EUROPEAN PARLIAMENT
2004
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2009
Committee on Economic and Monetary Affairs
PROVISIONAL
2004/0097(COD)
14.3.2005
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DRAFT REPORT
on the proposal for a directive of the European Parliament and of the Council
on reinsurance and amending Council Directives 73/239/EEC, 92/49/EEC and
Directives 98/78/EC and 2002/83/EC
(COM(2004)0273 – C6-0038/2004 – 2004/0097(COD))
Committee on Economic and Monetary Affairs
Rapporteur: Peter Skinner
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Symbols for procedures
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Consultation procedure
majority of the votes cast
Cooperation procedure (first reading)
majority of the votes cast
Cooperation procedure (second reading)
majority of the votes cast, to approve the common position
majority of Parliament’s component Members, to reject or amend
the common position
Assent procedure
majority of Parliament’s component Members except in cases
covered by Articles 105, 107, 161 and 300 of the EC Treaty and
Article 7 of the EU Treaty
Codecision procedure (first reading)
majority of the votes cast
Codecision procedure (second reading)
majority of the votes cast, to approve the common position
majority of Parliament’s component Members, to reject or amend
the common position
Codecision procedure (third reading)
majority of the votes cast, to approve the joint text
(The type of procedure depends on the legal basis proposed by the
Commission)
Amendments to a legislative text
In amendments by Parliament, amended text is highlighted in bold italics.
Highlighting in normal italics is an indication for the relevant departments
showing parts of the legislative text for which a correction is proposed, to
assist preparation of the final text (for instance, obvious errors or omissions
in a given language version). These suggested corrections are subject to the
agreement of the departments concerned.
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CONTENTS
Page
DRAFT EUROPEAN PARLIAMENT LEGISLATIVE RESOLUTION ................................. 5
EXPLANATORY STATEMENT............................................................................................ 36
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DRAFT EUROPEAN PARLIAMENT LEGISLATIVE RESOLUTION
on the proposal for a directive of the European Parliament and of the Council on
reinsurance and amending Council Directives 73/239/EEC, 92/49/EEC and Directives
98/78/EC and 2002/83/EC
(COM(2004)0273 – C6-0038/2004 – 2004/0097(COD))
(Codecision procedure: first reading)
The European Parliament,
– having regard to the Commission proposal to the European Parliament and the Council
(COM(2004)0273)1,
– having regard to Article 251(2) and Articles 47(2) and 55 of the EC Treaty, pursuant to
which the Commission submitted the proposal to Parliament (C6-0038/2004),
– having regard to Rule 51 of its Rules of Procedure,
– having regard to the report of the Committee on Economic and Monetary Affairs and the
opinion of the Committee on Legal Affairs (A6-0000/2005,
1. Approves the Commission proposal as amended;
2. Calls on the Commission to refer the matter to Parliament again if it intends to amend the
proposal substantially or replace it with another text;
3. Instructs its President to forward its position to the Council and Commission.
Text proposed by the Commission
Amendments by Parliament
Amendment 1
RECITAL 11
(11) This Directive should apply to
reinsurance undertakings which conduct
exclusively reinsurance business and do
not engage in direct insurance business; it
should also apply to the so-called "captive"
reinsurance undertakings created or owned
by industrial, commercial or financial
firms other than undertakings to which
Directive 98/78/EC of the European
Parliament and of the Council on the
supplementary supervision of insurance
undertakings in an insurance group2
1
(11) This Directive should apply to
reinsurance undertakings which conduct
exclusively reinsurance business and do
not engage in direct insurance business; it
should also apply to the so-called "captive"
reinsurance undertakings created or owned
by either a financial undertaking other
than an insurance or reinsurance
undertaking or a group of insurance or
reinsurance undertakings to which
Directive 98/78/EC of the European
Parliament and of the Council on the
Not yet published in OJ.
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applies, the purpose of which is to provide
reinsurance cover exclusively to the risks
of the firms to which they belong.
supplementary supervision of insurance
undertakings in an insurance group applies,
or by one or several non financial
undertakings, the purpose of which is to
provide reinsurance cover exclusively to
the risks of the undertakings to which they
belong. When in this Directive reference
is made to reinsurance undertakings it
shall include captive reinsurance
undertakings, except when special
provision is made for captive reinsurance
undertakings.
Captive reinsurance undertakings do not
cover risks deriving from the external
direct insurance or reinsurance business
of an insurance or reinsurance
undertaking belonging to the group.
Furthermore, insurance or reinsurance
undertakings belonging to a financial
conglomerate may not own a captive
undertaking.
Amendment 2
RECITAL 12 A (new)
(12a) This Directive should not apply to
the provision of reinsurance cover by or
fully guaranteed by a Member State for
reasons of substantial public interest, in
the capacity of reinsurer of last resort, in
particular where because of a specific
situation in a market, it is unfeasible to
obtain adequate commercial cover; in this
regard “adequate commercial cover”
should mainly mean a market failure
which is characterised by an evident lack
of a sufficient range of insurance offers,
although excessive premiums should not
per se imply the inadequacy of that
commercial cover. Article 1, paragraph 2
(d) also applies to arrangements between
insurance undertakings to which
Directives 73/239/EEC and 2002/83/EC
apply that aim to pool financial claims
ensuing from large risks such
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as terrorism.
Amendment 3
RECITAL 12 B (new)
(12b) The reinsurance undertaking must
limit its objects to the business of
reinsurance and related operations. This
requirement may allow a reinsurance
undertaking to carry on, for instance,
activities such as provision of statistical or
actuarial advice risk analysis or research
for its clients. It may also include a
holding company function and activities
with respect to financial sector activities
within the meaning of Article 2 point 8 of
Directive 2002/87/EC of the European
Parliament and of the Council of 16
December 2002 on the supplementary
supervision of credit institutions,
insurance undertakings and investment
firms in a financial conglomerate1. In any
case this requirement does not allow the
carrying on of unrelated banking and
financial activities.
1
OJ L 35, 11.2.2003, p. 1.
Amendment 4
RECITAL 13
(13) This Directive should clarify the
powers and means of supervision vested in
the competent authorities. The competent
authorities of the reinsurance undertaking's
home Member State should be responsible
for monitoring the financial health of
reinsurance undertakings, including their
state of solvency, the establishment of
adequate technical provisions and the
covering of those provisions by quality
assets.
(13) This Directive should clarify the
powers and means of supervision vested in
the competent authorities. The competent
authorities of the reinsurance undertaking's
home Member State should be responsible
for monitoring the financial health of
reinsurance undertakings, including their
state of solvency, the establishment of
adequate technical provisions and
equalisation reserves and the covering of
those provisions and reserves by quality
assets.
Amendment 5
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RECITAL 14 A (new)
(14a) The provisions governing transfers
of portfolios should be in line with the
single authorisation provided for in this
Directive. They should apply to different
kinds of transfers of portfolios between
reinsurance undertakings, such as
transfers of portfolios resulting from
mergers between reinsurance
undertakings or other instruments of
company law or transfers of portfolios of
outstanding losses in run-off to another
reinsurance undertaking. Moreover, the
provisions governing transfers of
portfolios should include provisions
specifically concerning the transfer to
another reinsurance undertaking of the
portfolio of contracts concluded under the
freedom of establishment or the freedom
to provide services.
Amendment 6
RECITAL 19
(19) A reinsurance undertaking conducting
reinsurance business in respect of credit
insurance, whose credit reinsurance
business amounts to more than a small
proportion of its total business should be
required to set up an equalisation reserve
which does not form part of the solvency
margin; this reserve should be calculated
according to the one of the methods laid
down in Directive 73/239/EEC and which
are recognised as equivalent; furthermore
this Directive should allow the home
Member State to also require reinsurance
undertakings whose head office is situated
within its territory to set up equalisation
reserves for classes of risks other than
credit reinsurance, following the rules laid
down by that home Member State.
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(19) A reinsurance undertaking conducting
reinsurance business in respect of credit
insurance, whose credit reinsurance
business amounts to more than a small
proportion of its total business should be
required to set up an equalisation reserve
which does not form part of the solvency
margin; this reserve should be calculated
according to the one of the methods laid
down in Directive 73/239/EEC and which
are recognised as equivalent; furthermore
this Directive should allow the home
Member State to also require reinsurance
undertakings whose head office is situated
within its territory to set up equalisation
reserves for classes of risks other than
credit reinsurance, following the rules laid
down by that home Member State.
Following the introduction of the IFRS 4
accounting standards, this Directive
should clarify the prudential treatment of
equalisation reserves established in
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accordance with this Directive.
Amendment 7
RECITAL 20
(20) The reinsurance undertaking should
have assets to cover technical provisions
which shall take account of the type of
business carried out by a reinsurance
undertaking, in particular the nature,
amount and duration of the expected
claims payments, in such a way as to
secure sufficiency, liquidity, security,
quality, profitability and matching of its
investments, which the undertaking shall
ensure are diversified and adequately
spread and which gives the undertaking the
possibilities to respond adequately to
changing economic circumstances, in
particular developments in the financial
markets and real estate markets or large
impact catastrophic events.
(20) The reinsurance undertaking should
have assets to cover technical provisions
and equalisation reserves which shall take
account of the type of business carried out
by a reinsurance undertaking, in particular
the nature, amount and duration of the
expected claims payments, in such a way
as to secure sufficiency, liquidity, security,
quality, profitability and matching of its
investments, which the undertaking shall
ensure are diversified and adequately
spread and which gives the undertaking the
possibilities to respond adequately to
changing economic circumstances, in
particular developments in the financial
markets and real estate markets or large
impact catastrophic events.
Amendment 8
RECITAL 21 A (new)
(21a) In the light of the similarities
between life reassurance covering
mortality risk and non-life reinsurance, in
particular the cover of insurance risks
and the duration of the life reassurance
contracts, the required solvency margin
for life reassurance should be determined
in accordance with the provisions laid
down in this Directive for the calculation
of the required solvency margin for nonlife reinsurance; the home Member State
should however be allowed to apply the
rules provided for in Directive
2002/83/EC for the establishment of the
required solvency margin in respect of life
reassurance activities which are linked to
investment funds or participating
contracts.
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Amendment 9
RECITAL 25 A (new)
(25a) This Directive should be applicable
to finite reinsurance activities; therefore a
definition of finite reinsurance for the
purposes of this Directive will be
necessary; due to the special nature of
this line of reinsurance activity, the home
Member State should be given the option
to lay down specific provisions for the
pursuit of finite reinsurance activities.
These provisions could differ from the
general regime laid down in this Directive
on a number of specific points.
Amendment 10
RECITAL 25 B (new)
(25b) This Directive should provide rules
concerning those special purpose vehicles
that assume risks from insurance and
reinsurance undertakings. The special
nature of such special purpose vehicles,
which are not insurance or reinsurance
undertakings, calls for the establishment
of specific provisions in Member States.
Furthermore, this Directive should
provide that the home Member State
should lay down more detailed rules in
order to set the conditions under which
outstanding amounts from a special
purpose vehicle can be used as assets
covering technical provisions by an
insurance or a reinsurance undertaking.
This Directive should also provide that
recoverable amounts from a special
purpose vehicle may be considered as
amounts deductible under reinsurance or
retrocession contracts within the limits set
out in this Directive, subject to an
application by the insurance undertaking
to the competent authority and after
agreement of that authority.
Amendment 11
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ARTICLE 1, PARAGRAPH 2
2. This Directive shall not apply to the
following:
2. This Directive shall not apply to the
following:
a)
insurance undertakings to which
Directives 73/239/EEC and 2002/83/EC
apply;
a)
insurance undertakings to which
Directives 73/239/EEC and 2002/83/EC
apply;
b)
activities and bodies referred to in
Article 3(1) and (2) of Directive
73/239/EEC;
b)
activities and bodies referred to in
Articles 2 and 3 of Directive 73/239/EEC;
c)
activities and bodies referred to in
Article 3 of Directive 2002/83/EC;
c)
activities and bodies referred to in
Article 3 of Directive 2002/83/EC;
d)
the activity of reinsurance
conducted by the government of a Member
State when this is acting, for reasons of
substantial public interest, in the capacity
of reinsurer of last resort in circumstances
where such a role is required by a situation
in the market in which it is objectively
impossible to obtain commercial cover.
d)
the activity of reinsurance
conducted or fully guaranteed by the
government of a Member State when this is
acting, for reasons of substantial public
interest, in the capacity of reinsurer of last
resort including in circumstances where
such a role is required by a situation in the
market in which it is unfeasible to obtain
adequate commercial cover.
Amendment 12
ARTICLE 2, PARAGRAPH 1, POINT (A)
(a) reinsurance means the activity
consisting in accepting risks ceded by an
insurance undertaking, by another
reinsurance undertaking or by an
institution for occupational retirement
provision falling under the scope of
Directive 2003/41/EC of the European
Parliament and of the Council1
1
(a) reinsurance means the activity
consisting in accepting risks ceded by an
insurance undertaking, or by another
reinsurance undertaking.
In the case of the association of
underwriters known as Lloyd's,
reinsurance also means the activity
consisting in an insurance or reinsurance
undertaking other than Lloyd's accepting
risks ceded by any member of Lloyd's.
OJ L 235, 23.9.2003, p. 10..
Amendment 13
ARTICLE 2, PARAGRAPH 1, POINT (A A) (new)
(aa) captive reinsurance undertaking
means a reinsurance undertaking owned
either by a financial undertaking other
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than an insurance or a reinsurance
undertaking or a group of insurance or
reinsurance undertakings to which
Directive 98/78/EC applies, or by a non
financial undertaking, the purpose of
which is to provide reinsurance cover
exclusively for the risks of the
undertaking or undertakings to which it
belongs or of an undertaking or
undertakings of the group of which the
captive reinsurance undertaking is a
member;
Amendment 14
ARTICLE 2, PARAGRAPH 1, POINT (N)
(n) captive reinsurance undertaking
means a reinsurance undertaking owned
either- by a financial undertaking other
than an insurance undertaking or a
reinsurance undertaking or a group of
insurance or reinsurance undertakings to
which Directive 98/78/EC applies, or by
one or several non financial
undertakings, the purpose of which is to
provide reinsurance cover exclusively to
the risks of the undertaking or
undertakings to which it belongs or to an
undertaking or undertakings of the group
of which the captive reinsurance
undertaking makes part.
(n) financial undertaking means one of
the following entities:
(i)
a credit institution, a financial
institution or an ancillary banking
services undertaking within the meaning
of Article 1(5) and (23) of Directive
2000/12/EC of the European Parliament
and of the Council of 20 March 2000
relating to the taking up and pursuit of
the business of credit institutions1;
(ii)
an investment firm or a
financial institution within the meaning
of Article 4(1)(1) of Directive 2004/39/EC
of the European Parliament and of the
Council of 21 April 2004 on markets of
financial institutions2;
(iii)
a mixed financial holding
company within the meaning of Article
2(15) of directive 2002/87/EC.
1
OJ L 126, 26.5.2000, p. 1. Directive as last
amended by Commission Directive 2004/69/EC
(OJ L 125, 28.4.2004, p. 44).
2
OJ L 145, 30.4.2004, p. 1.
Amendment 15
ARTICLE 2, PARAGRAPH 1, POINT (N A) (new)
(na) special purpose vehicle (SPV) means
any undertaking, whether incorporated or
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not, other than an existing insurance or
reinsurance undertaking, which assumes
risks from insurance or reinsurance
undertakings and which fully funds its
exposure to such risks through the
proceeds of a debt issuance or some other
financing mechanism where the
repayment rights of the providers of such
debt or other financing mechanism are
subordinated to the reinsurance
obligations of such vehicle.
Amendment 16
ARTICLE 2, PARAGRAPH 1, POINT (N B) (new)
(nb) finite reinsurance means reinsurance
under which the explicit maximum
loss potential, expressed as the maximum
economic risk transferred, arising both
from a significant underwriting risk and
from a timing risk transfer, exceeds the
premium over the lifetime of the contract,
by a limited but significant amount,
together with at least one of the following
two features:
(i) explicit and material considerationof
the time value of money;
(ii) contractual provisions to moderate
the balance of economic experience
between the parties over time to achieve
the target risk transfer.
Amendment 17
ARTICLE 2, PARAGRAPH 2
2. For the purposes of paragraph 1(c) any
permanent presence of an undertaking in
the territory of a Member State shall be
treated in the same way as an agency or
branch, even if that presence does not take
the form of a branch or agency, but
consists merely of an office managed by
the undertaking's own staff or by a person
who is independent but has permanent
authority to act for the undertaking as an
agency would.
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2. For the purposes of paragraph 1(a), the
provision of cover by a reinsurance
undertaking to an institution for
occupational retirement provision falling
within the scope of Directive 2003/41/EC
of the European Parliament and of the
Council of 3 June 2003 on the activities
and supervision of institutions for
accupational retirement provision1, where
such institution’s Home Member State
has allowed it, shall also be considered as
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an activity falling within the scope of this
Directive.
For the purposes of paragraph 1(i) , and in
the context of Articles 7 and 14 and of the
other levels of holding referred to in
Article 14, the voting rights referred to in
Article 92 of Directive 2001/34/EC shall
be taken into account.
For the purposes of paragraph 1(c) any
permanent presence of an undertaking in
the territory of a Member State shall be
treated in the same way as an agency or
branch, even if that presence does not take
the form of a branch or agency, but
consists merely of an office managed by
the undertaking's own staff or by a person
who is independent but has permanent
authority to act for the undertaking as an
agency would.
For the purposes of paragraph 1(k), any
subsidiary of a subsidiary undertaking shall
also be regarded as a subsidiary of the
undertaking which is those undertakings'
ultimate parent undertaking.
For the purposes of paragraph 1(m), any
subsidiary undertaking of a subsidiary
undertaking shall be considered a
subsidiary of the parent undertaking which
is at the head of those undertakings.
For the purposes of paragraph 1(i) , and in
the context of Articles 12 and 19 to 23 and
of the other levels of holding referred to in
Article 14, the voting rights referred to in
Article 92 of Directive 2001/34/EC shall
be taken into account.
Fort the purposes of paragraph 1(m) a
situation in which two or more natural or
legal persons are permanently linked to one
and the same person by a control
relationship shall also be regarded as
constituting a close link between such
persons.
For the purposes of paragraph 1(k), any
subsidiary of a subsidiary undertaking shall
also be regarded as a subsidiary of the
undertaking which is those undertakings'
ultimate parent undertaking.
For the purposes of paragraph 1(m), any
subsidiary undertaking of a subsidiary
undertaking shall be considered a
subsidiary of the parent undertaking which
is at the head of those undertakings.
For the purposes of paragraph 1(m) a
situation in which two or more natural or
legal persons are permanently linked to one
and the same person by a control
relationship shall also be regarded as
constituting a close link between such
persons.
1
OJ L 235, 23.9.2003, p. 10.
Amendment 18
ARTICLE 34
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The assets covering the technical
provisions shall take account of the type
of business carried out by a reinsurance
undertaking, in particular the nature, the
amount and the duration of the expected
claims payments, in such a way as to
secure sufficiency, liquidity, security,
quality, profitability and matching of its
investments, which the undertaking shall
ensure are diversified and adequately
spread and which gives the undertaking
the possibilities to respond adequately to
changing economic circumstances, in
particular developments in the financial
markets and real estate markets or large
impact catastrophic events.
1. The home Member State shall require
every reinsurance undertaking to invest
the assets covering the technical
provisions and the equalisation reserve
referred to in Article 33 in accordance
with the following rules:
(a) the assets shall take account of the
type of business carried out by a
reinsurance undertaking, in particular the
nature, the amount and the duration of
the expected claims payments, in such a
way as to secure sufficiency, liquidity,
security, quality, profitability and
matching of its investments;
(b) the reinsurance undertaking shall
ensure that the assets are diversified and
adequately spread and allow the
undertaking to respond adequately to
changing economic circumstances, in
particular developments in the financial
markets and real estate markets or large
impact catastrophic events. The
undertaking has to assess the impact of
irregular market circumstances on its
assets and has to diversify the assets in
such a way that it reduces such impact;
(c) investment in assets which are not
admitted to trading on a regulated
financial market must in any event be
kept to prudent levels;
(d) investment in derivative instruments
shall be possible insofar as they
contribute to a reduction of investment
risks or facilitate efficient portfolio
management. They must be valued on a
prudent basis, taking into account the
underlying assets, and included in the
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valuation of the institution's assets. The
institution shall also avoid excessive risk
exposure to a single counterparty and to
other derivative operations;
(e) the assets shall be properly diversified
in such a way as to avoid excessive
reliance on any one particular asset,
issuer or group of undertakings and
accumulations of risk in the portfolio as a
whole. Investments in assets issued by the
same issuer or by issuers belonging to the
same group shall not expose the
undertaking to excessive risk
concentration;
Member States may decide not to apply
the requirements referred to in point (e) to
investment in government bonds.
2. Member States shall not require
reinsurance undertakings located in their
territory to invest in particular categories
of assets.
3. Member States shall not subject the
investment decisions of a reinsurance
undertaking located in their territory or
its investment manager to any kind of
prior approval or systematic notification
requirements.
4. Notwithstanding the provisions of
paragraphs 1 to 3, the home Member
State may, for every reinsurance
undertaking whose head office is situated
in its territory, lay down the following
quantitative rules, provided they are
prudentially justified:
(a) investments of gross technical
provisions in currencies other than those
in which technical provisions are set
should be limited to 30%;
(b) investments of gross technical
provisions in shares and other negotiable
securities treated as shares, bonds, debt
securities which are not admitted to
trading on a regulated market should be
limited to 30%;
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(c) the home Member State may require
every reinsurance undertaking to invest
no more than 5% of its 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, and no more than 10% 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 undertakings which are members of
the same group;
5. Furthermore, the home Member State
shall lay down more detailed rules setting
the conditions for the use of amounts
outstanding from a special purpose
vehicle as assets covering technical
provisions according to this Article.
Amendment 19
ARTICLE 36, PARAGRAPH 1, POINT (B)
(b) statutory and free reserves not
corresponding to underwriting liabilities;
(b) statutory and free reserves not
corresponding to underwriting liabilities or
classified as equalisation reserves;
Amendment 20
ARTICLE 37, PARAGRAPH 3, SUBPARAGRAPH 6
The sum so obtained shall be multiplied by
the ratio existing in respect of the sum of
the last three financial years between the
amount of claims remaining to be borne by
the reinsurance undertaking after deduction
of amounts recoverable under retrocession
and the gross amount of claims; this ratio
may in no case be less than 50%.
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The sum so obtained shall be multiplied by
the ratio existing in respect of the sum of
the last three financial years between the
amount of claims remaining to be borne by
the reinsurance undertaking after deduction
of amounts recoverable under retrocession
and the gross amount of claims; this ratio
may in no case be less than 50%. Upon
application, with supporting evidence, by
the reinsurance undertaking to the
competent authority of the home Member
State and with agreement of that
authority, amounts recoverable from
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special purpose vehicles referred to
in Article 44b of this Directive may also
be deducted as retrocession.
Amendment 21
ARTICLE 37, PARAGRAPH 4, SUBPARAGRAPH 8
obtained shall be multiplied by the ratio
existing in respect of the sum of the last
three financial years between the amount
of claims remaining to be borne by the
undertaking after deduction of amounts
recoverable under retrocession and the
gross amount of claims; this ratio may in
no case be less than 50%.
The sum so obtained shall be multiplied by
the ratio existing in respect of the sum of
the last three financial years between the
amount of claims remaining to be borne by
the undertaking after deduction of amounts
recoverable under retrocession and the
gross amount of claims; this ratio may in
no case be less than 50%. Upon
application, with supporting evidence, by
the reinsurance undertaking to the
competent authority of the home Member
State and with agreement of that
authority, amounts recoverable from
special purpose vehicles referred to
in Article 44b of this Directive may also
be deducted as retrocession.
Amendment 22
ARTICLE 38
1. Subject to Article 40, the required
solvency margin for life reassurance
activities shall be determined as laid down
in paragraphs 2 to 7 according to the
classes of reinsurance underwritten.
1. The required solvency margin for life
reassurance activities shall be determined
according to Article 37 of this Directive.
2. For the kinds of reinsurance referred to
in Article 2(1)(a) and (b) of Directive
2002/83/EC other than assurances linked
to investment funds and for the operations
referred to in Article 2(3), the required
solvency margin shall be equal to the sum
of the following two results:
2. Notwithstanding paragraph 1, the home
Member State may provide that for
reinsurance classes of assurance business
covered by Article 2(1)(a) of Directive
2002/83/EC linked to investment funds or
participating contracts and for the
operations referred to in Article 2(1)(b),
2(2)(b), (c), (d) and (e) of Directive
2002/83/EC, the required solvency margin
shall be determined in accordance with
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Article 28 of Directive 2002/83/EC.
(a) first result:
4% of the mathematical provisions
relating to reinsurance acceptances gross
of retro cessions shall be multiplied by the
ratio, for the last financial year, of the
total mathematical provisions net of retro
cessions to the gross total mathematical
provisions. That ratio may in no case be
less than 85%;
(b) second result:
for policies on which the capital at risk is
not a negative figure, 0,3% of such capital
underwritten by the reinsurance
undertaking shall be multiplied by the
ratio, for the last financial year, of the
total capital at risk retained as the
undertaking's liability after retro cessions
to the total capital at risk gross of retro
cessions; that ratio may in no case be less
than 50%.
For temporary reinsurance on death of a
maximum term of three years the fraction
shall be 0,1%. For such reinsurance of a
term of more than three years but not
more than five years the above fraction
shall be 0,15%.
3.
For reinsurance of supplementary
insurance referred to in Article 2(1)(c) of
Directive 2002/83/EC the required
solvency margin shall be equal to the
required solvency margin for reinsurance
undertakings as laid down in Article 37 of
this Directive.
4.
For reinsurance of permanent
health insurance not subject to
cancellation referred to in Article 2(1)(d)
of Directive 2002/83/EC, the required
solvency margin shall be equal to:
(a) 4% of the mathematical provisions,
calculated in compliance with paragraph
2(a) of this Article; plus
(b) the required solvency margin for
reinsurance undertakings as laid down in
Article 37 of this Directive. However, the
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condition contained in Article 37(6)(b) of
this Directive that a provision be set up
for increasing age may be replaced by a
requirement that the business be
conducted on a group basis.
5.
For reinsurance of capital
redemption operations referred to in
Article 2(2)(b) of Directive 2002/83/EC,
the required solvency margin shall be
equal to 4% of the mathematical
provisions calculated in compliance with
paragraph 2(a) of this Article.
6.
For reinsurance of tontines,
referred to in Article 2(2)(a) of Directive
2002/83/EC, the required solvency margin
shall be equal to 1% of their assets.
7.
For reinsurance classes of
assurances business covered by Article
2(1)(a) and (b) of Directive 2002/83/EC
linked to investment funds and for the
operations referred to in Article 2(2)(c),
(d) and (e) of Directive 2002/83/EC, the
required solvency margin shall be equal
to the sum of the following:
(a) in so far as the reinsurance
undertaking bears an investment risk, 4%
of the technical provisions, calculated in
compliance with paragraph 2(a) of this
Article;
(b) in so far as the reinsurance
undertaking bears no investment risk but
the allocation to cover management
expenses is fixed for a period exceeding
five years, 1% of the technical provisions,
calculated in compliance with paragraph
2(a) of this Article;
(c) in so far as the reinsurance
undertaking bears no investment risk and
the allocation to cover management
expenses is not fixed for a period
exceeding five years, an amount
equivalent to 25% of the last financial
year's net administrative expenses
pertaining to such business;
(d) in so far as the reinsurance
undertaking covers a death risk, 0,3% of
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the capital at risk calculated in
compliance with paragraph 2(b) of this
Article.
Amendment 23
TITLE IIIa (new) and ARTICLE 44 A (new)
TITLE IIIa – PROVISIONS RELATING
TO FINITE REINSURANCE AND
SPECIAL PURPOSE VEHICLES
Article 44a – Finite Reinsurance
1. The home Member State may lay down
specific provisions concerning the pursuit
of finite reinsurance activities regarding:
mandatory conditions for
inclusion in all contracts issued;
sound administrative and
accounting procedures, adequate internal
control mechanisms and risk
management requirements;
accounting, prudential and
statistical information requirements;
the establishment of technical
provisions to ensure that they are
adequate, reliable and objective;
investment of assets covering
technical provisions in order to ensure
that they take account of the type of
business carried on by the reinsurance
undertaking, in particular the nature, the
amount and the duration of the expected
claims payments, in such a way as to
secure sufficiency, liquidity, security,
profitability and matching of its assets;
rules relating to available solvency
margin, required solvency margin and the
minimum guarantee fund that the
reinsurance undertaking shall maintain
in respect of finite reinsurance activities.
2. In the interests of transparency,
Member States shall communicate the text
of all measures laid down by their
national law for the purposes of
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paragraph 1 to the Commission without
delay.
Amendment 24
ARTICLE 44 B (new)
Article 44b – Special Purpose Vehicles
(SPVs) that assume risks from insurance
or reinsurance undertakings
1. Where a Member State decides to allow
the establishment within its territory of
special purpose vehicles within the
meaning of this Directive, it shall require
prior official authorisation thereof.
2. The Member State where the special
purpose vehicle is established shall lay
down the conditions under which the
activities of such an undertaking shall be
carried on. In particular, that Member
State shall lay down rules regarding:
-scope of authorisation; mandatory
conditions for inclusion in all contracts
issued;
-good repute and appropriate professional
qualifications of persons running the
special purpose vehicle;
-fit and proper requirements for
shareholders or members having a
qualifying holding in the special purpose
vehicle;
-sound administrative and accounting
procedures, adequate internal control
mechanisms and risk management
requirements;
-accounting, prudential and statistical
information requirements;
-rules relating to solvency requirements of
special purpose vehicles.
3. In the interests of transparency,
Member States shall communicate the text
of all measures laid down by their
national law for the purposes of
paragraph 2, to the Commission without
delay.
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Amendment 25
ARTICLE 51
Article 51 - Rights acquired by existing
reinsurance undertakings
deleted
1. Reinsurance undertakings subject to
this Directive, which were authorised or
entitled to conduct reinsurance business
in accordance with the provisions of the
Member States in which they have their
head offices before the date of entry into
force of this Directive shall be deemed to
be authorised, in accordance with Article
3.
However, they shall be subject to
fulfilment of the provisions of this
Directive concerning the carrying on of
the business of reinsurance and to the
requirements set out in Articles 6(a), (c),
(d), Articles 7, 8 and 12 and Articles 32 to
41 as from the date of implementation
referred to in Article 61.
2.
Member States may allow
reinsurance undertakings referred to in
paragraph 1 which at the date of entry
into force of this Directive do not comply
with Articles 6 (a), 7, 8 and and Articles
32 to 40 a period of [2 years] after the
date referred to in Article 61 in order to
comply with these requirements.
Amendment 26
ARTICLE 52
Article 52 - Reinsurance undertakings
closing their activity
deleted
1. Reinsurance undertakings which by
[date of transposition of this Directive laid
down in Article 61(1)] have ceased to
conduct new reinsurance contracts and
exclusively administer their existing
portfolio in order to terminate their
activity shall not be subject to this
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Directive.
2. Member States shall draw up the list of
the reinsurance undertakings concerned
and they shall communicate that list to all
the other Member States.
Amendment 27
ARTICLE 57, POINT 4 A new)
Article 16 a, paragraphs 3 and 4 ( Directive 73/239/EEC)
(4a) In Article 16a (3), seventh
subparagraph, and 16a (4), seventh
subparagraph, the following shall be
added:
"Upon application, with supporting
evidence, by the insurance undertaking to
the competent authority of the home
Member State and with the agreement of
that authority, amounts recoverable from
Special Purpose Vehicles referred to
in Article 44b of Directive 200./.. /EC of
the European Parliament and of the
Council [reinsurance Directive]* may be
deducted as retrocession."
* OJ L ... .
Amendment 28
ARTICLE 57, POINT 5
Article 17 b ( Directive 73/239/EEC)
1. If the Commission decides, pursuant to
Article 56(c) of Directive 200./../EC of the
European Parliament and of the Council*
[reinsurance directive] to enhance the
amounts used for the calculation of the
required solvency margin provided for in
Article 37 (3) and (4) of that Directive,
each Member State shall apply to
insurance undertakings whose head office
is situated within its territory the
provisions of Articles 35-39 of that
Directive in respect of their reinsurance
acceptances activities, where one the
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1. Each Member State shall require that
an insurance undertaking whose head
office is situated within its territory and
which conducts reinsurance activities
establishes, in respect of its entire
business, a minimum guarantee fund in
accordance with Article 40 of Directive
200./../EC [reinsurance Directive], where
one of the following conditions is met:
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following conditions is meet:
a) the reinsurance premiums collected
exceed 10% of their total premium;
(a) the reinsurance premiums collected
exceed 10% of its total premium;
b) the reinsurance premiums collected
exceed EUR 500 000;
(b) the reinsurance premiums collected
exceed EUR 50 000 000;
c) the technical provisions resulting from
their reinsurance acceptances exceed 10%
of their total technical provisions.
(c) the technical provisions resulting from
its reinsurance acceptances exceed 10% of
its total technical provisions.
2. An insurance undertaking to which
paragraph 1 applies shall establish, in
respect of its entire business, a minimum
guarantee fund in accordance with Article
40(2) of Directive 200./../EC [reinsurance
Directive].
2. Each Member State may choose to
apply to such insurance undertakings as
are referred to in paragraph 1 and whose
head office is situated within its territory
the provisions of Article 34 of Directive
200./../EC [reinsurance Directive] in
respect of their reinsurance acceptance
activities, where one of the conditions laid
down in paragraph 1, second
subparagraph, is met.
* OJ L…..”
In that case, the relevant Member State
shall require that all assets employed by
the insurance undertaking to cover the
technical provisions corresponding to its
reinsurance acceptances shall be ringfenced, managed and organised
separately from the direct insurance
activities of the insurance undertaking,
without any possibility of transfer. In such
a case, and only as far as their
reinsurance acceptance activities are
concerned, insurance undertakings shall
not be subject to Articles 20 to 22 of
Directive 92/49/EEC and Annex I to
Directive 88/357/EEC.
Each Member State shall ensure that
their competent authorities verify the
separation provided for in the preceding
subparagraph.
3. If the Commission decides, pursuant to
Article 56(c) of Directive 200./../EC of the
European Parliament and of the Council*
[reinsurance directive] to enhance the
amounts used for the calculation of the
required solvency margin provided for in
Article 37 (3) and (4) of that Directive,
each Member State shall apply to such
insurance undertakings as are referred to
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in paragraph 1 the provisions of Articles
35 to 39 of that Directive in respect of
their reinsurance acceptance activities."
Amendment 29
ARTICLE 57, POINT 5 A (new)
Article 20 a , paragraph 4 (Directive 73/239/EEC)
(5a) In Article 20a, paragraph 4 shall be
replaced by the following:
"4. Member States shall ensure that the
competent authorities have the power to
decrease the reduction, based on
reinsurance, to the solvency margin as
determined in accordance with Article 16a
where:
(a) the nature or quality of reinsurance
contracts has changed significantly since
the last financial year;
(b) there is no, or a limited, risk transfer
under the reinsurance contracts."
Amendment 30
ARTICLE 58, POINT 2 A (new)
Article 21, paragraph 1, introduction (Directive 92/49/EEC)
(2a) In article 21, paragraph 1, the
introduction shall be replaced by the
following:
"1. The home Member State may not
authorise insurance undertakings to cover
their technical provisions and
equalisation reserves with any assets other
than those in the following categories :"
Amendment 31
ARTICLE 58, POINT 2 B (new)
Article 21, paragraph 1, point b, letter f (Directive 92/49/EEC)
(2b) In Article 21(1)(B), letter (f) shall be
replaced by the following:
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“(f) debts owed by reinsurers, including
reinsurers’ shares of technical provisions,
and by the special purpose vehicles
referred to in Article 44b of Directive
200./../EEC [Reinsurance Directive].”
Amendment 32
ARTICLE 58, POINT 2 C (new)
Article 21, paragraph 1, subparagraph 3 (Directive 92/49/EEC)
(2c) In Article 21(1), the third
subparagraph shall be replaced by the
following:
"The inclusion of any asset or category of
assets listed in the first subparagraph
shall not mean that all these assets should
automatically be accepted as cover for
technical provisions. The home Member
State shall lay down more detailed rules
setting the conditions for the use of
acceptable assets."
Amendment 33
ARTICLE 58, POINT 2 D (new)
Article 22, paragraph 1, introduction (Directive 92/49/EEC)
(2d) In Article 22, paragraph 1, the
introduction shall be replaced by the
following:
"1. As regard the assets covering
technical provisions and equalisation
reserves, the home Member State shall
require every insurance undertaking to
invest no more than:"
Amendment 34
ARTICLE 58, POINT 2 E (new)
Article 23, paragraph 1, point b, letter f (Directive 92/49/EEC)
(2e) In Article 23(1)(B), letter (f) shall be
replaced by the following:
“(f) debts owed by reinsurers, including
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reinsurers’ shares of technical provisions,
and by special purpose vehicles referred
to in Article 44b of Directive 200./../EC
(Reinsurance Directive);"
Amendment 35
ARTICLE 58, POINT 2 F (new)
Article 23, paragraph 3 (Directive 92/49/EEC)
(2f) In Article 23, paragraph 3 shall be
replaced by the following:
"3.
The inclusion of any asset or
category of assets listed in paragraph 1
shall not mean that all these assets should
automatically be accepted as cover for
technical provisions. The home Member
State shall lay down more detailed rules
setting the conditions for the use of
acceptable assets."
Amendment 36
ARTICLE 59, POINT 7 A (new)
Article 28, paragraph 2, point (a) and (b) (Directive 2002/83/EC)
(7a) In Article 28 (2)(a), first
subparagraph, and 28(2)(b), first
subparagraph, the following shall be
added:
" Upon application, with supporting
evidence, by the insurance undertaking to
the competent authority of the home
Member State and with agreement of that
authority, amounts recoverable from the
Special Purpose Vehicles referred to
in Article 44b of Directive 200./../EC
(Reinsurance Directive) may be deducted
as retrocession."
Amendment 37
ARTICLE 59, POINT 8
Article 28a (Directive 2002/83/EC)
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(8) The following Article 28a is inserted:
(8) The following Article 28a shall be
inserted:
“Article 28a
“Article 28a
Solvency margin for assurance
undertakings conducting reinsurance
activities
Solvency margin for assurance
undertakings conducting reassurance
activities
If the Commission decides, pursuant to
Article 56(c) of Directive 200./../EC of the
European Parliament and of the Council*
[reinsurance directive] to enhance the
amounts used for the calculation of the
required solvency margin provided for in
Article 37(3) and (4), home Member
States shall apply the provisions of
Articles 35 to 39 of Directive 200./../EC
[Reinsurance Directive] to assurance
undertakings in respect of their
reinsurance acceptances activities, where
one of the following conditions is meet:
1. Each Member State shall apply to
insurance undertakings whose head office
is situated within its territory the
provisions of Articles 35 to 39 of Directive
200./../EC of the European Parliament and
of the Council [reinsurance Directive] in
respect of their reinsurance acceptances
activities, where one of the following
conditions is met:
a) the reinsurance premiums collected
exceed 10% of their total premium;
(a) the reinsurance premiums collected
exceed 10% of their total premium;
b) the reinsurance premiums collected
exceed EUR 500 000;
(b) the reinsurance premiums collected
exceed EUR 50 000 000;
c) the technical provisions resulting from
their reinsurance acceptances exceed 10%
of their total technical provisions.”
(c) the technical provisions resulting from
their reinsurance acceptances exceed 10%
of their total technical provisions.
2. Each Member State may choose to
apply to assurance undertakings referred
to in paragraph 1 and whose head office
is situated within its territory the
provisions of Article 34 of Directive
200./../EC in respect of their reinsurance
acceptances activities, where one of the
conditions laid down in paragraph 1,
second subparagraph, is meet.
In that case, the respective Member State
shall require that all assets employed by
the assurance undertaking to cover the
technical provisions corresponding to its
reinsurance acceptances shall be ringfenced, managed and organised
separately from the direct assurance
activities of the assurance undertaking,
without any possibility of transfer. In such
case, and only as far as their reinsurance
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acceptance activities are
concerned, assurance undertakings shall
not be subject to Articles 22 to 26 of
Directive 2002/83/EC.
Each Member State shall ensure that
their competent authorities verify the
separation provided for in the preceding
subparagraph.
Amendment 38
ARTICLE 59, POINT 8 A (new)
Article 37, paragraph 4 (Directive 2002/83/EC)
(9) Article 37(4) shall be replaced by the
following:
"4. Member States shall ensure that the
competent authorities have the power to
decrease the reduction, based on
reinsurance, to the solvency margin as
determined in accordance with Article 28
where:
(a) the nature or quality of reinsurance
contracts has changed significantly since
the last financial year;
(b) there is no, or a limited, risk transfer
under the reinsurance contracts."
Amendment 39
-61 (new)
TITLE IX and ARTICLE
TITLE IX - FINAL PROVISIONS
TITLE IX - TRANSITIONAL AND
FINAL PROVISIONS
Article -61 Right acquired by existing reinsurance
undertakings
1. Reinsurance undertakings subject to
this Directive, which were authorised or
entitled to conduct reinsurance business
in accordance with the provisions of the
Member States in which they have their
head offices before the date of entry into
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force of this Directive, shall be deemed to
be authorised in accordance with Article
3.
However, they shall be obliged to comply
with the provisions of this Directive
concerning the carrying on of the
business of reinsurance and with the
requirements set out in Articles 6(a), (c),
(d), Articles 7, 8 and 12 and Articles 32 to
41 as from the date of implementation of
the laws, regulations and administrative
provisions necessary to comply with this
Directive referred to in Article 61 (1).
2. Member States may allow reinsurance
undertakings referred to in paragraph 1
which at the date of entry into force of
this Directive do not comply with Articles
6 (a), 7, 8 and Articles 32 to 40 a period
until ….* in order to comply with such
requirements.
* 12 months from the date referred to in
Article 61(1)
Amendment 40
ARTICLE -61 A (new)
Article -61a Reinsurance undertakings closing their
activity
1. Reinsurance undertakings which by
…..* have ceased to conduct new
reinsurance contracts and exclusively
administer their existing portfolio in order
to terminate their activity shall not be
subject to this Directive.
2. Member States shall draw up the list of
the reinsurance undertakings concerned
and they shall communicate that list to all
the other Member States.
* the date referred to in Article 61(1).
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Amendment 41
ARTICLE -61 B (new)
Article -61b Transitional period for Articles 57(3) and
59(6)
A Member State may postpone the
application of the provisions of Article
57(3) of the present Directive amending
Article 15(3) of Directive 73/239/EEC and
of the provision in Article 59(6) of this
Directive amending Article 20(4) of
Directive 2002/83/EC, until ….*
* 12 months after the date referred to in
Article 61(1).
Amendment 42
ARTICLE 61, PARAGRAPH 1
1) Member States shall bring into force the
laws, regulations and administrative
provisions necessary to comply with this
Directive at the latest by.. They shall
forthwith communicate to the Commission
the texts of those provisions and a
correlation table between those provisions
and this Directive.
1) Member States shall bring into force the
laws, regulations and administrative
provisions necessary to comply with this
Directive at the latest by ….*. They shall
forthwith communicate to the Commission
the texts of those provisions and a
correlation table between those provisions
and this Directive.
* 24 months after the date of entry into
force
Amendment 43
ANNEX I
Form of reinsurance undertakings:
Form of reinsurance undertakings:
– 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
verzekeringsvereniging', 'société
coopérative/coöperatieve
– 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
verzekeringsvereniging', 'société
coopérative/coöperatieve
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vennootschap';
vennootschap';
– in the case of the Kingdom of
Denmark: 'aktieselskaber', 'gensidige
selskaber';
– in the case of the Czech Republic:
'akciová společnost';
– in the case of the Kingdom of
Denmark: 'aktieselskaber', 'gensidige
selskaber';
– in the case of the Federal Republic of
Germany: 'Aktiengesellschaft',
'Versicherungsverein auf
Gegenseitigkeit', 'Öffentlichrechtliches
Wettbewerbsversicherungsunternehme
n';
– in the case of the Federal Republic of
Germany: 'Aktiengesellschaft',
'Versicherungsverein auf
Gegenseitigkeit', 'Öffentlichrechtliches
Wettbewerbsversicherungsunternehme
n';
– 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 the Republic of Estonia:
'aktsiaselts';
– in the case of the Hellenic Republic:
"ανώνυμη εταιρία",
"αλληλασφαλιστικός συνεταιρισμός";
– in the case of Ireland: incorporated
companies limited by shares or by
guarantee or unlimited;
– in the case of the Kingdom of Spain:
'sociedad anónima';
– 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 the Italian Republic:
'società per azioni';
– in the case of the Grand Duchy of
Luxembourg: 'société anonyme';
– in the case of the Kingdom of the
Netherlands: 'naamloze
vennootschap', 'onderlinge
waarborgmaatschappij';
– in the case of Ireland: incorporated
companies limited by shares or by
guarantee or unlimited;
– 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 Italian Republic:
'società per azioni';
– in the case of the Republic of Cyprus:
– in the case of the Repulic of Latvia:
'akciju sabiedrība', 'sabiedrība ar
ierobežotu atbildību';
– in the case of the Republic of
Lithuania: 'akcinė bendrovė', 'uždaroji
akcinė bendrovė';
– in the case of the Hellenic Republic:
"ανώνυμη εταιρία",
"αλληλασφαλιστικός συνεταιρισμός";
– in the case of the Grand Duchy of
Luxembourg: 'société anonyme',
'société en commandite par actions',
'association d’assurances mutuelles',
– in the case of the Kingdom of Spain:
'sociedad anónima';
– in the case of the Portuguese Republic:
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'sociedade anónima', 'mútua de
seguros';
'société coopérative';
– in the case of the Republic of
Hungary: 'biztosító részvénytársaság',
'biztosító szövetkezet', 'harmadik
országbeli biztosító magyarországi
fióktelepe';
– in the case of the Republic of Austria:
'Aktiengesellschaft',
'Versicherungsverein auf
Gegenseitigkeit';
– in the case of the Republic of Finland:
'keskinäinen vakuutusyhtiö/ömsesidigt
försäkringsbolag', 'vakuutusosakeyhtiö/försäkringsaktiebolag',
'vakuutusyhdistys/försäkringsförening';
– in the case of the Republic of Malta:
'limited liability company';
– in the case of Kingdom of Sweden:
'försäkringsaktiebolag', 'ömsesidigt
försäkringsbolag', '”
– in the case of the Republic of Austria:
'Aktiengesellschaft',
'Versicherungsverein auf
Gegenseitigkeit';
– in the case of the Kingdom of the
Netherlands: 'naamloze
vennootschap', 'onderlinge
waarborgmaatschappij';
– in the case of the Republic of Poland:
'spółka akcyjna', 'towarzystwo
ubezpieczeń wzajemnych';
– in the case of the Portuguese Republic:
'sociedade anónima', 'mútua de
seguros';
– in the case of the Republic of Slovenia:
'delniška družba';
– in the case of the Slovak Republic:
'akciová spoločnost';
– in the case of the Republic of Finland:
'keskinäinen vakuutusyhtiö/ömsesidigt
försäkringsbolag', 'vakuutusosakeyhtiö/försäkringsaktiebolag',
'vakuutusyhdistys/försäkringsförening';
– in the case of Kingdom of Sweden:
'försäkringsaktiebolag', 'ömsesidigt
försäkringsbolag';
– 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 or
incorporated under Friendly Societies
Act, "the association of underwriters
known as Lloyd's";
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EXPLANATORY STATEMENT
It should be recognised that the work of the Council and the Commission in bringing positive
proposals for outcomes of this directive has been exemplary, matched only by the cooperation of both the Netherlands and Luxembourg presidencies in working with the
Parliament to attempt a resolution of issues in the first reading.
About Reinsurance
Reinsurance is insurance for insurers. It steps in when an insurance undertaking is facing
differences between prediction1 and reality, a gap that is known as underwriting (actuarial)
risk.
Reinsurance allows direct insurers to free themselves from the part of a risk that exceeds their
underwriting capacity, which they can not bear alone. It can help a company reduce its
probability of ruin and thus plays an important part in risk management and long term
stability of financial systems.
Reinsurance undertakings also contribute to increased liquidity in financial markets by freeing
equity that was tied up to cover risk thus increasing capital available to insurance companies.
Furthermore, they participate in financial markets' activities, mainly through the management
of their assets.2
Some Outstanding Issues
Some issues remain contentious with the industry in particular, the key issue of the treatment
of life and non-life reinsurance. The proposal for a 3per mill capital charge on life insurance
contracts is excessive. The non-life calculation method may be a more acceptable
compromise.
Another issue is the use of collateral to secure reinsurance contracts. This is no longer an
effective regulatory tool and represents an inefficient use of capital, which could otherwise be
released into the wider economy thereby potentially contributing to the goals of the Lisbon
Strategy.
Furthermore, the proposal for minimum capital requirements for captive reinsurance entities
is excessive, but again, industrial interests have indicted their willingness to accept it in the
context of an overall compromise.
International Dimension
Globally, there are approximately around 250 reinsurance entities in 50 countries with
1
Prediction: insurers set premium rates by prediction of future losses. They can predict the total annual loss to be expected
for a group much more accurately than for an individual, then distributes the projected losses among those insured, thereby
determining the premium.
2
For the reinsurer to honour its financial obligations and to make profit, it needs to combine underwriting (examining and
pricing risk) with asset management (investing received premiums) as well as capital management (for unexpected losses that
can not be covered by premiums or asset management income).
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business volume of over 170 billion USD of reinsurance premiums. Over 30 per cent of it is
created by only 5 top reinsurance companies, all of them European, while most of the
premiums originate in North America.1
Collateral requirements placed on EU reinsurers in the US bring about massive costs for those
companies, thereby distorting competition. The continued existence of collateral arrangements
in some EU markets and the lack of single market arrangements make it impossible for these
companies to mount an effective challenge to this anti-competitive practice.
This represents a significant barrier to entry for all EU reinsurance entities to those markets
and engenders massive costs to those who do operate in these markets.
Ten biggest reinsurance companies in 2003
Ranking
Rating
Name
Country
NRWP**
ASF***
(USD m)
(USD m)
1
A+
Munich Re Co.
Germany
25 489
31 370
2
AA
Swiss Re Co.
Switzerland
14 004
9 154
3
A
Lloyd's
UK
7 818
20 611
4
AA-
Hannover Rueck-AG
Germany
4 663
3 834
5
AA-
Allianz AG
Germany
4 662
55 147
6
AAA
General Re Corp.
US
3 073
5 435
7
AA-
Everest Re Co.
US
2 966
1 716
8
AA
Transatlantic Re Co.
US
2 945
1 851
9
AA
Swiss Re Life and Health
US
2 839
2 110
Germany
2 629
1 457
America Inc
10
A+
GE Frankona Rueck AG
Source: Standard and Poor, Ten Years of Global Reinsurance Highlights, 7 February 2005
**NRWP - net reinsurance premiums written (life + non-life)
***ASF - adjusted shareholders' funds (difference between company's assets and liabilities)
Non-life reinsurance dominates the industry, comprising more than 80% of overall premiums.
Life insurance business consists mostly of savings and therefore has a small risk component
and smaller need for reinsurance.
In addition to professional reinsurers, a number of large direct insurance companies write
reinsurance business. As for special types of risks, insurance pools (such as nuclear insurance
pools) have been created.
1
Over 70 percent of premiums originate in North America, followed by Western Europe (49 per cent) and Asia (14 per
cent). (Swiss Re Economic Research and Consulting, in "Understanding reinsurance", 2004)
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The Directive and why it is necessary?
Currently there is a fragmented market, which needs integration under a common set of rules.
Due to limitation of reinsurers to B2B transactions, the reinsurance industry has for a long
time escaped the public eye as well as the levels of supervision and regulation enforced in
direct insurance business. Due to highly exposed risk, catastrophe risk and other hazardous
business taken over by reinsurers, a pan-European system based on prudent supervision has
become a necessity.
Although a possibility for voluntary disclosure of reinsurance information has been discussed
in the process of drafting and consultation of new legislation, the new regulatory system is
based on a current direct insurance supervision rules (fast track solution). It has three main
features:
1-Mutual recognition of the supervision in the Member State where the insurance undertaking
is licensed. The Home Member State supervisory authority will have sole competence for
prudential supervision of reinsurance undertaking within the EU.
2-Mandatory licensing system as established with the third insurance directive. It has been
chosen over a voluntary passport system.
3-Quantitative solvency requirements in line with those of direct insurance, but due to higher
volatility and less supervision in reinsurance, the proposal incorporates a possibility to
increase the margin up to 50% for non-life reinsurance through comitology.
Transition and Application
In order for countries with differing regulatory systems to promote the change in an orderly
fashion a period of 24 months for application could be allowed with an additional 12 months
for transition to effect the practical changes required for the market.
However, any transition period established in respect of the taking of collateral must be
considered wholly independently of the wider review of insurance solvency.
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