to prevent irregularities within
their territories.  This shall include the possibility of preventing insurance
undertakings from continuing to conclude new insurance contracts within their
territories.
 ---pagebreak---                                             £4
7.   p^r^ar-aphR ?    4 and 5 shall not affect the powers of the Member States to
          1
penal i?.* inf ring<*tnents within their territories.
8.   If an undertaking which has committed an infringement has an establishment or
possesses property in the Member State concerned, the competent authorities of the
 latter may, in accordance with national law, apply the administrative penalties
prescribed for that infringement by way of enforcement against that establishment
or property.
9.   Any measure adopted under paragraphs 4 to 8 involving penalties or
restrictions on the conduct of insurance business must be properly reasoned and
«•ommunicated to the undertaking concerned.
10.   Every two years the Commission shall submit to the Insurance Committee set up
by Directive 91/675/EEC a report summarizing the number and types of cases in
which, in each Member State, authorization has been refused under Article 10 of
Directive 73/239/EEC or Article 16 of Directive 88/357/EEC as amended by this
Directive or measures have been taken under paragraph 5.      Member States shall
co-operate with the Commission by providing it with the information required for
that report.
                                         Article 41
Nothing in this Directive shall prevent insurance undertakings with head offices
in Member States from advertising their services, through all available means of
eomrniinioat ion. in the Member State of the branch or the Member State of the
provision of services, subject to any rules governing the form and content of such
advertising adopted in the interest of the general good.
 ---pagebreak---                                        u.
                                     Article 42
 1. Article 20 of Directive 88/357/EEC is hereby repealed.
2.   In the event of an insurance undertaking's being wound up, commitments arising
out of contracts underwritten through a branch or under the freedom to provide
services shall be met in the same way as those arising out of that undertaking's
other insurance contracts, without distinction as to nationality as far as the
persons insured and the beneficiaries are concerned.
                                     Article 43
 1. Article 21 of Directive 88/357/EEC is hereby repealed.
2.  Where insurance is offered under the right of establishment or the freedom to
provide services, the policy-holder shall, before any commitment is entered into,
be informed of the Member State in which the head office or, where appropriate,
the branch with which the contract is to be concluded is situated.
Any documents issued to the policy-holder must convey the information referred to
in the first subparagraph.
The obligations imposed in the first two subparagraphs shall not apply to the
risks referred to in Article 5(d) of Directive 73/239/EEC.
3.  The contract or any other document granting cover, together with the insurance
proposal where it is binding upon the policy-holder, must state the address of the
head office, or, where appropriate, of the branch of the insurance undertaking
which grants the cover.
 ---pagebreak---                                        Bi
Each Member State may require that the name and address of the representative of
the insurance undertaking referred to in Article 12a(4) of Directive 88/357/EEC
also appear in the documents referred to in the first subparagraph.
                                     Article 44
1.   Article 22 of Directive 88/357/EEC is hereby repealed.
2.   Every insurance undertaking shall inform the competent authority of its home
Member State, separately in respect of transactions carried out under the right oi
establishment and those carried out under the freedom to provide services, of the
amount of the premiums, claims and commissions, without deduction of reinsurance,
by Member State and by group of classes, and also as regards class 10 of point A
of the Annex to Directive 73/239/EEC, not including carrier's liability, the
frequency and average cost of claims.
The groups of classes are hereby defined as follows:
- accident and sickness (classes 1 and 2 ) ;
- motor (classes 3. 7 and 10, the figures for class 10. excluding carriers'
   liability, being given separately);
- fire and other damage to property (classes 8 and 9 ) ;
- aviation, marine and transport (classes 4, 5. 6. 7, 11 and 12);
- general liability (class 13);
 ---pagebreak--- - credit and suretyship (classes 14 and 15);
- other classes (classes 16, 17 and 18).
The competent authority of the home Member State shall forward that information
within a reasonable time and in aggregate form to the competent authorities of
each of the Member States concerned which so request.
                                    Article 45
1.  Article 24 of Directive 88/357/EEC is hereby repealed.
2.  Nothing in this Directive shall affect the Member States' right to require
undertakings carrying on business within their territories under the right of
establishment or the freedom to provide services to join and participate, on the
same terms as undertakings authorized there, in any scheme designed to guarantee
the payment of insurance claims to insured persons and injured third parties.
                                    Article 46
1.  Article 25 of Directive 88/357/EEC is hereby repealed.
2.  Without prejudice to any subsequent harmonization, every insurance contract
shall be subject exclusively to the indirect taxes and parafiscal charges on
insurance premiums in the Member State in which the risk is situated as defined in
Article 2(d) of Directive 88/357/EEC. and also, in the case of Spain, to the
surcharges legally established in favour of the Spanish "Consorcio de Compensaciôn
de Seguros" for the performance of its functions relating to the compensation of
losses arising from extraordinary events occurring in that Member State.
 ---pagebreak---                                               &
 In derogation from the first indent of Article 2(d) of Directive B8/357/EEC, and
 for the Durposes of this paragraph, moveable property contained i-n a building
 situated within the territory of a Member State, except for goods in commercial
 transit, shall be a risk situated in that Member State, even if the building and
 its contents are not covered by the same insurance policy.
The law applicable to the contract under Article 7 of Directive 88/357/EEC shall
not affect the fiscal arrangements applicable.
 Fending future harmonization, each Member State shall apply to those undertakings
which cover risks situated within its territory its own national provisions to
ensure the collection of indirect taxes and parafiscal charges due under the first
 subparagraph.
                                            TITLE V
                                    TRANSITIONAL PROVISIONS
                                          Article 47
The Federal Republic of Germany may postpone until 1 January 1996 the application
of the first sentence of the second subparagraph of Article 53(2).        During that
period, the provisions of the following subparagraph shall apply in the situation
referred to in Article 53(2).
When the technical basis for the calculation of premiums has been communicated *«o
the competent authorities of the home Member State in accordance with the third
sentence of the second subparagraph of Article 53(2), those authorities shall
without delay forward that information to the competent authorities oi the Member
State in which the risk i «; situated so that they may comment        If the competent
.'Mil \\')r i t i es of the home Member State take no account of those comments  th*»v
 ---pagebreak---                                       66.
shall inform the competent authorities of the Member State in which the risk is
situated accordingly in detail and state their reasons.
                                     Article 48
Member States may allow insurance undertakings with head offices within their
territories, the buildings and land of which that cover their technical provisions
exceed, at the time of the notification of this Directive, the percentage laid
down in Article 22(1)(a) a period expiring no later than 31 December 1998 within
which to comply with that provision.
                                     Article 49
The Kingdom of Denmark may postpone until 1 January 1999 the application of this
Directive to compulsory insurance against accidents at work.  During that period
the exclusion provided for in Article 12(2) of Directive 88/357/EEC for accidents
at work shall continue to apply in the Kingdom of Denmark.
                                     Article 50
Spain, until 31 December 1996, and Greece and Portugal, until 31 December 1998,
may operate the following transitional arrangements for contracts covering risks
situated exclusively in one of those Member States other than those defined in
Article 5(d) of Directive 73/239/EEC:
(a) in derogation from Article 8(3) of Directive 73/239/EEC and from Articles 29
    and 39 of this Directive, the competent authorities of the Member States in
    question may require the communication, before use. of general and special
    insurance policy conditions;
 ---pagebreak---                                           6?
(b) the amount of the technical provisions relating to the contracts referred to
      in this Article shall oe determined under the supervision of the Merr.oer State
      concerned in accordance with its own rules or, failing that, in accordance
      with the procedures established within its territory in accordance with this
      Directive.    Cover of those technical provisions by equivalent and matching
      assets and the localization of those assets shall be effected under the
      supervision of that Member State in accordance with its rules and practices
      adopted in accordance with this Directive.
                                            TITLE VI
                                        FINAL PROVISIONS
                                           Article 51
The following technical adjustments to be made to Directives 73/239/EEC and
88/357/EEC and to this Directive shall be adopted in accordance with the procedure
laid down in Directive 91/675/EEC:
- extension of the legal forms provided for in Article 8(l)(a) of Directive
  73/239/EEC;
- amendments to the list set out in the Annex to Directive 73/239/EEC, <
  adaptation of the terminology used in that list to take account of the
  development of insurance markets;
- clarification of the items constituting the solvency margin listed in
  Article 16(1) of Directive 73/239/EEC to take account of the créait       oi new
  financial instruments;
- «.* I t.ci ation of the minimum guarantee fund provided for in Article 1V < <"• î ) \
  Directive 73/239/EEC to take account of economic and financial development:;;
 ---pagebreak---                                        6t.
- amendments, to take account of the creation of new financial instruments, to the
   list of assets acceptable as cover for technical provisions set out in
   Article 21 and to the rules on the spreading of investments laid down in
   Article 22;
- changes in the relaxations in the matching rules laid down in Annex 1 to
   Directive 88/357/EEC, to take account of the development of new currency-hedging
   instruments or progress made towards economic and monetary union;
- clarification of the definitions in order to ensure uniform application of
   Directives 73/239/EEC and 88/357/EEC and of this Directive throughout the
   Community.
                                      Article 52
1.   Branches which have started business, in accordance with the provisions in
force in their Member States of establishment, before the entry into force of the
provisions adopted in implementation of this Directive shall be presumed to have
been subject to the procedure laid down in Article 10(1) to (5) of Directive
73/239/EEC.   They shall be governed, from the date of that entry into force, by
Articles 15. 19, 20 and 22 of Directive 73/239/EEC and by Article 40 of this
Directive.
2.   Articles 34 and 35 shall not affect rights acquired by insurance undertakings
carrying on business under the freedom to provide services before the entry into
force of the provisions adopted in implementation of this Directive.
 ---pagebreak---                                         a.
                                     Article 53
The following Article shall be inserted in Directive 73/239/EEC:
"Article 28a
  1.  Under the conditions laid down by national law, each Member State shall
  authorize agencies and branches set up within its territory and covered by this
 Title to transfer all or part of their portfolios of contracts to an accepting
 office established in the same Member State if the competent authorities of that
 Member State or, if appropriate, of the Member State referred to in Article 26
  certify that after taking the transfer into account the accepting office
 .possesses the necessary solvency margin.
  2.  Under the conditions laid down by national law, each Member State shall
 authorize agencies and branches set up within its territory and covered by this
 Title to transfer all or part of their portfolios of contracts to an insurance
 •undertaking with a head office in another Member State if the competent
 authorities of that Member State certify that after taking the transfer into
 account the accepting office possesses the necessary solvency margin.
  3.  If under the conditions laid down by national law a Member State authorizes
 •agencies and branches set up within its territory and covered by this Title to
  transfer all or part of their portfolios of contracts to an agency or branch
 covered by this Title and set up within the territory of another Member State it
 shall ensure that the competent authorities of the Member State of the accept *ng
 office or, if appropriate, of the Member State referred to in Article 26 certify
 that after taking the transfer into account the accepting office possesses t lie
 necessary solvency margin, that the law of the Member State of the accepting
 office permits such a transfer and that that State has agreed to the transfer
 ---pagebreak---                                        ?..
4.  In the circumstances referred to in paragraphs 1, 2 and 3 the Member State in
which the transferring agency or branch is situated shall authorize the transfer
after obtaining the agreement of the competent authorities of the Member State in
which the risks are situated, where different from the Member State in which the
transferring agency or branch is situated.
5.  The competent authorities of the Member States consulted shall give their
opinion or consent to the competent authorities of the home Member State of the
transferring insurance undertaking within three months of receiving a request; the
absence of any response from the authorities consulted within that period shall be
considered equivalent to a favourable opinion or tacit consent.
6.  A transfer authorized in accordance with this Article shall be published as
laid down by national law in the Member State in which the risk is situated.  Such
transfers shall automatically be valid against policy-holders, insured persons and
any other persons having rights or obligations arising out of the contracts
transferred.
This provision shall not affect the Member States' rights to give policy-holders
the option of cancelling contracts within a fixed period after a transfer.
                                    Article 54
1.  Notwithstanding any provision to the contrary, a Member State in which
contracts covering the risks in class 2 of point A of the Annex to
Directive 73/239/EEC may serve as a partial or complete alternative to health
cover provided by the statutory social security system may require that those
contracts comply with the specific legal provisions adopted by that Member State
to protect the general good in that class of insurance, and that the general and
special conditions of that insurance be communicated to the competent authorities
of that Member State before use.
 ---pagebreak---                                      7<
2.   Member States may require that the health insurance system referred to in
paragraph 1 De operated on a technical basis similar to that of life assurance
where :
- the premiums paid are calculated on the basis of sickness tables and other
   statistical data relevant to the Member State in which the risk is situated in
   accordance with the mathematical methods used in insurance;
- a reserve is set up for increasing age;
- the insurer may cancel the contract only within a fixed period determined by the
   Member State in which the risk is situated;
- the contract provides that premiums may be increased or payments reduced, even
   for current contracts;
- the contract provides that the policy-holder may change his existing contract
   into a new contract complying with paragraph 1, offered by the same insurance
   undertaking or the same branch and taking account of his acquired rights.   In
  particular, account must be taken of the reserve for increasing age and a new
  medical examination may be required only for increased cover.
In that event, the competent authorities of the Member State concerned shall
publish the sickness tables and other relevant statistical data referred to in the
first, subparagraph and transmit them to the competent authorities of the home
Member State.   The premiums must be sufficient, on reasonable actuarial
assumptions, for undertakings to be able to meet all their commitments having
regard to all aspects of their financial situation.   The home Member State shall
require that the technical basis for the calculation of premiums be communicafe.il
to its competent authorities before the product is circulated.   This paragraph
shall also apply where existing contracts are modified.
 ---pagebreak---                                         n.
                                     Article 55
Member States may require that any insurance undertaking offering, at its own
 risk, compulsory insurance against accidents at work within their territories
comply with the specific provisions of their national law concerning such
insurance, except for the provisions concerning financial supervision, which shall
be the exclusive responsibility of the home Member State.
                                     Article 56
Member States shall ensure that decisions taken in respect of an insurance
undertaking under laws, regulations and administrative provisions adopted in
accordance with this Directive may be subject to the right to apply to the courts.
                                     Article 57
1.   The Member States shall adopt the laws, regulations and administrative
provisions necessary for their compliance with this Directive no later than
31 December 1993 and bring them into force no later than 1 July 1994. They shall
forthwith inform the Commission thereof.
When they adopt such measures the Member States shall include references to this
Directive or shall make such references when they effect official publication.
The manner in which such references are to be made shall be laid down by the
Member States.
2.   The Member States shall communicate to the Commission the texts of the main
provisions of national law which they adopt in the field covered by this
Directive.
 ---pagebreak---                                      73.
                                    Article 58
This Directive is addressed to the Member States
Done at Brussels,
                                            For the Counci1
                                             The President
 ---pagebreak---  ---pagebreak---  ---pagebreak---                                                                      ISSN 0254-1475
                                                               COM (92) 63 final
                                                      DOCUMENTS
EN                                                                               io
                                Catalogue number : CB-CO-92-068-EN-C
                                                             ISBN 92-77-41463-4
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