EU GUIDE
RELATING TO THE
INSURANCE SECTOR
JUNE 2005
Prepared By: Berna Özşar
TSRŞB EU Specialist
1
TABLE OF CONTENTS
I.
The Creation of a Single Insurance Market
p. 3.
II.
The European Community Acquis relating to Insurance
p. 6.
1. Life Assurance
2. Non-Life Insurance
3. Accounting
4. E-Commerce
5. Insurance Groups
6. Financial Conglomerates
7. Insurance Mediation
8. Motor Insurance
9. Reinsurance
10. Solvency
11. Winding-Up
12. Statistics
13. Insurance Committee
14. International Agreements
15. Infringements of the Insurance Acquis by Member States
p. 6.
p. 10.
p. 24.
p. 31.
p. 32.
p. 33.
p. 35.
p. 37.
p. 45.
p. 46.
p. 47.
p. 47.
p. 49.
p. 51.
p. 52.
European Union Enlargement 2004 and Insurance
p. 56.
1. What are Accession Negotiations?
2. Negotiations in Insurance
p. 57.
p. 58.
III.
a. Greek Cypriot Administration
b. Czech Republic
c. Estonia
d. Hungary
e. Latvia
f. Lithuania
g. Malta
h. Poland
i. Slovak Republic
j. Slovenia
p. 58.
p. 59.
p. 61.
p. 62.
p. 63.
p. 64.
p. 65.
p. 66.
p. 68.
p. 69.
2
I. THE CREATION OF A SINGLE INSURANCE MARKET
The creation of a single market in the insurance sector has been one of the priorities of the
European Union in the field of financial services.
The legal basis of the European Union acquis communautaire in this field is Chapter 2 of the
Treaty Establishing the European Community relating to the right of establishment (Articles
43-48 (ex Articles 52-58)) and Chapter 3 of the Treaty Establishing the European Community
relating to services (Articles 49-55 (ex Articles 59-66)).
Under Chapter 2 relating to the right of establishment, restrictions on the freedom of
establishment of nationals of a Member State in the territory of another Member State are
prohibited and this also applies to restrictions on the setting-up of agencies, branches or
subsidiaries by nationals of any Member State established in the territory of any Member
State. Freedom of establishment also includes the right to take up and pursue activities as selfemployed persons and to set up and manage undertakings.
Under Chapter 3 relating to services, restrictions on freedom to provide services within the
Community are prohibited in respect of nationals of Member States who are established in a
State of the Community other than that of the person for whom the services are intended.
According to the Treaty, the internal market in the field of insurance is an area where there
are no internal frontiers. The process for realizing a single market for insurance started in
1961 with the launch of a General Programme on free movement of services, aiming at
approximating substantive national law. Since 1 July 1994, the European Union insurance
markets (including the 10 new Member States as of 1 May 2004), together with those of
Liechtenstein, Norway and Iceland under the European Economic Area, have created a vast
single insurance market. The reason why the process lasted for more than 30 years can be
explained by the fact that the form of regulation in different Member States was different in
terms of scope and rigidity.
The creation of a vast single insurance market is a unique development which has no
equivalent around the world. It has made it possible for companies to sell their products
anywhere in the Union and rendered it possible for consumers to have access to any
Community insurer, including the ones not established in their country of residence.
Through this Single Insurance Market, the European Union not only aims at increasing the
competitiveness of undertakings but also providing clients with the opportunity to have access
to better products and establishing client confidence in insurance operators. By realizing these
aims, the European Commission aspires for the creation of a competitive insurance sector
which will contribute to economic efficiency and development in general.
In recent years, the insurance markets in EU Member States have witnessed a growing
demand for insurance products, accompanied by a noteworthy growth in turnover. This
growing demand and the growth in the insurance sector have thus triggered economic activity
and development.
With these recent trends, the Community now has a dual activity in the insurance sector:
3
-
Making it possible for all Community citizens to have access to available
insurance products in the market and providing them with the necessary legal and
financial protection in insurance transactions;
-
Ensuring that an insurance company with the authorization to operate in one
Member State can enjoy the right of establishment and the right to provide services
in order to pursue its activities throughout the European Union.
Legislation governing the insurance sector
To realize its objectives, the Community separated life assurance and non-life insurance and
also legislated in different fields like accounting, motor insurance, solvency, e-Commerce and
reinsurance.
-
The life assurance sector
The first coordinating Directive on direct life assurance (Directive 79/267/EEC
repealed by Directive 2002/83/EC) was adopted in 1979 to lay down the rules
necessary to facilitate the effective exercise of the right of establishment in respect
of insurance activities.
The second coordinating Directive on life assurance (Directive 90/619/EEC
repealed by Directive 2002/83/EC) aimed at facilitating the effective exercise of
the right to supply life assurance services.
A third coordinating Directive on direct life assurance (Directive 92/96/EEC
repealed by Directive 2002/83/EC) was adopted by the Council in 1992 to
complete the internal market for insurance activities on the basis of the principles
of a single administrative license and supervision of the activities of an insurance
undertaking by the authorities in the Member State where the undertaking has its
head office.
All these directives were consolidated in one coherent text with the adoption of
Directive 2002/83/EC by the European Parliament and the Council on 5 November
2002.
-
Non-life insurance sector
The legal framework for the realization of the freedom of establishment in respect
of direct non-life insurance in the Community was established by the adoption of
Directive 73/239/EEC.
Directive 88/357/EEC, on the other hand, set the necessary arrangements
guaranteeing the effective exercise of freedom to provide non-life insurance
services.
4
A third coordinating Directive on direct non-life insurance (92/49/EEC) was also
adopted by the Council. This Directive covers provisions relating to insurance
supervision, the coordination of national rules governing the investment, spread
and localization of the assets used to cover technical provisions, access to and
pursuit of insurance activities, supervision according to the principle of home
country control, etc.
-
Specific areas
Apart from life assurance and non-life insurance directives, the Community has
also legislated in other fields like motor vehicle insurance, annual accounts and
consolidated accounts of insurance undertakings, solvency, e-commerce,
reinsurance, insurance groups, financial conglomerates, insurance mediation, and
winding-up.
All these Community measures have provided the legislative framework for
completing the internal market in the insurance sector. These measures will be
more closely examined under Chapter III of this study, relating to the European
Community acquis in the field of insurance.
5
II. THE EUROPEAN COMMUNITY ACQUIS RELATED TO
INSURANCE
1. LIFE ASSURANCE
1. Directive 2002/83/EC of the European Parliament and of the Council of 5 November
2002 concerning life assurance
(Official Journal L 345 , 19/12/2002 p. 1 – 51.)
Repeals:

First Council Directive 79/267/EEC of 5 March 1979 on the coordination of laws,
regulations and administrative provisions relating to the taking up and pursuit of
the business of direct life assurance
(Official Journal L 063, 13/03/1979 p. 1 – 18.)

Council Directive 90/619/EEC of 8 November 1990 on the coordination of laws,
regulations and administrative provisions relating to direct life assurance, laying
down provisions to facilitate the effective exercise of freedom to provide services
and amending Directive 79/267/EEC
(Official Journal L 330 , 29/11/1990 p. 50 – 61.)

Council Directive 92/96/EEC of 10 November 1992 on the coordination of laws,
regulations and administrative provisions relating to direct life assurance and
amending Directives 79/267/EEC and 90/619/EEC (third life Assurance
Directive)
(Official Journal L 360, 09/12/1992 p. 1 – 27.)

European Parliament and Council Directive 95/26/EC of 29 June 1995 amending
Directives 77/780/EEC and 89/646/EEC in the field of credit institutions,
Directives 73/239/EEC and 92/49/EEC in the field of non- life insurance,
Directives 79/267/EEC and 92/96/EEC in the field of life assurance, Directive
93/22/EEC in the field of investment firms and Directive 85/611/EEC in the field
of undertakings for collective investment in transferable securities (Ucits), with a
view to reinforcing prudential supervision
(Official Journal L 168 , 18/07/1995 p. 7 – 13.)

Directive 2002/12/EC of the European Parliament and of the Council of 5 March
2002 amending Council Directive 79/267/EEC as regards the solvency margin
requirements for life assurance undertakings
6
(Official Journal L 077, 20/03/2002 p. 11 – 16.)
Summary
Directive 2002/83/EC concerns the taking-up and pursuit of the self-employed activity of
direct insurance carried on by undertakings which are established in a Member State or wish
to become established there.
It aims at simplifying EU legislation governing life assurance by converting all previous
directives into a single and consistent text. The Directive replaces all the directives adopted in
this field since 1979 and includes provisions under 8 titles: Definitions and Scope (Title I);
Taking-up of the Business of Life Assurance (Title II); Conditions Governing the Business of
Assurance (Title III); Provisions Relating to the Right of Establishment and Freedom to
Provide Services; Rules Applicable to Agencies or Branches Established within the
Community and Belonging to Undertakings whose Head Offices are Outside the Community
(Title V); Rules Applicable to Subsidiaries of Parent Undertakings Governed by the Laws of a
Third Country and to the Acquisisition of Holdings by such Parent Undertakings (Title VI);
Transitional and Other Provisions (Title VII) and Final Provisions (Title VIII).
Under Title I, the definition of “assurance undertaking” is of particular importance. The
Directive defines “assurance undertaking” as “an undertaking which has received official
authorization from the authorities of the home Member State”. This undertaking, however,
should have established its head Office in the territory of that State and extended its business
to an entire class or to other classes (Title II, Art. 4, Principle of Authorization). The
definition aims at ensuring that non-Community insurers who are established in the
Community only through an agency or a branch do not benefit from the provisions on
freedom to provide services.
Under Title III, Directive 2002/83/EC strengthens a number of rules which have previously
existed in the First Life Assurance Directive. For instance, the powers of the supervisory
authorities are increased. Under Article 13, competent authorities should have the powers to
make detailed enquiries (by gathering information or requiring the submission of documents
and carrying out on-the-spot investigation); to take any measures with regard to the assurance
undertaking, its directors or managers or the persons who control it; and to make sure that
these measures are carried out, where appropriate through judicial channels.
Article 15 relating to “qualifying holdings” is another important issue under Title III. Natural
or legal persons who propose either to hold or to dispose a “qualifying holding” in an
assurance undertaking, should inform the competent authorities of the home Member State.
Such persons should also inform the competent authorities if they propose to increase their
qualifying holding so that the proportion of the voting rights or of the capital held by them
would reach or exceed 20%, 33% or 50% or so that the assurance undertaking would become
their subsidiary. The same is also true for persons proposing to dispose of a qualifying
holding.
Directive 2002/83/EC also sets rules relating to technical life-assurance provisions under
Article 20. Every assurance undertaking is to establish sufficient technical provisions whose
amount should be calculated by prudent prospective actuarial valuation, taking account of all
7
future liabilities. The rate of interest, the statistical elements of the valuation and the
allowance for expenses should be chosen with prudence. Assurance undertakings can only
cover their technical provisions with the following assets: investments (debt securities, bonds
and other money- and capital-market instruments; loans; shares and other variable-yield
participations; units in undertakings for collective investment in transferable securities
(UCITS) and other investment funds; land, buildings and immovable-property rights), debts
and claims (debts owed by reassurers; deposits with and debts owed by ceding undertakings;
debts owed by policy holders and intermediaries; advances against policies; tax recoveries;
claims against guarantee funds) and others like tangible fixed assets, cash at bank and in hand.
Another very important issue under Title III is the rules relating to the solvency margin and to
the guarantee fund. According to Directive 2002/83, assurance undertakings should have an
adequate available solvency margin which consists of the following assets of the assurance
undertaking: paid-up share capital; reserves (statutory and free); the profit or loss brought
forward after deduction of dividends to be paid; profit reserves appearing in the balance sheet.
The required solvency margin, on the other hand, is the sum of two results.
The first result is:
4% of the math. provisions relating to direct business and reinsurance acceptances gross of
reinsurance cessions × ratio of the total math. provisions net of reinsurance cessions to the
gross total math. provisions (last financial year)
The second result is:
(For policies on which the capital at risk is not negative)
0,3 % of capital underwritten by the assurance undertaking × ratio of the total capital at risk
retained as the undertaking’s liability after reinsurance cessions and retrocessions to the total
capital at risk gross of reinsurance.
For temporary assurance on deathof a maximum term of 3 years, the fraction shall be 0,1%;
while for such assurance of a term between 3 and 5 years, the fraction shall be 0,15%.
In accordance with the Directive, the guarantee fund is 1/3 of the required solvency margin
and it might not be less than EUR 3 million.
If the solvency margin falls below the guarantee fund, the competent authority may require a
short-term finance scheme from the undertaking. In cases where policy holders’ rights are
threatened, then the competent authority is to require a financial recovery plan.
Under Title IV, Directive 2002/83/EC also sets provisions relating to the right of
establishment and freedom to provide services. Accordingly, if an assurance undertaking has
the intention to establish a branch in another Member State, it shall first inform the competent
authorities of its home Member State.
Title V is about the rules applicable to agencies or branches established within the
Community but belonging to undertakings whose head offices are outside the Community.
Such an undertaking should fulfill certain conditions to be granted an authorization by the
8
Member State, like being entitled to undertake insurance activities under its national law,
designating a general representative, undertaking to establish accounts at the place of
management of the agency or branch, undertaking to keep a solvency margin and submitting a
scheme of operations.
With Directive 2002/83/EC, a procedure of reciprocity between the Community and third
countries in respect of life assurance is also introduced. The Community aims at gaining a
comparable access to third countries by establishing a special procedure through the
authorization of a subsidiary of a non-Community company or the acquisition by a nonCommunity company of a share in the capital of a Community insurer. As a result, the
Community tries to receive the national treatment normally reserved for companies of that
country.
Directive 2002/83/EC is amended by Directive 2004/66/EC , which adapts the legislation in
force relating to free movement of goods, company law, agriculture, taxation, education and
training, culture, and the audiovisual field and external relations to be able to facilitate
transposal by the new Member States.
2. Directive 2000/64/EC of the European Parliament and of the Council of 7 November
2000 amending Council Directives 85/611/EEC, 92/49/EEC, 92/96/EEC and 93/22/EEC
as regards exchange of information with third countries
(Official Journal L 290, 17/11/2000 p. 27 – 28.)
Summary
Directive 2000/64/EC amends four directives, which among these is the Third Non-Life
Insurance Directive, as regards exchange of information with third countries.
In accordance with the Directive, Member States may conclude co-operation agreements for
exchanging information with the competent authorities of third countries or with authorities or
bodies of third countries (authorities responsible for the official supervision of financial
institutions, bodies involved in the liquidation and bankruptcy of insurance undertakings,
persons responsible for carrying out statutory audits of the accounts of insurance
undertakings) if the information disclosed is subject to guarantees of professional secrecy.
The exchange of information should serve the purpose of supervision by the above-mentioned
authorities or bodies.
3. Council Directive 2004/66/EC of 26 April 2004 adapting Directives 1999/45/EC,
2002/83/EC, 2003/37/EC and 2003/59/EC of the European Parliament and of the Council
and Council Directives 77/388/EEC, 91/414/EEC, 96/26/EC, 2003/48/EC and
2003/49/EC, in the fields of free movement of goods, freedom to provide services,
agriculture, transport policy and taxation, by reason of the accession of the Czech
Republic, Estonia, Cyprus, Latvia, Lithuania, Hungary, Malta, Poland, Slovenia and
Slovakia
9
(Official Journal L 168 , 01/05/2004 p. 35 – 67.)
Summary
Directive 2004/66/EC amends a number of directives, among which is Directive 2002/83/EC,
by reason of the accession of 10 new Member States, namely the Czech Republic, Estonia,
Greek Cypriot Administration, Latvia, Lithuania, Hungary, Malta, Poland, Slovenia and
Slovakia.
The Directive amends Article 6, relating to the conditions of authorisation. Accordingly, the
home Member State is to require every assurance undertaking for which authorization is
sought to adopt one of the forms listed under Article 6 paragraph 1(a). The forms which can
be obtained from the new Member States are added in their official languages.
Another amendment is made to Article 18 of Directive 2002/83/EC which is about the pursuit
of life assurance and non-life insurance activities to include the new Member States.
2. NON-LIFE INSURANCE
1. First Council Directive 73/239/EEC of 24 July 1973 on the coordination of laws,
regulations and administrative provisions relating to the taking-up and pursuit of the
business of direct insurance other than life assurance
(Official Journal L 228 , 16/08/1973 p. 3 – 19.)
Summary
Directive 73/239/EEC is the first directive on the co-ordination of laws, regulations and
administrative provisions relating to the taking-up and pursuit of business of direct insurance
other than life assurance. It is, in other words, the first of three Council Directives on non-life
insurance. The Directive has been amended several times over the years and almost every
article of the Directive has been subject to alterations.
The rationale behind this directive was to facilitate the taking-up and pursuit of the business
of non-life insurance and to eliminate certain divergencies which existed between national
supervisory legislation.
To achieve this objective and to ensure adequate protection for insured and third parties in all
Member States, it was necessary to co-ordinate, in particular, the provisions relating to the
financial guarantees required of insurance undertakings.
Directive 73/239/EEC originally has five titles and an Annex.
Title I is about the general provisions, stating first and foremost that the Directive is about the
self-employed activity of direct insurance carried on by insurance undertakings established in
a Member State or which wish to become established there in the classes of insurance defined
10
in the Annex. These classes are accident, sickness, land vehicles, railway rolling stock,
aircraft, ships, goods in transit, fire and natural forces, other damage to property, motor
vehicle liability, aircraft liability, liability for ships, general liability, credit-insolvency,
suretyship, miscellaneous financial loss- employment risks, legal expenses and assistance.
The Directive does not apply to:
-
life assurance, annuities, supplementary insurance carried on by life-assurance
undertakings, insurance forming part of a statutory system of social security;
-
capital redemption operations, operations of provident and mutual benefit institutions,
operations carried out by organizations not having a legal personality and export credit
insurance operations;
-
mutual associations;
-
a list of institutions in Member States.
Title II sets out the rules applicable to undertakings whose head offices are situated within the
Community. Under the Directive, each Member State is held responsible to make the takingup of the business of direct insurance in its territory subject to an official authorization. The
competent authorities of the Member States are to give this authorization. The Directive also
sets provisions for conditions of admission for an undertaking having its head office in the
territory of another Member State and seeking an authorization to open an agency or branch.
Besides conditions of admission, the Directive also determines conditions for exercise of
business. Member States need to collaborate closely with one another in supervising the
financial position of authorized undertakings. Member States also need to require
undertakings to establish sufficient technical reserves and an adequate solvency margin. The
amounts and ratios used in calculating the solvency margin have been lately amended by
Directive 2002/13/EC (please see below).
The Directive also sets provisions relating to situations where the withdrawal of authorization
may be necessary.
Title III of the Directive is about rules applicable to agencies or branches established within
the Community and belonging to undertakings whose head offices are outside the
Community. These provisions have also been subject to amendments in time and they will be
discussed in more detail below.
The remaining two titles of the Directive are about transitional provisions and final
provisions.
2. Council Directive 73/240/EEC of 24 July 1973 abolishing restrictions on freedom of
establishment in the business of direct insurance other than life assurance
(Official Journal L 228, 16/08/1973 p. 20 – 22.)
Summary
11
Council Directive 73/240/EEC sets provisions on the abolishment of restrictions on freedom
of establishment in the business of direct insurance other than life assurance. The Directive
obliges Member States to abolish the following restrictions:
-
restrictions preventing beneficiaries from establishing themselves in the host
country under the same conditions as nationals of that country,
discriminatory administrative practices.
If a host Member State requires of its own nationals wishing to take up such activity proof of
good repute and proof of no previous bankruptcy or proof of either of these, that Member
State shall accept as sufficient evidence, in respect of nationals of other Member States, the
production of an extract from the judicial record or an equivalent document issued by the
auhorities of the country of origin. If the country of origin does not issue such documentary
proof, such proof may be replaced by a declaration on oath, a solemn declaration or notary. A
declaration in respect of no previous bankruptcy may also be made before a competent
professional or trade body.
Under the Directive, Member States are also responsible to guarantee that beneficiaries have
the right to join professional or trade organizations under the same conditions as their own
nationals.
The right to join such organizations may entail eligibility for election or appointment to high
office but these posts may be reserved for nationals, if the organization in question is involved
in the exercise of official authority.
3. Council Directive 76/580/EEC of 29 June 1976 amending Directive 73/239/EEC on the
coordination of laws, regulations and administrative provisions relating to the taking up
and pursuit of the business of direct insurance other than life assurance
(Official Journal L 189, 13/07/1976 p. 13 – 14.)
Summary
Article 5(a) of Directive 73/239/EEC used the term “unit of account” as the unit defined in the
Statute of the European Investment Bank. Directive 76/580/EEC changes this definition and
defines unit of account as “the European unit of account (EUA) as defined by the Commission
Decision 3289/75/ECSC”.
However, following the introduction of “Euro” as the European currency, Directive
76/580/EEC became obsolete. The other articles of the Directive have also become obsolete,
after the first revision of the solvency margin amounts by 2002/13/EC, as well as its other
articles which contain only final provisions laying down its date of implementation and entry
into force.
4. Council Directive 78/473/EEC of 30 May 1978 on the coordination of laws, regulations
and administrative provisions relating to Community co-insurance
12
(Official Journal L 151, 07/06/1978 p. 25 – 27.)
Summary
Council Directive 78/473/EEC applies to Community co-insurance operations relating to risks
classified according to the following classes of insurance: railway rolling stock, aircraft, ships
(sea, lake, river and canal vessels), goods in transit, fire and natural forces, other damage to
property, aircraft liability, liability for ships (sea, lake, river and canal vessels), general
liability and miscellaneous financial loss –employment risks.
In accordance with the Directive, the amount of technical reserves are to be determined by the
different co-insurers according to the rules fixed by the Member State where they are
established. However, the reserve for outstanding claims shall be at least equal to that
determined by the leading insurer according to the rules of practice of the State where such
insurer is established. It is also important that the technical reserves established by the
different co-insurers are represented by matching assets.
The Member States are to guarantee that the co-insurers in their territory keep statistical data
relating to the extent of Community co-insurance operations.
If an insurance undertaking is wound up, then liabilities arising from participation in
Community co-insurance contracts shall be met the same way as those arising under that
undertaking’s other insurance contracts.
5. Council Directive 84/641/EEC of 10 December 1984 amending, particularly as regards
tourist assistance, the First Directive (73/239/EEC) on the coordination of laws,
regulations and administrative provisions relating to the taking-up and pursuit of the
business of direct insurance other than life assurance
(Official Journal L 339, 27/12/1984 p. 21 – 25.)
Summary
Directive 84/641/EEC amends Directive 73/239/EEC, especially with respect to tourist
assistance.
First and foremost, Directive 84/641/EEC extends the scope of Directive 73/239/EEC by
stating that it “concerns the taking-up and pursuit of the self-employed activity of direct
insurance, including the provision of assistance by undertakings established in the territory of
a Member State.” This assistance refers to tourist assistance. In other words, it refers to
assistance provided for persons who get into difficulties while travelling, while away from
home or while away from their permanent residence. Against the prior payment of a premium,
this assistance consists of providing aid to the beneficiary under an assistance contract. The
aid may consist in the provision of benefits in cash or in kind, it does not, however, cover
servising, maintenance, after-sales service or the mere indication or provision of aid as an
intermediary.
13
Such assistance is also added to the Annex of Directive 73/239/EEC as a new class of
insurance (Class 18). As provided below, this assistance is defined as “assistance for persons
who get into difficulties while traveling, while away from home or while away from their
permanent residence.”
Directive 73/239/EEC lists the operations which are out of its scope. Directive 84/641/EEC
adds to this list the assistance activity in which liability is limited to the following operations
in the event of an accident or breakdown involving a road vehicle:
-
an on-the-spot breakdown service,
the conveyance of the vehicle to the nearest or the most appropriate location at
which repairs may be carried out,
the conveyance of the vehicle to their home, point of departure or original
destination within the same State,
unless such operations are carried out by an undertaking subject to this Directive.
Directive 84/641/EEC also states that Member States are responsible to require every
undertaking whose head office is situated in their territory to produce an annual account,
covering not only the types of operation, of its financial situation and solvency (as provided
for in Directive 73/239/EEC), but also other resources available to them for meeting their
liabilities.
In accordance with the Directive, undertakings which have requested or obtained
authorization from more than one Member State, may apply for the following advantages:
-
The solvency margin should be calculated in relation to the entire business which it
carries on within the Community;
The deposit should be lodged in only one of the Member States;
The assets representing the guarantee fund shall be localized in any one of the
Member States.
The undertakings which would like to benefit from these advantages, need to apply to the
competent authorities of the Member State concerned. These advantages may be withdrawn at
the request of one or more of the Member States concerned.
6. Council Directive 87/343/EEC of 22 June 1987 amending, as regards credit insurance
and suretyship insurance, First Directive 73/239/EEC on the coordination of laws,
regulations and administrative provisions relating to the taking-up and pursuit of the
business of direct insurance other than life assurance
(Official Journal L 185, 04/07/1987 p. 72 – 76.)
Summary
Article 2 (2)(d) of Directive 73/239/EEC stated clearly that “pending further coordination,
which shall be implemented within four years of notification of this Directive” it did not apply
to “export credit insurance operations for the account of or with the support of the State”.
Since the protection of insured persons normally provided by the Directive is provided by the
14
State itself where export credit insurance operations are carried out for the account of or with
the guarantee of the State, under Directive 87/343/EEC such operations were to continue to be
excluded.
Directive 87/343/EEC also states that each Member State shall require undertakings to set up
an equalization reserve (for risks under Class 14 of the Annex of Directive 73/239/EEC) to be
able to offset any technical deficit or above-average claims ratio arising in that financial year.
Each Member State is to calculate the equalization reserve in line with its national rules but
this should be done in accordance with the methods set out in point D of the Annex (Point D
is also added by Directive 87/343/EEC). Point D sets out four methods of calculating the
equalization reserve for the credit insurance class.
However, it is possible for Member States to be exempted from the requirement to set up an
equalization reserve for credit insurance business, if 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 2 500 000 ECU (the amount determined in units of ECU is
no longer available).
Directive 87/343/EEC also amends the provision of Directive 73/239/EEC relating to the
amounts determined for the guarantee fund. However, this provision was later amended again
with Directive 2002/13/EC (please see below).
7. Council Directive 87/344/EEC of 22 June 1987 on the coordination of laws,
regulations and administrative provisions relating to legal expenses insurance
(Official Journal L 185, 04/07/1987 p. 77 – 80.)
Summary
Council Directive 87/344/EEC applies to “legal expenses insurance” and co-ordinates the
provisions laid down by law, regulation or administrative action in this field. This consists of
bearing the costs of legal proceedings and providing other services directly linked to
insurance cover to be able to (1) secure compensation for the loss, damage or injury suffered
by the insured person, by settlement out of court or through civil or criminal proceedings, (2)
defending or representing the insured person in civil, criminal, administrative or other
proccedings.
According to the Directive, the legal expenses cover is to be in a separate contract or it shall
be dealth with in a separate section of a single policy. Member States should guarantee that
the undertakings within their territories adopt at least one of the following 3 alternatives:
(1) A composite undertaking should make sure that its staff members, who are concerned
with the management of legal expenses claims, are not involved in a similar activity
for another class transacted by the company.
Irrespective of whether the undertaking is composite or specialized, the undertaking’s
staff members (who are concerned with the management of legal expenses claims)
cannot be involved in a similar activity in another undertaking having financial,
commercial or administrative links with the first undertaking.
15
(2) The management of claims for legal expenses insurance should be given to an
undertaking having separate legal peersonality and that undertaking should be
mentioned in the separate contract or separate section.
(3) In the contract, the undertaking should give the injured person the right to entrust the
defence of his interests to a lawyer of his choice or to any other appropriately qualified
person.
No matter which solution is adopted, the intersts of people having legal expenses cover should
be safeguarded.
If recourse to a lawyer is necessary, it should be guaranteed that this person is appropriately
qualified to defend, represent or serve the intersts of the insured person. The insured person is
free to to choose such a lawyer or any other appropriately qualified person.
Member States should take the necessary measures to guarantee that an arbitration or other
procedure offering similar guarantees is provided, in the event of a difference of legal opinion
between a legal expenses insurer and his insured. It should be mentioned in the insurance
contract that the insured person has the right to have recourse to such a procedure.
8. Second Council Directive 88/357/EEC of 22 June 1988 on the coordination of laws,
regulations and administrative provisions relating to direct insurance other than life
assurance and laying down provisions to facilitate the effective exercise of freedom to
provide services and amending Directive 73/239/EEC
(Official Journal L 172, 04/07/1988 p. 1 – 14.)
Summary
Second Council Directive 88/357/EEC aims at supplementing the First Directive 73/239/EEC
and laying down special provisions relating to freedom to provide services for the
undertakings and in respect of the classes of insurance covered by the First Directive.
The Second Council Directive gives definitions of several terms under Title I: General
Provisions, which among these are “undertaking”, “establishment”, “Member State where the
risk is situated”, “Member State of establishment”, “Member State of provision of services”.
Under Title II: Provisions Supplementary to the First Directive, a definition of “large
risks” has been made. Under this definition, the following are defined as “large risks”:
-
risks classified under classes of railway rolling stock, aircraft, ships, goods in
transit, aircraft liability, liability for ships;
-
risks classified under classes of credit-insolvency and suretyship, where the policyholder is engaged professionally in an industrial or commercial activity or in one
of the liberal professions and the risks relate to such activity;
16
-
risks classified under classes of fire and natural forces, other damage to property,
general liability and miscellaneous financial loss – employment risks, if the policyholder exceeds the limits determined under the Directive.
It is also possible for Member States to add to the third category, risks insured by professional
associations, joint ventures or temporary groupings.
The Directive also lists the law applicable to contracts of insurance referred to by the
Directive. Accordingly:
-
If the habitual residence or central administration of a policy-holder is the Member
State in which the risk is situated, the applicable law is the law of that Member
State.
-
If the habitual residence or central administration of a policy-holder is not the
Member State in which the risk is situated, parties to the contract of insurance may
apply either the law of the Member State in which the risk is situated or the law of
the country in which the policy-holder has his habitual residence or central
administration.
-
If a policy-holder pursues a commercial or industrial activity or a liberal profession
and the contract covers two or more risks relating to these activities and situated in
different Member States, the laws of those Member States and of the country in
which the policy-holder has his habitual residence or central administration can be
applied.
The applicable law can change if Member States grant greater freedom of choice, if the risks
covered by the contract are limited to events occurring in one Member State other than the
Member State where the risk is situated and if large risks are under question. If no choice has
been made, the contract shall be governed by the law of the country, from amongst the ones
considered above.
Second Council Directive 88/357/EEC also adds to the First Council Directive provisions
about the powers and means that can be used by supervisory authorities. Member States are
responsible to ensure that supervisory authorities have the powers and means necessary for
supervision of the activities of insurance undertakings in their territory. This means that
supervisory authorities can make detailed inquiries about the undertaking’s situation and the
whole of its business, gather information, carry out on-the-spot investigations at the
undertaking’s premises, take measures with regard to the undertaking and ensure that these
measures are carried out, if necessary by enforcement, where appropriate through judicial
channels.
The third Title of the Directive is about provisions peculiar to the freedom to provide
services. Title III applies when an undertaking, through an establishment situated in a
Member State covers a risk situated in another Member State. In this case, the latter shall be
the Member State of provision of services. This Title does not apply to transactions,
undertakings and institutions to which the first Directive does not apply to. It does not apply
to insurance contracts covering risks as regards accidents at work, motor vehicle liability not
including carrier’s liability, as regards motorboats and boats, as regards nuclear civil liability
and pharmaceutical products liability, as regards compulsory insurance of building works.
17
According to the Directive, if an undertaking intends to provide services, it needs to inform
the competent authorities of the head office Member State, about the Member State of the
establishment concerned, indicating the Member State or Member States within the territory
of which it contemplates providing services and the nature of the risks which it proposes to
cover. The Member States (within the territory of which an undertaking intends to provide
services) may make access to such activity subject to administrative authorization. These
Member States may require that the undertaking produces a certificate issued by the
competent authorities of the head office Member State, a certificate issued by the competent
authorities of the Member State of establishment indicating the classes to be practiced and the
scheme of operations (conditions of insurance policies, the premium rates, the forms and other
printed documents).
If required, any undertaking providing services is responsible to submit documents to the
competent authorities of the Member State of provision of services.
The final Title of the Directive, Title IV is about transitional arrangements for four Member
States, namely Greece, Ireland, Spain and Portugal.
9. Council Directive 90/618/EEC of 8 November 1990 amending, particularly as regards
motor vehicle liability insurance, Directive 73/239/EEC and Directive 88/357/EEC which
concern the coordination of laws, regulations and administrative provisions relating to
direct insurance other than life assurance
(Official Journal L 330, 29/11/1990 p. 44 – 49.)
Summary
Council Directive 90/618/EEC amends the First and Second Council Directives relating to the
coordination of laws, regulations and administrative provisions relating to direct insurance
other than life assurance.
The First Council Directive had set out under Title III, rules applicable to agencies or
branches established within the Community and belonging to undertakings whose head
offices are outside the Community. Directive 90/618/EEC also adds rules applicable to
subsidiaries of parent undertakings governed by the laws of a third country and to acquisitions
of holdings by such parent undertakings.
For instance, the competent authorities of the Member States need to inform the Commission
when they authorize a direct or indirect subsidiary whose parent undertakings are governed by
the laws of a third country. The Commission should also be informed when such a parent
undertaking acquires a holding in a Community insurance undertaking and turns it into its
subsidiary.
The Directive also encourages Member States to inform the Commission if and when their
insurance undertakings encounter difficulties in establishing themselves or carrying on their
activities in a third country. When a third country fails to grant Community insurance
undertakings effective market access comparable to that granted by the Community to
insurance undertakings from that third country, the Commission may propose the Council to
18
give a mandate for negotiations in order to obtain comparable competitive opportunities for
Community insurance undertakings. The Commission may then initiate negotiations to
remedy the situation. In addition to initiating negotiations, it may also be decided that the
competent authorities of the Member States must limit or suspend their decisions regarding
requests for authorizations and regarding the acquisition of holdings by direct or indirect
parent undertakings governed by the laws of the third country in question. The duration of
these measures does not normally exceed three months.
Another important amendment introduced by Council Directive 90/618/EEC relates to motor
vehicle liability insurance. The Second Council Directive had defined the term “Member State
of provision of services” as the “Member State in which the risk is situated when it is covered
by an establishment situated in another Member State”. Directive 90/618/EEC states that the
Member State of provision of services shall require the insurance undertaking to guarantee
that persons pursuing claims for events occurring in its territory are not placed in a less
favorable situation as a result of the fact that the undertaking is covering a risk in “motor
vehicle liability” by way of provision of services rather than through an establishment situated
in that State.
For this purpose, the Member State of provision of services needs to require the undertaking
to appoint a representative to collect all necessary information in relation to claims. This
representative shall possess sufficient powers to represent the undertaking in relation to
persons suffering damage and before the competent authorities of the State of provision of
services with regard to checking the existence and validity of motor vehicle liability insurance
policies.
10. Council Directive 92/49/EEC of 18 June 1992 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 (third non-life
insurance Directive)
(Official Journal L 228, 11/08/1992 p. 1 – 23.)
Summary
The Third Non-Life Insurance introduces many new amendments to the First Non-Life
Insurance Directive.
For instance, under Title II (rules applicable to undertakings whose head offices are
situated within the Community), most of the provisions have been replaced by new
provisions. As before, prior official authorization is necessary for the taking up of the
business of direct insurance. Any undertaking with a head office in the territory of a Member
State or any authorized undertaking extending its business to an entire class or to classes may
seek authorization from the competent authorities of the home Member State.
This authorization is valid for the entire Community and shall be granted for a particular class
of insurance. The First Non-Life Insurance Directive had indicated that home Member States
were to require every insurance undertaking for which authorization is sought to adopt one of
the forms listed under Article 8. The Third Non-Life Insurance Directive adds to this list the
19
forms to be adopted in the case of Greece, Spain and Portugal, which were not members when
the First Non-Life Insurance Directive came into force.
Under the Directive, the competent authorities of the home Member State should be given
information as regards the identities of the shareholders or members who have qualifying
holdings in an undertaking before they grant an authorization to that undertaking. If the
competent authorities are not satisfied with the qualifications of the shareholders or members,
then they may refuse authorization.
As for the conditions for the exercise of business, the Directive introduces under Title III
(Harmonization of the conditions governing the business of insurance) new amendments
and replacements. For instance, the scope of Article 13 is widened. The new article ensures
that the financial supervision of an insurance undertaking is the sole responsibility of the
home Member State. Such financial supervision should include verification as regards the
insurance undertaking’s entire business, its state of solvency, the establishment of technical
provisions and of the assets covering them. The competent authorities are responsible to
require insurance undertakings to have sound administrative and accounting procedures and
adequate internal control mechanism.
Under Title III, the Directive gives competent authorities supervision powers to make detailed
enquiries by gathering information and carrying out on-the-spot investigations, taking
measures with regard to undertakings and ensuring that those measures are carried out.
The Third Non-Life Insurance Directive also repeals the provisons of the Second Non-Life
Insurance Directive with regard to the transfer of portfolios of contracts. Member States are to
give authorization to insurance undertakings with head offices within their territories to
transfer of all or part of their portfolios of contracts to an accepting office within the
Community. When a branch proposes to transfer all or part of its portfolio of contracts, the
Member State of the branch should be consulted. The authorization of the competent
authorities of the home Member State of the transfering undertaking is necessary for the
transfer to be made.
The First Non-Life Insurance Directive had specified the conditions under which
authorization granted to an insurance undertaking could be withdrawn. The Third Directive
changes these conditions. Under the new directive, authorization can be withdrawn if the
undertaking:
- does not make use of the authorization within 12 months,
- no longer fulfills the conditions for admission,
- has been unable to take the measures specified in the restoration plan or finance
scheme.
Under the Directive, natural or legal persons are obliged to inform the competent authorities
of the home Member State if they are planning to acquire a qualifying holding in an insurance
undertaking or if they are planning to increase their qualifying holding so that their voting
rights reach or exceed 20, 33 or 50 % or so that the insurance undertaking would become his
subsidiary.
Under Title III, the Directive also amends and introduces provisions concerning the
requirement for insurance undertakings to establish adequate technical provisions, assets
20
covering technical provisions and the setting up of an equalization reserve (for offsetting any
technical deficit or above-average claims ratio). In accordance with the Directive, Member
States can only cover their technical provisions with certain categories of assets, which are
investments (debt securities, bonds, capital market instruments, loans, land, buildings, etc.),
debts and claims (debts owned by reinsurers, tax recoveries, claims against guarantee funds,
etc.) and others (tangible fixed assets other than land and buildings, cash at bank and in hand,
etc.).
Under Title IV (provisions relating to right of establishment and the freedom to provide
services), the Third Non-Life Insurance Directive also introduces amendments to the First
Directive with respect to the establishment of branches by insurance undertakings,
information to be provided by insurance undertakings in such cases and other provisions
regulating the right of establishment and the freedom to provide services.
11. European Parliament and Council Directive 95/26/EC of 29 June 1995 amending
Directives 77/780/EEC and 89/646/EEC in the field of credit institutions, Directives
73/239/EEC and 92/49/EEC in the field of non- life insurance, Directives 79/267/EEC
and 92/96/EEC in the field of life assurance, Directive 93/22/EEC in the field of
investment firms and Directive 85/611/EEC in the field of undertakings for collective
investment in transferable securities (Ucits), with a view to reinforcing prudential
supervision
(Official Journal L 168, 18/07/1995 p. 7 – 13.)
Summary
Directive 95/26/EC amends directives in the field of credit institutions, non-life insurance, life
assurance, investment firms and undertakings for collective investment in transferable
securities.
As regards exchanges of information, the Directive amends the Third Non-Life Insurance
Directive and provides that “Member States can authorize exchanges of information between
the competent authorities and other authorities (the authorities responsible for overseeing the
bodies involved in the liquidation and bankruptcy of financial undertakings; the authorities
responsible for overseeing the persons carrying out statutory audits of the accounts of
insurance undertakings and independent actuaries of insurance undertakings carrying out legal
supervision of those undertakings and the bodies responsible for overseeing such actuaries).
Another amendment introduced by the Directive to be inserted to the Third Non-Life
Insurance Directive provides that Member States may authorize the exchange of information
between the competent authorities and the authorities or bodies responsible for the detection
and investigation of breaches of company law, with the aim of strengthening the stability of
the financial system.
12. Directive 2000/26/EC of the European Parliament and of the Council of 16 May 2000
on the approximation of the laws of the Member States relating to insurance against
civil liability in respect of the use of motor vehicles and amending Council Directives
73/239/EEC and 88/357/EEC (Fourth motor insurance Directive)
21
(Official Journal L 181, 20/07/2000 p. 65 – 74.)
Summary
Please find the summary of the Directive under the title “Motor Insurance”.
13. Directive 2000/64/EC of the European Parliament and of the Council of 7 November
2000 amending Council Directives 85/611/EEC, 92/49/EEC, 92/96/EEC and 93/22/EEC
as regards exchange of information with third countries
(Official Journal L 290, 17/11/2000 p. 27 – 28.)
Summary
Please find the summary of the Directice under the title “Life”.
14. Directive 2002/13/EC of the European Parliament and of the Council of 5 March
2002 amending Council Directive 73/239/EEC as regards the solvency margin
requirements for non-life insurance undertakings
(Official Journal L 077, 20/03/2002 p. 17 – 22.)
Summary
All insurance undertakings have liabilities to pay (like current and future claims of
policyholders) and in order to be able to cover these liabilities, they put aside an amount of
money. However, sometimes unforeseen events may occur and the money that has been
previously put aside can turn out to be insufficient. The solvency margin is the extra capital
that insurance providers are required to hold as a buffer against such unforeseen events to be
able to protect their policyholders.
The Financial Services Action Plan (FSAP), which was endorsed by the European Council
meetings in Cologne on 3 and 4 June 1999 and in Lisbon on 23 and 24 March 2000,
underlines the importance of the solvency margin for insurance undertakings to protect
policyholders in the single market.
The First Council Directive (Directive 73/239/EEC) had set forth provisions regarding the
solvency margin that undertakings were required to establish in respect of their entire
business.
Directive 2002/13/EC amends Directive 73/239/EEC. Accordingly, the available solvency
margin shall consist of the assets of the insurance undertaking free of any foreseeable
liabilities, including the paid-up share capital, reserves (statutory and free) not corresponding
to underwriting liabilities and the profit or loss brought forward after deduction of dividends
to be paid. The available solvency margin is to be reduced by the amount of own shares
directly held by the insurance undertaking.
In accordance with the Directive, the available solvency margin may also consist of :
22
-
cumulative preferential share capital and subordinated loan capital up to 50% of
the lesser of the available solvency margin and the required solvency margin, no
more than 25 % of which shall consist of subordinated loans with a fixed maturity,
or fixed-term cumulative preferential share capital;
-
securities with no specified maturity date and other instruments, including
cumulative preferential shares, up to 50% of the lesser of the available solvency
margin and the required solvency margin for the total of such securities and the
subordinated loan capital.
Directive 2002/13/EC also inserts new provisions regarding the required solvency margin.
According to the Directive, the required solvency margin is determined either on the basis of
the annual amount of premiums or contributions or of the average burden of claims for the
past three financial years. The reference period for the average burden of claims is increased
to seven years in the case of insurance undertakings which underwrite only one or more of the
risks of credit, storm, hail or frost.
The amount of the required solvency margin should be equal to the higher result obtained
after calculations are made on both the premium basis and the claims basis.
-
The premium basis is calculated as follows:
higher of the gross written premiums or contributions and gross earned premiums
or contributions (premiums or contributions in respect of aircraft liability, liability
for ships and general liability are increased by 50 %) + premiums or contributions
due in respect of direct business in the last financial year + amount of premiums
accepted for all reinsurance in the last financial year - total amount of premiums or
contributions cancelled in the last financial year – amount of taxes and levies
The obtained amount is divided into 2:
the first portion extends up to EUR 50 million (18 % of it is calculated)
the second comprises the excess (16 % of it is calculated)
These portions are added and multiplied by the ratio of the sum of the last 3
financial years between the amount of claims remaining to be borne by the
undertaking after deduction of amounts recoverable under reinsurance and the
gross amount of claims. This ratio cannot be less than 50 %.
-
The claims basis is calculated as follows:
Premiums or contributions in respect of aircraft liability, liability for ships and
general liability are increased by 50 % + amount of claims paid (calculated in
accordance with the reference period) + amount of claims paid in respect of
reinsurances or retrocessions and amount of provisions for claims outstanding
established at the end of the last financial year – recoveries effected – amount of
provisions for claims outstanding established at the commencement of the second
financial year preceding the last financial year for which there are accounts (if the
period of reference is 7 years, then calculations are made accordingly –sixth
financial year is taken)
23
1/3 or 1/7 of the obtained amount is taken (according to the reference period) and
divided into 2 parts:
the first portion extends up to EUR 35 million (26 % of it is calculated)
the second comprises the excess (23 % of it is calculated)
These portions are added and multiplied by the ratio of the sum of the last 3
financial years between the amount of claims remaining to be borne by the
undertaking after deduction of amounts recoverable under reinsurance and the
gross amount of claims. This ratio cannot be less than 50 %.
Directive 2002/13/EC also replaces the provisions set forth under Directive 73/239/EEC
regarding the guarantee fund. The guarantee fund is 1/3 of the required solvency margin and
it cannot be less than EUR 2 million. However, when all or some of the risks in the classes of
motor vehicle liability, aircraft liability, liability for ships, general liability, credit-insolvency
and suretyship are covered, this amount should be EUR 3 million.
These amounts are reviewed annually to take account of changes in the European index of
consumer prices for all Member States.
3. ACCOUNTING
1. Directive 2003/51/EC of the European Parliament and of the Council of 18 June 2003
amending Directives 78/660/EEC, 83/349/EEC, 86/635/EEC and 91/674/EEC on the
annual and consolidated accounts of certain types of companies, banks and other
financial institutions and insurance undertakings (Text with EEA relevance)
(Official Journal L 178, 17/07/2003 p. 16 – 22.)
Summary
The Lisbon European Council of 23-24 March 2000 emphasised the need to accelerate
completion of the internal market for financial services and set the deadline of March 2005 for
implementation of the Commission’s Financial Services Action Plan. It urged that steps be
taken to enhance the comparability of financial statements prepared by listed companies
(Community companies whose securities are admitted to trading on a regulated market).
EU accounting requirements have been primarily based on the four Accounting Directives:
that is to say, the Fourth and Seventh Directives on the annual and consolidated accounts of
companies; the Directive on the annual and consolidated accounts of banks and other financial
institutions (the Bank Accounts Directive); and the Directive on the annual and consolidated
accounts of insurance undertakings (the Insurance Accounts Directive).
For realizing the Lisbon objectives, Directive 2003/51/EC, which is widely known as the
“Modernization of Accounts Directive”, amended the Accounting Directives.
24
The Directive introduces significant changes to, among others, Directive 91/674/EEC, which
is also known as the “Insurance Accounts Directive (IAD)” (please see below) and thus
removes any discrepancy between the accounting directives and Regulation (EC) No
1606/2002 of the European Parliament and of the Council of 19 July 2002 on the application
of international accounting standards (IAS Regulation).
An important aspect of the Modernization of Accounts Directive is that it permits insurance
undertakings to use fair-value accounting, expressed through appropriate standards issued by
the International Accounting Standards Board (IASB). The Directive requires Member States
to make certain changes to national law concerning the form and content of company
accounts and the content of the directors’ and auditors’ reports. It also gives Member States
options in certain areas.
The Directive clarifies the treatment of off-balance-sheet financing (debts and loans) and
extends beyond the financial aspects the risk analysis made in companies' management
reports. It also spells out the compulsory content of an audit report.
The “Modernization of Accounts Directive” also repeals the Annex of the “Insurance
Accounts Directive” (Directive 91/674/EEC) relevant to Lloyd’s. For the purposes of both
directives, both Lloyd’s and Lloyd’s syndicates are deemed to be insurance undertakings. As
a result of the Modernisation Directive, Lloyd’s syndicate accounts are no longer required to
be prepared on a cumulative basis for three underwriting years at a time but are to be prepared
on an annual accounting basis in line with other insurance undertakings in accordance with
the provisions of the IAD.
Member States are to implement the Modernization Directive by 1 January 2005.
2. Council Directive 91/674/EEC of 19 December 1991 on the annual accounts and
consolidated accounts of insurance undertakings
(Official Journal L 374, 31/12/1991 p. 7 – 31.)
Summary
Accounting has a great importance for the insurance sector and its supervision. Council
Directive 91/674/EEC, which is also known as the “Insurance Accounts Directive” (IAD),
sets out the basic framework for the annual accounts and consolidated accounts of insurance
undertakings.
The Directive applies to all insurance companies or firms except small mutual associations
and sets provisions concerning the balance sheet and the profit and loss account.
Under the Insurance Accounts Directive (IAD), a precise layout is prescribed for the balance
sheet and special provisions relating to certain balance-sheet items are also set. The major
differences in the structure and contents of the balance sheets of insurance undertakings in
different Member States have led the European law-makers to set up this layout (with one
standard structure and the same item designations) for the balance sheets of all Community
insurance undertakings.
25
The prescribed layout for the balance sheet is as follows:
ASSETS
A. Subscribed capital unpaid
B. Intangible assets
C. Investments
I. Land and buildings
II. Investments in affiliated undertakings and participating interests:
1. Shares in affiliated undertakings
2. Debt securities issued by, and loans to, affiliated undertakings
3. Participating interests
4. Debt securities issued by, and loans to, undertakings with which an insurance
undertaking is linked by virtue of a participating interest
III. Other financial investments
1. Shares and other variable-yield securities and units in unit trusts
2. Debt securities and other fixed-income securities
3. Participation in investment pools
4. Loans guaranteed by mortgages
5. Other loans
6. Deposits with credit institutions
7. Other
IV. Deposits with ceding undertakings
D. Investments for the benefit of life-assurance policyholders who bear the
investment risk
E. Debtors
I. Debtors arising out of direct insurance operations
1. policyholders
2. intermediaries
II. Debtors arising out of reinsurance operations
III. Other debtors
IV. Subscribed capital called but not paid
F. Other assets
I. Tangible assets and stocks other than land and buildings, buildings under
construction and deposits paid on land and buildings
26
II. Cash at bank and in hand
II. Own shares
IV. Other
G. Prepayments and accrued income
I. Accrued interest and rent
II. Deferred acquisition costs
III. Other prepayments and accrued income
H. Loss for the financial year
LIABILITIES
A. Capital and reserves
I. Subscribed capital or equivalent funds
II. Share premium account
III. Revaluation reserve
IV. Reserve
V. Profit or loss brought forward
VI. Profit or loss for the financial year
B. Subordinated liabilities
C. Technical provisions
1. Provision for unearned premiums:
(a) gross amount
(b)reinsurance amount
2. Life assurance provision:
(a) gross amount
(b) reinsurance amount
3.Claims outstanding:
27
(a) gross amount
(b) reinsurance amount
4.Provision for bonuses and rebates
(a) gross amount
(b) reinsurance amount
5. Equalization provision
6. Other technical provisions:
(a) gross amount
(b) reinsurance amount
D. Technical provisions for life-assurance policies where the investment risk is borne
by the policyholders
(a) gross amount
(b) reinsurance amount
E. Provisions for other risks and charges
1. Provisions for pensions and similar obligations
2. Provisions for taxation
3. Other provisions
F. Deposits received from reinsurers
G. Creditors
I. Creditors arising out of direct insurance operations
II. Creditors arising out of reinsurance operations
III. Debenture loans, showing convertible loans separately
IV. Amounts owed to credit institutions
V.Other creditors, including tax and social security
H. Accruals and deferred income
I. Profit for the financial year
Under the Directive, a precise layout is prescribed for the profit and loss account as well.
There are also special provisions relating to certain items in the profit and loss account.
The main headings in the profit and loss account layout is as follows:
Technical account- Non-life insurance business
1. Earned premiums, net of reinsurance
28
2.
3.
4.
5.
Allocated ivestment return transferred from the non-technical account
Other technical income, net of reinsurance
Claims incurred, net of reinsurance
Changes in other technical provisions, net of reinsurance, not shown under other
headings
6. Bonuses and rebates, net of reinsurance
7. Net operating expenses
8. Other technical charges, net of reinsurance
9. Change in the equalization provision
10. Sub-total
Technical account- Life assurance business
1.
2.
3.
4.
5.
6.
Earned premiums, net of reinsurance
Investment income
Unrealized gains on investments
Other technical income, net of reinsurance
Claims incurred, net of reinsurance
Change in other technical provisions, net of reinsurance, not shown under other
headings
7. Bonuses and rebates, net of reinsurance
8. Net operating expenses
9. Investment charges
10. Unrealized losses on investments
11. Other technical charges, net of reinsurance
12. Allocated investment return transferred to the non-technical account
13. Sub-total
Non-technical account
1. Balance on the technical account- non-life insurance business
2. Balance on the technical account- life-assurance business
3. Investment income
4. Allocated investment return transferred from the life-assurance technical account
5. Investment charges
6. Allocated investment return transferred to the non-life insurance technical account
7. Other income
8. Other charges, including value adjustments
9. Tax on profit or loss on ordinary activities
10. Profit or loss on ordinary activities after tax
11. Extraordinary income
12. Extraordinary charges
13. Extraordinary profit or loss
14. Tax on extraordinary profit or loss
15. Other taxes not shown under the preceding items
16. Profit or loss for the financial year
The Directive also sets provisions regarding valuation rules (it is possible for Member States
to either impose a specific set of rules or leave companies a choice between alternative rules
29
stated in the Directive), contents of the notes on the accounts, presentation of consolidated
accounts and publication of accounts and annual reports.
3. Fourth Council Directive 78/660/EEC of 25 July 1978 based on Article 54 (3) (g) of the
Treaty on the annual accounts of certain types of companies
(Official Journal L 222, 14/08/1978 p. 11 – 31.)
Amended by:
Seventh Council Directive 83/349/EEC of 13 June 1983 based on the Article 54 (3) (g) of
the Treaty on consolidated accounts
(Official Journal L 193, 18/07/1983 p. 1 – 17.)
Directive 2003/51/EC of the European Parliament and of the Council of 18 June 2003
amending Directives 78/660/EEC, 83/349/EEC, 86/635/EEC and 91/674/EEC on the
annual and consolidated accounts of certain types of companies, banks and other
financial institutions and insurance undertakings (Text with EEA relevance)
(Official Journal L 178, 17/07/2003 p. 16 – 22.)
Please see above.
Summary
The Fourth Council Directive aims at co-ordinating Member States’ laws and provisions
regarding the presentation and content of annual accounts and annual reports, the valuation
methods used and their publication in respect of all companies with limited liability.
The Directive applies to all limited companies but Member States may exempt banks, other
financial institutions and insurance companies.
Under the Directive, the annual accounts comprise the balance sheet, the profit and loss
account and the notes on the accounts. These documents constitute a composite whole and the
Directive lays down the provisions which govern the drawing up of all these documents.
The layout of the balance sheet and of the profit and loss account cannot be changed from one
financial year to the next. As for the layout of the balance sheet, the Directive provides for
two alternatives, leaving it to the Member States to choose. It then lists the balance sheet
items and comments on them.
As for the profit and loss account, the Directive again provides for alternatives, from which
Member States are free to choose.
The Directive states general principles for the valuation of items in the annual accounts, such
as prudence, consistency in the application of the methods of valuation, etc.
30
The Directive also sets forth provisions regarding the preparation of an annual report. This
annual report should include a fair review of the development of the company’s business and
of its position. The report should also give an indication of any important events that have
occurred since the end of the last financial year, the company’s likely future development and
activities in the field of research and development.
The annual accounts and the annual report should also be published in accordance with sertain
rules.
Last but not least, under the Directive, companies should have their annual accounts audited
by one or more persons authorized by national law. Such persons are responsible to verify that
the annual report is consistent with the annual accounts for the same financial year.
4. E-COMMERCE
1. Directive 2000/31/EC of the European Parliament and of the Council of 8 June 2000
on certain legal aspects of information society services, in particular electronic
commerce, in the Internal Market ('Directive on electronic commerce')
(Official Journal L 178, 17/07/2000 p. 1 – 16.)
Summary
The main objective of Directive 2000/31/EC is to guarantee the freedom to provide
information society services in accordance with EC Treaty rules on the freedom to provide
services. The Directive establishes that in principle, and subject to some derogations, such
services may be offered freely throughout the European Union as long as they comply with
the law in their home Member State -country of origin regime- (Article 3).
Due to their contractual nature, financial services are appropriate for trade over the Internet.
The E-Commerce Directive applies to all financial services, including the insurance sector.
This means that Member States will have to remove existing provisions that prohibit the offer
of insurance products over the internet. In addition, prior authorization, apart from the
insurance authorizations laid down in the Insurance Directives, will not be necessary for the
provision of insurance services.
However, the application of the E-Commerce Directive to insurance is incomplete simply
because the Directive provides for derogations under the scope of life assurance and non-life
directives (for the list of “Derogations from Article 3”, please see the Annex of the Directive).
The reason is that the specific requirements of these Directives conflict with the country of
origin principle and necessitate host country competence.
However, this derogation only applies to the activities of the insurance undertakings but not to
the activities of insurance intermediaries.
31
If analyzed in a broader perspective, the derogation for insurance from Article 3 of the ECommerce Directive has an impact in the following fields1:
-
Conditions to carry on cross-border electronic insurance activities
If an insurance undertaking wishes to carry on electronic insurance transactions, it
will be subject to the existing provisions of Insurance Directives regarding, for
instance, the notification procedure for the free provision of services and control
on policy conditions.
-
Advertising
According to the Insurance directives, insurance undertakings may advertise their
services in a host Member State subject to the rules adopted in that Member State
in the interest of general good. However, Article 3 of the E-Commerce Directive
provides that the Host State, may only restrict or impede to this principle on a
case-by case basis and in line with strict conditions.
-
Contract law
The law applicable to an insurance contract will be determined in accordance with
the provisions of the Insurance Directives. For life business and mass risks, the law
that is applicable is the law of the Member State where the risk/commitment is
located.
-
Information to policyholders on the insurance contract
As for insurance contracts concluded by electronic means, the insurer will be
responsible to give information to the policyholder in accordance with the rules in
force in the Member State where it is established.
5. INSURANCE GROUPS
1. Directive 98/78/EC of the European Parliament and of the Council of 27 October 1998
on the supplementary supervision of insurance undertakings in an insurance group
(Official Journal L 330, 05/12/1998 p.1 – 12)
Summary
Please see the Working Paper of the Insurance Committee, “E-Commerce and Financial Services”,
26/11/2001, MARKT/2094/01.
1
32
Life and non-life directives contain provisions for the supervision of insurance undertakings.
This supervision is supported by Directive 98/78/EC (also known as the “Insurance Groups
Directive”) which provides for a “supplementary supervision” by the competent authorities
of Member States.
This “supplementary supervision” takes into account related undertakings of the insurance
undertaking, participating undertakings in the insurance undertaking and related undertakings
of a participating undertaking in the insurance undertaking.
Supplementary supervision is carried out by the competent authorities of the Member State in
which the insurance undertaking has received official authorization. These competent
authorities shall have access to information that is relevant for the purpose of supervision and
they shall have the authority to carry out on-the-spot verification of such information.
If insurance companies established in different Member States are related or have a common
participating undertaking, then the competent authorities of each Member State may establish
a cooperation amongst each other to facilatate the supervision.
The competent authorities carry out general supervision over transactions like loans,
guarantees and off-balance-sheet transactions, elements eligible for the solvency margin,
investments, reinsurance operations and agreements to share costs).
The Insurance Groups Directive is very crucial in the sense that it prevents “double gearing”.
As stated in detail in insurance directives, all insurance undertakings should have a solvency
margin, which is a guarantee of security for policy holders. There is, however, the risk that
groups of insurance undertakings may use the same capital to cover the separate solvency
margin requirements of the different insurance undertakings of the group –double gearing-.
In order to prevent this, the Insurance Groups Directive takes into account the financial
situation of related insurance and reinsurance undertakings in a group when calculating the
“adjusted solvency” of an insurance undertaking that is part of this group. The supervision of
the own funds of the holding companies in an insurance group is also of great importance.
This supervision is aimed at preventing the risk that holding companies may become indebted
and try to withdraw capital from their insurance subsidiaries, also known as capital leverage.
The Directive, in Annex I, provides for three different methods of calculation for adjusted
solvency. These are namely the “deduction and aggregation method”, “requirement deduction
method” and “accounting consolidation-based method”. All these three methods are
considered to be equivalent.
6. FINANCIAL CONGLOMERATES
1. 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 conglomerate and amending Council Directives
73/239/EEC, 79/267/EEC, 92/49/EEC, 92/96/EEC, 93/6/EEC and 93/22/EEC, and
Directives 98/78/EC and 2000/12/EC of the European Parliament and of the Council
33
(Official Journal L 035, 11/02/2003 p. 1 – 27.)
Summary
The European Union financial legislation had long been defined as sector-based, addressing
primarily homogeneous financial groups whose activities are limited to insurance or banking.
However, the latest developments in financial markets have led to the creation of crosssectoral groups across the EU. The importance of Directive 2002/87/EC (also known as the
Financial Conglomerates Directive) stems from the fact that it is the “first comprehensive
implementation in the world of internationally-agreed recommendations on supervision of
financial conglomerates”.
Through the implementation of the Financial Comglomerates Directive, the European Union
aims at effectively supervising the financial conglomerates across different financial sectors
and across borders; enhancing financial stability and protecting insurance policy holders and
investors.
According to the Directive, if the parent undertaking of the financial conglomerate is in the
Community, a regulatory co-ordinator responsible for co-ordination and exercise of
supplementary supervision is to be appointed.
If a financial conglomerate is headed by a regulated entity, the task of coordinator is to be
exercised by the competent authority which has authorised that regulated entity. If a financial
conglomerate is not headed by a regulated entity, there are principles for identifying the coordinator based upon the size and jurisdiction of the regulated sectors or entities within the
conglomerate.
If the parent undertaking of the financial conglomerate is outside the Community, competent
authorities shall verify whether the regulated entities are subject to supervision by a thirdcountry competent authority, which is equivalent to that provided for by the provisions of the
Directive on the supplementary supervision of regulated entities. This regulator is to consult
with the other European regulators of the group’s entities.
The Directive requires the co-ordinator to carry out the supplementary supervision through:
-
co-ordination of the gathering and dissemination of relevant or essential
information,
supplementary supervision of the financial situation and capital adequacy of the
conglomerate,
assessment of the financial conglomerate’s structure, organization and internal
control system,
planning and coordination of supervisory activities.
The Directive sets requirements on solvency to prevent multiple gearing (the same capital
being used more than once as a buffer against risk in different entities in the same
conglomerate) and downstreaming (parent companies issuing debt and then using the
proceeds as equity for their regulated subsidiaries).
The Financial Comglomerates Directive also contains provisions ensuring appropriate risk
management and internal control systems in the conglomerate and provisions guaranteeing
34
appropriate concentration of risk at group level and appropriate transactions between entities
in the same conglomerate.
7. INSURANCE MEDIATION
1. Council Directive 77/92/EEC of 13 December 1976 on measures to facilitate the
effective exercise of freedom of establishment and freedom to provide services in respect
of the activities of insurance agents and brokers (ex ISIC Group 630) and, in particular,
transitional measures in respect of those activities
(Official Journal L 026, 31/01/1977 p. 14 – 19.)
Summary
Directive 77/92/EEC requires Member States to adopt measures in respect of establishment or
provision of services in their territories by natural persons and companies or firms wishing to
pursue the following activities in a self-employed manner:
(a) professional activities of persons who bring together persons seeking insurance or
reinsurance and insurance or reinsurance undertakings, carry out work in
preparation to the conclusion of insurance or reinsurance contracts and assist in the
administration and performance of such contracts,
(b) professional activities of persons acting for one or more insurance undertakings in
introducing, proposing and carrying out work in preparation to the conclusion of
insurance contracts or assissting the administration and performance of such
contracts,
(c) activities of persons other than those mentioned above, who, acting on behalf of
such persons carry out introductory work, introduce insurance contracts or collect
premiums.
If, in a Member State, the taking up or pursuing of these activities is subject to the possession
of general, commercial or professional knowledge and ability, that Member State shall accept
such knowledge and ability gained in another Member State (through pursuing one of these
activities) for periods specified in the Directive.
This should be certified by a certificate, issued by the competent authority in the Member
State of origin or Member State whence the person concerned comes.
2. Commission Recommendation 92/48/EEC of 18 December 1991 on insurance
intermediaries
(Official Journal L 019, 28/01/1992 p. 32 – 33.)
Summary
35
Commission Recommendation 92/48/EEC defines insurance intermediary as a person taking
up or pursuing the professional activities listed under Article 2 of Directive 77/92/EEC
(please see above). An undertaking exercising the activity of insurance intermediary should
employ the adequate number of persons who possess the general, commercial and
professional knowledge and ability.
An insurance intermediary shall possess professional indemnity insurance or any other
comparable guarantee against liability arising from professional negligence. He/she should
have a good reputation, sufficient financial capacity (the level and form to be determined by
the Member States) and should not have been declared bankrupt.
Insurance intermediaries fulfilling these conditions should be registered in their Member
States. They can only be allowed to take up and pursue the activity of insurance intermediary
after being registered.
3. Directive 2002/92/EC of the European Parliament and of the Council of 9 December
2002 on insurance mediation
(Official Journal L 009, 15/01/2003 p. 3 – 10.)
Summary
Insurance and reinsurance intermediaries have a significant role in the distribution of
insurance and reinsurance products throughout the European Union. For the proper
functioning of the single market in insurance, these intermediaries need to operate freely.
Directive 2002/92/EC (also known as the Insurance Mediation Directive) sets up the rules for
the taking-up and pursuit of the activities of insurance and reinsurance mediation by natural
and legal persons which are established in a Member State or which wish to become
established there.
The directive defines “mediation” as “activities of introducing, proposing or carrying out
work preparatory to the conclusion of contracts, or of concluding such contracts, or of
assisting in the administration and performance of such contracts”.
Insurance and reinsurance intermediaries shall be registered with a competent authority in
their home Member State. Once registered, they can take-up and pursue mediation activities
in the Community by means of both freedom of establishment and freedom to provide
services.
Intermediaries should have appropriate knowledge and ability and they should also have a
good reputation, possessing a clean police record. They should hold professional indemnity
insurance that covers the entire Community or other comparable guarantee against liability
arising from professional negligence for at least EUR 1 000 000 applying to each claim and in
aggregate EUR 1 500 000 per year for all claims. Member States are responsible for
protecting consumers in cases where the intermediary does not transfer the premium to the
insurance undertaking or transfer the amount of claim or return premium to the insured.
36
These minimum requirements are of great significance, necessitating a high level of
professionalizm and competence. It is possible for Member States to take even more severe
measures, but only for intermediaries registered on their territory.
If an insurance or reinsurance intermediary intends to carry on business in one or more
Member States, it is necessary to inform the competent authorities of the Member State first.
The competent authorities then inform the competent authorities of any host Member State,
wishing to know the intention of the intermediary within a month. The intermediary may start
business one month after the date he was informed by the competent authorities of the home
Member State that the notification has been made to the host Member State. If the host
Member State does not wish to be informed of the fact, then the intermediary may start
business right away.
The Directive requires insurance intermediaries to give clear explanations to customers for the
advice they give on which products to purchase. They need to state clearly in writing the
reasons why they have recommended particular products in the light of the customer’s
individual requirements.
For dissatisfied customers, the Directive encourages Member States to set up effective
alternative dispute settlement procedures for out-of-court redress.
8. MOTOR INSURANCE
1. Council Directive 72/166/EEC of 24 April 1972 on the approximation of the laws of
Member States relating to insurance against civil liability in respect of the use of motor
vehicles, and to the enforcement of the obligation to insure against such liability
(Official Journal L 103, 02/05/1972 p. 1 – 4.)
Amended by:

Council Directive 72/430/EEC of 19 December 1972 amending Council Directive
72/166/EEC of 24 April 1972 on the approximation of the laws of the Member
States relating to insurance against civil liability in respect of the use of motor
vehicles and to the enforcement of the obligation to insure against such liability
(Official Journal L 291, 28/12/1972 p. 162 – 162.)
Commission Recommendations:

Commission Recommendation 73/185/EEC of 15 May 1973 relating to the
implementation by the original Member States of the Council Directive of 24
April 1972 on the approximation of the laws of the Member States relating to
insurance against civil liability in respect of the use of motor vehicles and to the
enforcement of the obligation to insure against such liability
(Official Journal L 194, 16/07/1973 p. 13 – 13.)
37

Commission Recommendation 74/165/EEC of 6 February 1974 to the Member
States concerning the application of the Council Directive of 24 April 1972 on the
approximation of the laws of the Member States relating to the use of motor
vehicles, and to the enforcement of the obligation to insure against such liability
(Official Journal L 087, 30/03/1974 p. 12 – 12.)

Commission Recommendation 81/76/EEC of 8 January 1981 on accelerated
settlement of claims under insurance against civil liability in respect of the use of
motor vehicles
(Official Journal L 057, 04/03/1981 p. 27 – 27.)
Summary
The Motor Insurance Directives are a fundamental element to the free movement of vehicles
in the European Union. Council Directive 72/166/EEC is the first of a series of directives
adopted in this field.
In accordance with the Directive, Member States shall not make checks on insurance against
civil liability for vehicles normally based in the territory of another Member State or for
vehicles normally based in the territory of a third country entering their territory. However, it
is possible for Member States to carry out random checks.
Member States are to take measures to guarantee that civil liability for the use of vehicles
normally based in their territory is covered by insurance. The insurance contract should cover
any loss or injury caused in the territory of these States and any loss or injury suffered by
nationals of Member States during a direct journey between two territories in the EC area.
Member States may act in derogation from these principles for certain groups of people and
certain types of vehicles to be determined.
In case an accident occurs in the territory of a Member State and this accident is caused by a
vehicle normally based in the territory of another Member State, the national insurers’ bureau
should obtain information about the territory in which the vehicle is normally based and the
details of the insurance of the vehicle.
For third country vehicles failing to cover the loss or injury they have caused, Member States
have the right to prevent their use in their territory.
Vehicles normally based in the territory of a third country should be provided with a valid
green card (an international certificate of insurance issued on behalf of a national bureau) or
with a certificate of frontier insurance establishing that the vehicle is insured.
38
2. Second Council Directive 84/5/EEC of 30 December 1983 on the approximation of the
laws of the Member States relating to insurance against civil liability in respect of the
use of motor vehicles
(Official Journal L 008, 11/01/1984 p. 17 – 20.)
Summary
With the First Motor Insurance Directive, Member States were put under the obligation to
take measures to guarantee that civil liability for the use of vehicles normally based in their
territory is covered by insurance. The Second Motor Insurance Directive states that this
insurance should compulsorily cover both damage to property and personal injuries. In the
case of personal injury, the Directive determines the cover to be 350 000 ECU, while in the
case of damage to property the cover is 100 000 ECU per claim.2
Member States also need to establish or authorize a body for providing compensation. Such
compensation should at least be up to the limits of the insurance obligation for damage to
property or personal injuries.
If any statutory provision or any contractual clause contained in an insurance policy excludes
from insurance the use or driving of vehicles by:
-
persons who do not have express or implied authorization,
persons who do not hold a license permitting them to drive the vehicle concerned,
or
persons who are in breach of the statutory technical requirements concerning the
condition and safety of the vehicle concerned,
will be void in respect of claims by third parties who have been the victims of an accident.
In the case of stolen vehicles or vehicles obtained by violence, Member States may lay down
that the body they have established or authorized will pay compensation instead of the insurer.
Under the Directive, the members of the family of the insured person, driver or any other
person who is liable under civil law in the event of an accident and whose liability is covered
by insurance shall not be excluded from insurance in respect of their personal injuries by
virtue of that relationship.
3. Third Council Directive 90/232/EEC of 14 May 1990 on the approximation of the laws
of the Member States relating to insurance against civil liability in respect of the use of
motor vehicles
(Official Journal L 129, 19/05/1990 p. 33 – 35.)
Summary
Please note that “ECU” as a unit of account is no longer used by the European Union. The Fifth Motor
Insurance Directive will be replacing Article 1 of the Second Motor Insurance Directive (84/5/EEC) and the
amounts for compulsory insurance will be determined accordingly.
2
39
Under the Third Council Directive, Member States are to take the necessary steps to guarantee
that the compulsory insurance policies against civil liability arising out of the use of vehicles
cover, on the basis of a single premium, the entire territory of the Community and guarantee
in each Member State, the cover required by its law or the cover required by the law of the
Member State where the vehicle is normally based when that cover is higher.
If a dispute arises between the body established by the Member State for the payment of
compensation and the civil liability insurer as to which must compensate the victim, Member
States shall guarantee that one of these parties is designated to be responsible for paying
compensation to the victim without delay.
To sum up, with these three directives, the Community has succeeded to prepare the grounds
for a single market in the field of motor insurance. Within this context:
-
An obligation was introduced for all motor vehicles in the Community to be
covered by insurance against third-party liability (compulsory motor insurance)
and minimum amounts were fixed for such insurance cover;
-
The insurance certificate was made valid throughout the Community territory. This
guaranteed the free movement of motor vehicles, thus abolishing border checks on
insurance;
-
Victims of accidents (including those caused by unidentified or uninsured
vehicles) were provided with a better protection through the establishment of
compensation bodies in all Member States;
-
All passangers in the vehicle (including the family of the driver) were covered by
compulsory insurance.
4. Directive 2000/26/EC of the European Parliament and of the Council of 16 May 2000
on the approximation of the laws of the Member States relating to insurance against
civil liability in respect of the use of motor vehicles and amending Council Directives
73/239/EEC and 88/357/EEC (Fourth motor insurance Directive)
(Official Journal L 181, 20/07/2000 p. 65 – 74.)
Summary
The Fourth Motor Insurance Directive establishes a mechanism for the quick settlement of
claims where the accident takes place outside the victim’s Member State of residence
(“visiting victims”). This mechanism completes the system that has been established by the
previous Motor Insurance Directives to compensate the local victims of accidents caused by
vehicles from another Member State.
Under the Fourth Motor Directive, injured parties in accidents enjoy a direct right of action
against the insurance undertaking covering the responsible person against civil liability.
40
The Directive requires all insurance undertakings to appoint a “claims representative” in each
Member State other than the one in which they have received their official authorization. This
person should be resident or established in the Member State where he is appointed and he
will be responsible for handling and settling claims arising from an accident.
The choice of the claims representative is at the discretion of the insurance undertaking and
teh Member States cannot restrict this choice. The claims representative may work for one or
more insurance undertakings and he shall possess sufficient powers to represent the insurance
undertaking in relation to injured parties.
Through the appointment of the claims representative, the European Commission aims at
ensuring that an accident victim will be able to deal with a representative of the liable insurer
in his or her own Member State and language.
The Fourth Motor Insurance Directive requires that Member States establish an information
center responsible for the following tasks:
-
-
keeping a register containing information on the registration numbers of motor
vehicles, the numbers of the insurance policies covering the use of those vehicles,
the number of the green card or frontier insurance policy, insurance undertakings
covering the use of vehicles, etc.
co-ordinating the compilation and dissemination of that information
assisting entitled persons to be apprised of the above-mentioned information.
For a period of seven years, the injured party can obtain information from the information
center of his country of residence, the Member State where the vehicle is normally based or
the Member State where the accident occurred, about the name and address of the insurance
undertaking, the number of the insurance policy and the name and address of the insurance
undertaking’s claims representative. The information center should also provide the injured
party with the name and address of the owner or usual driver or the registered keeper of the
vehicle if the injured party has a legitimate interest in obtaining such information.
The Fourth Motor Insurance Directive also requires that Member States establish
compensation bodies responsible for providing compensation to injured parties. These bodies
will be charged with settling claims in cases where there is no claims representative or where
the insurer is too slow in dealing with the file. Injured parties may present a claim to the
compensation body in their Member State of residence but they cannot present a claim if they
have taken legal action directly against the insurance undertaking. The compensation body
takes action within two months of the date when the injured party presents a claim for
compensation to it but it shall terminate its action if the insurance undertaking, or its claims
representative makes a reasoned reply to the claim.
If it is not possible to identify the vehicle, or if, within two months following the accident, it is
not possible to identify the insurance undertaking, the injured party may apply for
compensation from the compensation body in the Member State where he resides.
It is important to note that none of these measures change the rules on liability or on the
jurisdiction currently applied in Member States. In case of an accident, the law in the country
where the accident has occurred will continue to apply. If there is a dispute as to who is liable
41
for an accident and the case is refferred to court, it will be heard in accordance with the law
and in the country where the accident happened.
5. Commission Decision 2003/20/EC of 27 December 2002 on the application of Article 6
of the Directive 2000/26/EC of the European Parliament and of the Council of 16 May
2000 on the approximation of the laws of the Member States relating to insurance
against civil liability in respect of the use of motor vehicles and amending Council
Directives 73/239/EEC and 88/357/EEC (Text with EEA relevance) (notified under
document number C(2002) 5304)
(Official Journal L 008, 14/01/2003 p. 35 – 36.)
Summary
Commission Decision 2003/20/EC is about the application of Article 6 of Directive
2000/26/EC, which relates to the establishment or approval of compensation bodies
responsible for providing compensation to injured parties (please see above). In accordance
with Decision 2003/20/EC, Article 6 of Directive 2000/26/EC was to take effect as from 20
January 2003 and Member States were held responsible to inform the European Commission
of measures taken to apply the Decision.
6. Commission Decision 2003/564/EC of 28 July 2003 on the application of Council
Directive 72/166/EEC relating to checks on insurance against civil liability in respect of
the use of motor vehicles (Text with EEA relevance) (notified under document number
C(2003) 2626)
(Official Journal L 192, 31/07/2003 p. 23 – 39.)
Repeals:

Commission Decision 91/323/EEC of 30 May 1991 relating to the application of
Council Directive 72/166/EEC on the approximation of the laws of the Member
States relating to insurance against civil liability in respect of the use of motor
vehicles and to the enforcement of the obligation to insure against such liability
(Official Journal L 177, 05/07/1991 p. 25 – 36.)

Commission Decision 93/43/EEC of 21 December 1992 relating to the application
of Council Directive 72/166/EEC on the approximation of the laws of the Member
States relating to insurance against civil liability in respect of the use of motor
vehicles and to the enforcement of the obligation to insure against such liability
(Official Journal L 016, 25/01/1993 p. 51 – 52.)

Commission Decision 97/828/EC of 27 October 1997 relating to the application of
Council Directive 72/166/EEC on the approximation of the laws of the Member
States relating to insurance against civil liability in respect of the use of motor
42
vehicles, and to the enforcement of the obligation to insure against such liability
(Text with EEA relevance)
(Official Journal L 343, 13/12/1997 p. 25 – 26.)

Commission Decision 1999/103/EC of 26 January 1999 relating to the application
of Council Directive 72/166/EEC on the approximation of the laws of the Member
States relating to insurance against civil liability in respect of the use of motor
vehicles and to the enforcement of the obligation to insure against such liability
(notified under document number C(1999) 109) (Text with EEA relevance)
(Official Journal L 033, 06/02/1999 p. 25 – 26.)

Commission Decision 2001/160/EC of 15 February 2001 on the application of
Council Directive 72/166/EEC on the approximation of the laws of the Member
States relating to insurance against civil liability in respect of the use of motor
vehicles and to the enforcement of the obligation to insure against such liability in
relation to Cyprus (Text with EEA relevance) (notified under document number
C(2001) 371)
(Official Journal L 057, 27/02/2001 P. 56 – 56.)
Summary
Commission Decision 2003/564/EC states that Member States are to refrain from making
checks on insurance against civil liability in respect of vehicles normally based in another
Member State or in the territory of the Czech Republic, Croatia, Greek Cypriot
Administration, Hungary, Iceland, Norway, Slovakia, Slovenia and Switzerland, as from 1
August 2003. This is in accordance with the Agreement reached between the National
Insurers’ Bureaux of the Member States of the European Economic Area and other Associate
States. This agreement is attached to the Decision as an appendix.
7. Commission Decision 2004/332/EC of 2 April 2004 on the application of Council
Directive 72/166/EEC with regard to checks on insurance against civil liability in respect
of the use of motor vehicles (Text with EEA relevance) (notified under document
number C(2004) 1235)
(Official Journal L 105, 14/04/2004 p. 39 – 39.)
Summary
Commission Decision 2004/332/EC states that Member States are to refrain from making
checks on insurance against civil liability in respect of vehicles which are normally based in
the territory of Estonia, Latvia, Lithuania, Malta and Poland, as from 30 April 2004. This is in
accordance with the Addendum to the Agreement reached between the National Insurers’
Bureaux of the Member States of the European Economic Area and other Associate States
(please refer to the annex of Commission Decision 2003/564/EC for the agreement).
43
8. Directive 2005/14/EC of the European Parliament and of the Council of 11 May 2005
amending Council Directives 72/166/EEC, 84/5/EEC, 88/357/EEC, 90/232/EEC and
Directive 2000/26/EC of the European Parliament and of the Council relating to
insurance against civil liability in respect of the use of motor vehicles (Fifth Motor
Insurance Directive)
(Official Journal L 149, 11/06/2005 p. 14-21.)
Summary
The increasing growth in cross-border traffic, the large number of questions, complaints and
petitions received by the European Commission on the operation of the Motor Insurance
Directives and the need to fill gaps or provide solutions to problems that arise, have
necessitated the revisal and modernization of the Directives.
The Fifth Motor Insurance Directive aims to revise the Motor Insurance Directives to achieve
the following objectives:
-
Updating and improving the protection of victims of motor vehicle accidents by
compulsory insurance;
-
Ensuring increased convergence as regards the interpretation and application of the
Directives by Member States;
-
Providing solutions to problems which arise frequently to create a more efficient
single market in motor insurance.
Taking into account that the minimum compensation amounts provided for in the Second
Motor Insurance Directive have not been updated since 1982, the new Directive determines
the compulsory insurance to be EUR 1 000 000 per victim in the case of personal injury or
EUR 5 000 000 per claim, whatever the number of victims and EUR 1 000 000 per claim in
the case of damage to property, whatever the number of victims. These amounts will be
reviewed every five years to take account of changes in the European Index of Consumer
Prices.
Under the Directive, pedestrians and cyclists are designated as specific categories of accident
victims. Motor vehicle insurance will cover personal injuries suffered by pedestrians and
cyclists and other non-motorised users of the roads. By ensuring that pedestrians and cyclists
are covered by compulsory insurance, the European Commission enhances their protection, as
the weakest parties in traffic.
The New Directive will make things easier for people wishing to change insurers by obliging
the insurer to provide policyholders with a statement concerning their claims record, at the
end of the contract.
The Directive will also help individuals or companies facing difficulties in finding insurance
coverage when buying vehicles in one Member State and selling them into another Member
State. During the journey and until its final registration in the Member State of destination, the
vehicle should be covered by an insurance policy. However, it is both difficult and expensive
to obtain such short-term insurance. To solve these problems, the Directive considers the
44
Member State of destination as the territory in which the vehicle is normally based. Therefore,
insurers operating in the Member State where the purchaser is resident will be able to cover
the risk during the period from its dispatch until its final registration.
Member States are to bring into force the laws, regulations and administrative provisions
necessary to comply with the Fifth Motor Insurance Directive by 11 June 2007 at the latest.
9. REINSURANCE
1. Council Directive 64/225/EEC of 25 February 1964 on the abolition of restrictions on
freedom of establishment and freedom to provide services in respect of reinsurance and
retrocession
(Official Journal P 056, 04/04/1964 p. 878 – 883.)
Summary
Council Directive 64/225/EEC was adopted with the aim of liberalizing all branches of
reinsurance, without any distinction. Under the Directive, Member States were urged to
abolish, in respect of the natural persons and companies or firms, the restrictions affecting the
right to take up and pursue the following activities:
-
activities of self-employed persons in reinsurance and retrocession,
in the case of natural persons, companies or firms dealing both in direct insurance
and in reinsurance and retrocession, the part of activities concerned with
reinsurance and retrocession.
The Directive listed the restrictions that existed in Germany, Belgium, Luxembourg, France
and Italy at the time being.
2. 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) 273 final, 2004/0097 (COD), Brussels 21/04/2004)
Summary
Currently, there are no harmonized reinsurance supervision rules in the European Union. The
European insurance legislation regulates reinsurance activities carried out by direct insurers
but it does not regulate activities carried out by specialized reinsurers. Harmonization work
started in the field of direct insurance mainly because of the neccessity to protect
policyholders and customers of insurance companies. Reinsurance, on the other hand, is
regarded as a business transaction between two professional parties and there exist no weaker
party to protect, such as consumers.
45
However, the lack of an EU framework has resulted in important differences in the
supervision of reinsurance undertakings throughout the EU and led to barriers to trade within
the internal market.
This has led the European Commission to put up a proposal for a Directive on reinsurance,
which would establish supervision of reinsurers by competent authorities in their home
country.
Under the proposed Directive, once licensed in one Member State, a reinsurance company
would automatically start carrying out reinsurance activities throughout the European Union
under the freedom of establishment and freedom to provide services. The company would not
be subjected to additional checks or supervision in host Member States. This authorization
would serve as a “single passport” for reinsurers.
The proposed Directive introduces a licensing system which sets out provisions for the
supervision of reinsurance. This means that reinsurers are to fulfill certain conditions to be
granted a license.
The proposed Directive also sets out rules for the supervision of reinsurance undertakings.
This would include rules on the establishment of technical provisions (like the amount that
has to be put aside by the reinsurance undertaking to be able to pay its contractual
commitments) and rules on the investment of assets covering these technical provisions.
There are also rules regarding solvency margins and minimum capital requirements.
With the proposed Directive, the European Union aims at strengthening its hand in
international trade negotiations because the lack of a harmonized supervision framework has
long been regarded as an obstacle in discussions with third countries on mutual recognition of
reinsurance supervision. The Directive is in line with the ongoing reinsurance supervision
project being carried out by the International Association of Insurance Supervisors (IAIS).
10. SOLVENCY
1. Directive 2002/83/EC of the European Parliament and of the Council of 5 November
2002 concerning life assurance
(Official Journal L 345 , 19/12/2002 p. 1 – 51.)
Summary
Please find the summary of the Directive under the “life” heading.
2. Directive 2002/13/EC of the European Parliament and of the Council of 5 March 2002
amending Council Directive 73/239/EEC as regards the solvency margin requirements
for non-life insurance undertakings
(Official Journal L 077, 20/03/2002 p. 17 – 22.)
46
Summary
Please find the summary of the Directive under the “non-life” heading.
11. WINDING-UP
1. Directive 2001/17/EC of the European Parliament and of the Council of 19 March
2001 on the reorganization and winding-up of insurance undertakings
(Official Journal L 110, 20/04/2001 p. 28-39.)
Summary
Directive 2001/17/EC applies to reorganization measures and winding-up procedures
concerning insurance undertakings. Under the Directive, if an insurance undertaking with
branches in other Member States fails, the winding-up process will be subject to a single
bankruptcy proceeding in the home Member State (the Member State where the undertaking
has its registered office). This also means that the procedure will be subject to a single
bankruptcy law (that of the home state). This is in line with the “home country control
principle” which is the basis for EU insurance directives.
Under the previous procedure, it was possible for authorities in different Member States to
open separate insolvency proceedings, if an insurance undertaking with branches across
Europe were wound up. The advantage of having a single winding-up proceeding rather than
several, is that costs are reduced and the procedure is accelerated.
If a winding-up proceeding is opened for an insurance undertaking, the authorization of the
insurance undertaking should be withdrawn. The decision to open such a proceeding should
be published by the competent authority, the liquidator or any person appointed for that
purpose by the competent authority. An extract from the winding-up decision should also be
published in the Official Journal of the European Communities.
When winding-up proceedings are opened, each known creditor who has his normal place of
residence, domicile or head office in another Member State shall be informed by written
notice. The creditors may lodge claims or submit written observations relating to claims.
As for re-organization measures, similar to winding-up procedures, only the competent
authorities of the home Member State will be able to decide on the reorganization measures
and these measures will be governed by the laws, regulations and procedures applicable in the
home Member State.
12. STATISTICS
1. Commission Regulation (EC) No 1225/1999 of 27 May 1999 concerning the definitions
of characteristics for insurance services statistics
47
(Official Journal L 154, 19/06/1999 p. 1-45.)
Summary
Council Regulation No 58/97 of 20 December 1996 concerning structural business statistics
establishes a common framework for the collection, compilation, transmission and evaluation
of Community statistics on the structure, activity, competitiveness and performance of
businesses in the Community.3 Annex 5 of the amended Regulation4 aims at establishing such
a framework for insurance services. The module includes a detailed list of characteristics on
which statistics shall be compiled in order to improve knowledge of the national, Community
and international development of the insurance sector.
Having regard to this Regulation and taking into account the necessity to implement a set of
definitions for the insurance services statistics characteristics, the European Commission has
adopted Regulation No 1225/1999. The Annex of the Regulation provides for the definitions
of the chracteristics referred to in Regulation 58/97.
2. Commission Regulation (EC) No 1226/1999 of 28 May 1999 concerning the
derogations to be granted for insurance services statistics (Text with EEA relevance)
(Official Journal L 154, 19/06/1999 p. 46- 74.)
Summary
Council Regulation No 58/97 of 20 December 1996 concerning structural business statistics
provides under Article 11 that during transitional periods, derogations may be accepted in so
far as the national statistical systems require major adaptations and that a supplementary
transitional period may be accorded to a Member State for the compilation of statistics.
In accordance with this Article, derogations to the characteristics of List A of Annex 5 of the
Regulation are specified in the Annex to Regulation 1226/1999 on a country by country basis.
3. Commission Regulation (EC) No 1227/1999 of 28 May 1999 concerning the technical
format for the transmission of insurance services statistics (Text with EEA relevance)
(Official Journal L 154, 19/06/1999 p. 75-90.)
Summary
Council Regulation No 58/97 of 20 December 1996 concerning structural business statistics
provides under Article 9 that the results of collected and estimated data should be transmitted
in an appropriate technical format.
Regulation 1227/1999 has been adopted by the Commission in order to specify the technical
format for the transmission of insurance services statistics. Under the Annex of the
3
OJ L 14, 17/01/1997, p. 1.
Regulation No 410/98 of 16 February 1998 amending Regulation (EC, Euratom) No 58/97 concerning
structural business statistics, OJ L 52, 21/02/1998, p.1.
4
48
Regulation, the technical format is divided into six titles, namely the form of the data, record
structure, description of the fields, examples of records, type of magnetic media and other
methods.
4. Commission Regulation 1228/1999 of 28 May 1999 concerning the series of data to be
produced for insurance services statistics (Text with EEA relevance)
(Official Journal L 154, 19/06/1999 p. 91-107.)
Summary
Taking into account the necessity to specify the frequency for the compilation of the multiyearly insurance services statistics, to specify the first reference year for the compilation of
the results laid down in Annex 5 of Regulation 58/97 (establishing a common framework for
the collection, compilation, transmission and evaluation of Community statistics on the
structure, activity, competitiveness and performance of insurance services) and to specify the
breakdown of the results for the production of insurance services statistics, the Commission
has adopted Regulation 1228/1999.
The Annex of the Regulation specifies the frequency for the compilation of multi-yearly
characteristics, the breakdowns of results and the first reference year for the compilation of
specific results specified in Regulation 58/97.
13. INSURANCE COMMITTEE
1. Council Directive 91/675/EEC of 19 December 1991 setting up an insurance
committee
(Official Journal L 374, 31/12/1991 p. 32 – 33.)
Summary
An Insurance Committee (IC) was established under Directive 91/675/EEC to assist the
European Commission in its work in the insurance field with the aim of establishing closer
co-operation between the national competent authorities and the Commission.
The Insurance Committee is composed of the representatives of Member States and chaired
by the representative of the Commission.
The Committee examines questions relating to the application of Community provisions about
the insurance sector, especially directives on direct insurance. The Commission may consult
the Committee on new proposals regarding further co-operation in the field of direct life
assurance and direct non-life assurance. The Committee, does not, however, consider specific
problems relating to individual insurance undertakings.
The European Commission has recently launched a package of seven measures to simplify
and enhance the decision-making and implementation in the financial services, also including
49
insurance. With this package, a Committee of European Insurance and Pensions Supervisors
(CEIOPS with 2004/6/EC, please see below) has been established to act as an independent
advisory group on insurance and occupational pensions. The European Insurance and
Occupational Pensions Committee (EIOPC with 2004/9/EC (has not come into force yet),
please see below) will replace the Insurance Committee and assist the Commission in
adopting implementing measures for EU Directives.
2. Commission Decision 2004/6/EC of 5 November 2003 establishing the Committee of
European Insurance and Occupational Pensions Supervisors (Text with EEA relevance)
(Official Journal L 003, 07/01/2004 p. 30 – 31.
Summary
The Committee of European Insurance and Pensions Supervisors (CEIOPS) has been
established to advise the European Commission regarding the preparation of draft
implementing measures in the fields of insurance, reinsurance and occupational pensions.
The Committee contributes to the consistent implementation of Community Directives and to
the convergence of the supervisory practices of Member States throughout the Community. It
is also a forum for supervisory co-operation, including the exchange of information on
supervised institutions.
The representatives of the Committee are designated by Member States from the high level
representatives of their competent authorities in the field of supervision of insurance,
reinsurance and occupational pensions. The Commission also designates a high level
representative to participate in the debates of the Committee.
3. Commission Decision 2004/9/EC of 5 November 2003 establishing the European
Insurance and Occupational Pensions Committee (Text with EEA relevance)
(Official Journal L 003, 07/01/2004 p. 34 – 35.)
Summary
Commission Decision 2004/9/EC establishes an advisory group on insurance and
occupational pensions in the Community, namely the European Insurance and Occupational
Pensions Committee (EIOPC). The primary aim is to amend the insurance committees to also
cover reinsurance and occupational pensions.
EIOPC will be replacing the Insurance Committee. However, to avoid duplication of
committees, the entry into force of Decision 2004/9/EC will be suspended until the entry into
force of any directive amending the purely advisory functions of the Insurance Committee.
EIOPC will be responsible to advise the Commission on issues relating to insurance,
reinsurance and occupational pensions as well as Commission proposals in these fields.
EIOPC will not consider specific problems relating to individual insurance or reinsurance
50
undertakings or to occupational pensions institutions and it will not address labor and social
law aspects.
The Committee will be composed of high level representatives of Member States and will be
chaired by a representative of the Commission.
14. INTERNATIONAL AGREEMENTS
1. Council Regulation (EEC) No 2155/91 of 20 June 1991 laying down particular
provisions for the application of Articles 37, 39 and 40 of the Agreement between the
European Economic Community and the Swiss Confederation on direct insurance other
than life assurance
(Official Journal L 205, 27/07/1991 p. 1-1.)
Summary
An Agreement between the European Economic Community and the Swiss Confederation on
direct insurance other than life assurance was signed at Luxembourg on 10 October 1989.
Under the Agreement, a Joint Committee was set up to administer the Agreement, ensure that
it is properly implemented and take decisions in the circumstances provided for therein.
Council Regulation 2155/91 provides that the Community, assisted by the representatives of
the Member States, is to be represented on the Joint Committee. The Community’s position in
the Joint Committee is to be adopted by the Council acting by a qualified majority on a
proposal from the Commission.
The Regulation is binding in its entirety and directly applicable in all Member States.
2. Council Decision 91/370/EEC of 20 June 1991 on the conclusion of the Agreement
between the European Economic Community and the Swiss Confederation concerning
direct insurance other than life assurance
(Official Journal L 205, 27/07/1991, p. 2-2).
Summary
Council Decision 91/370/EEC approves on behalf ıf the Community, the Agreement between
the European Economic Community and the Swiss Confederation concerning direct insurance
other than life assurance.
The text of the Agreement is atttached to the Decison.
3. Council Directive 91/371/EEC of 20 June 1991 on the implementation of the
Agreement between the European Economic Community and the Swiss Confederation
concerning direct insurance other than life assurance
51
(Official Journal L 205, 27/07/1991, p. 48-48).
Summary
One of the effects of the Agreement between the European Economic Community and the
Swiss Confederation is to impose, in relation to insurance undertakings which have their head
offices in Switzerland, legal rules different from those applicable under Chapter III of
Directive 73/239/EEC, to agencies and branches established within the Community of
undertakings whose head offices are outside the Community. Therefore, under Directive
91/371/EEC, Member States were asked to amend their national provisions to comply with
the Agreement and when they adopted these measures, they had to contain a reference to this
Directive.
4. 2001/776/EC: Decision No 1/2001 of the EC-Switzerland Joint Committee of 18 July
2001 amending the Annexes and Protocols to the Agreement between the European
Economic Community and the Swiss Confederation on direct insurance other than life
assurance and finding that the domestic legislation of the Contracting Parties is
compatible with that Agreement
(Official Journal L 291, 08/11/2001, p. 52-55).
Summary
Following the legislative provisions adopted by Switzerland and by the European Community
between the dates on which the Agreement was signed, certain amendments were made
concerning the list of applicable lgal forms, the replacement of the term ECU with EURO,
solvency margins, etc.
15. INFRINGEMENTS OF THE INSURANCE ACQUIS BY MEMBER STATES
The European Court of Justice (ECJ), the judicial branch of the European Community, has
played an important role in shaping the legal and political structure of the Community by
giving flesh and substance to Treaties and Directives.
The primary objective of the ECJ has been the enhancement of the effectiveness of
Community law and its integration into the legal systems of the Member States. This has been
achieved through case law, which is the general term used for the legal principles "developed
by judges" in determining legal disputes.
In the field of insurance, there has been many important decisions and interpretations reached
by the Court of Justice. Provided below, are some examples of cases referred to the European
Court of Justice, their backgrounds and the grounds of the judgments of the Court.
52
Case 205/84 Commission of the European Communities v. Federal Republic of Germany
(Insurance Services Case)
[1986] ECR 3755, [1987] 2 CMLR 69.
The Insurance Services Case is one of the most important cases in the field of freedom of
establishment and the free movement of services.
The European Commission lodged an application to the European Court of Justice for a
declaration that the Federal Republic of Germany has failed to fulfill its obligations under the
EEC Treaty, and in particular under Articles 59 and 60 (now Arts. 49 and 50), in relation to
the freedom to provide services in the field of insurance, including co-insurance and under
Council Directive 78/473/EEC on the co-ordination of the laws, regulations and
administrative provisions relating to Community co-insurance (please see the summary of the
Directive under Title II).
Articles 59 and 60 (now Arts. 49 and 50) require the removal not only of all discrimination
against a provider of a service on the grounds of his nationality but also all restrictions on his
freedom to provide services imposed by reason of the fact that he is established in a Member
State other than that in which the service is to be provided.
Under provisions of German law, where insurance undertakings in the Community wished to
provide certain kinds of direct insurance services in Germany through agents or
intermediaries, they were required to be established and authorized in Germany.
Secondly, in its legislation transposing Council Directive 78/473/EEC on co-insurance into
national law, Germany provided that the leading insurer (in the case of risks situated in the
Federal Republic of Germany) must be established in Germany and authorized as the sole
insurer of those risks. The European Commission argued that these provisions also violated
Articles 59 and 60 (now Arts. 49 and 50) of the Treaty.
The decision of the Court was in line with the Commission view:
“28. It must be stated that the requirements in question in these proceedings, namely
that an insurer who is established in another Member State, authorized by the
supervisory authority of that state and subject to the supervision of that authority,
must have a permanent establishment within the territory of the State in which the
service is provided and that he must obtain a separate authorization from the
supervisory authority of that State, constitute restrictions on the freedom to provide
services in as much as they increase the cost of such services in the State in which they
are provided, in particular where the insurer conducts business in that State only
occasionlly.”
Such requirements could only be regarded as compatible with Articles 59 and 60 (now Arts.
49 and 50) if restrictions on the freedom to provide services could be justified on grounds of
public interest.
Trying to justify the restrictions on grounds of public interest, the German government argued
that the insurance sector was a sensitive area from the point of view of the protection of the
53
consumer both as a policy holder and as an insured person. This was argued to be because of
the specific nature of the service provided by the insurer, which is linked to future events. If
an insured person cannot receive a payment under a policy following an event giving rise to a
claim, he might turn out to be in a very difficult position. It is also very difficult for a person
who wants to be insured to predict whether his insurer’s financial position and the terms of
the contract will provide him with the necessary guarantees in the future.
The Court accepted that the insurance sector was sensitive and the protection of the policyholder and the insured person was of great significance. The Court was also of the opinion
that under the insurance directives (which were in force at the time being), important issues
with respect to the reserves and assets of insurance companies were not covered. However,
regarding the establishment requirement, the Court ruled that such a requirement could
undermine the aim of Article 59 (now Art. 49) and that the German arguments concerning the
protection of policy-holders and insured persons did not make the establishment of the insurer
in the territory of the state in which the service is provided an indispensable requirement.
Case C-59/01 Commission of the European Communities v. Italian Republic
(European Court Reports 2003 page I-01759).
The European Commission lodged an application to the European Court of Justice for a
declaration that the Italian Republic had failed to fulfil its obligations under Directive
92/49/EEC (the Third Non-Life Insurance Directive) by introducing and maintaining in force
rate-freezing rules applicable to all contracts of insurance in respect of third-party liability
arising from the use of motor vehicles in relation to risks situated within Italian territory.
Directive 92/49/EEC aims at completing the internal market with respect to both the right of
establishment and the freedom to provide services and lays down the principle of freedom to
set premiums. Under Article 8, the Directive provides that “Member States cannot 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 policyholders.”
Italy had transposed the Directive into its national law and liberalized the rates for
compulsory motor vehicle insurance in the country, which were previously subject to a pricecontrol system. However, following a rise of about 400% in premiums, Italy adopted Decree
Law No. 70 of 28 March 2000 “containing urgent provisions to limit inflationary pressures”
concerning various sectors, which among these were compulsory motor-vehicle insurance.
Under the Decree, compulsory motor vehicle insurance premiums would be freezed and
insurance undertakings would not apply any increase in premium rates, initially for a period
of one year. These rules would apply to all insurance undertakings, without distinguishing
between insurance companies having their head office in Italy and those carrying on business
in Italy through branch offices or under the freedom to provide services.
The European Commission argued that these provisions were contrary to the principle of
freedom to set premiums and the system for exchanging information. With respect to rate
restrictions, the findings of the Court were in line with the Commission arguments.
54
The Court held that Directive 92/49/EEC aimed at securing the principle of freedom to set
premiums in the field of compulsory motor-vehicle insurance and therefore prohibited any
system of notification or approval of premium rates except within the framework of a general
price-control system.
The Court decided that the Italian legislation restricted the freedom of insurance undertakings
to set their premiums. The Court also rejected that the exercise was part of a general pricecontrol system, finding that the Italian legislation amounted to selective intervention in the
compulsory motor vehicle insurance system and did not have any links with measures in other
sectors.
Case C-312/01 Commission of the European Communities v. Hellenic Republic
(European Court Reports 2002 page I-07053).
The European Commission brought an action before the Court (First Chamber) alleging that
the Hellenic Republic had failed to fulfil its obligations under Directive 98/78/EC on the
supplementary supervision of insurance undertakings in an insurance group. The Commission
argued that the Greek government failed to adopt laws, regulations and administrative
provisions within the prescribed time-limit to fully comply with Directive 98/78/EC.
According to settled case-law, it is not possible for a Member State to rely on any provisions,
practices or circumstances in its own legal order to justify failure to implement a directive
within the prescribed time period. Therefore, the decision of the Court (First Chamber) was in
line with the Commission. The Court held that the Hellenic Republic had failed to fulfil its
obligations on the Directive by failing to bring into force or to communicate to the
Commission within the prescribed time-limit, all of the laws, regulations and administrative
provisions necessary to comply with the Directive.
55
III. EUROPEAN UNION ENLARGEMENT 2004 AND INSURANCE
1. WHAT ARE ACCESSION NEGOTIATIONS?
The accession negotiations process is the process which determines the conditions under
which each candidate country will join the European Union. The negotiations focus
specifically on the terms under which candidates adopt, implement and enforce the acquis
communautaire. In certain cases, on legal or economic grounds, the granting of transitional
arrangements may be possible but such arrangements must be limited in time and scope.
The negotiations with the candidate countries are conducted individually and their pace
depends largely on the degree of preparation by each candidate country and the complexity of
the issues to be resolved. Therefore, it is not possible to estimate the length of negotiations in
advance.
Negotiations are conducted under the chapters of the European Union acquis communautaire.
In the last enlargement, there had been 31 Chapters. However, the draft EU Common Position
establishing a negotiating framework for Turkey envisages negotiations to be conducted under
the following 35 Chapters:
1. Free movement of goods
2. Freedom of movement for workers
3. Right of establishment and freedom to provide services
4. Free movement of capital
5. Public Procurement
6. Company law
7. Intellectual property law
8. Competition policy
9. Financial services
10. Information society and media
11. Agriculture and rural development
12. Food safety, veterinary and phytosanitary policy
13. Fisheries
14. Transport policy
15. Energy
16. Taxation
17. Economic and monetary policy
18. Statistics
19. Social policy and employment
20. Enterprise and industrial policy
21. Trans-European networks
22. Regional policy and coordination of structural instruments
23. Judiciary and fundamental rights
24. Justice, freedom and security
25. Science and research
26. Education and culture
27. Environment
28. Consumer and health protection
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29. Customs Union
30. External relations
31. Foreign, security and defense policy
32. Financial control
33. Financial and budgetary provisions
34. Institutions
35. Other issues
The procedure for accession negotiations has three phases:
1. Screening
Before the actual negotiations start, a detailed examination of the different chapters of the
acquis communautaire (screening) takes place. The objective is to explain the acquis to the
candidate countries and to identify with them, areas where there may be problems to be
addressed.
2. Negotiations
For every chapter, candidate countries prepare their negotiating positions, which they submit
to the country holding the presidency of the European Union and the European Commission
through their Chief Negotiator for accession negotiators. These negotiating positions are
prepared by working groups established in line with individual chapters and reviewed in cooperation with the responsible sector and the related public authorities (including the Ministry
of Foreign Affairs, the country’s mission to the EU in Brussels, etc.). After the approval of the
negotiating position by the government, the position is submitted to the EU Member State
holding the presidency and the European Commission.
The Commission prepares its proposal on the submitted negotiating position, the so-called
Draft Common Position of the European Union. This position is then submitted to the
COREPER, on organ consisting of permanent representatives of member countries in
Brussels. This means that the relevant chapter can only be opened following the elaboration
and approval of the position document by the Union. Chapters are officially opened at a
meeting at the level of ministers or deputies.
The negotiating position of the candidate country is thoroghly examined by experts from
European Union member countries. If a candidate country has harmonised all the necessary
legislation with the acquis communautaire under a chapter, then this chapter is provisionally
closed at a meeting between the representatives of the European Union and a candidate
country (at the level of ministers or deputies). "Provisionally" means that the chapter can be
reopened during the negotiation process.
3. Ratification process
Agreements that will be concluded between a candidate country and the EU in individual
negotiating chapters will form the basis for the Accession Treaty. This agreement will define
the precise terms under which a candidate country will enter the European Union, what
transitional periods it will apply and for how long. The signing of the Treaty by member
countries is followed by the ratification process, i.e. the approval of the Treaty by parliaments
of member countries and the European Parliament.
57
2. NEGOTIATIONS IN INSURANCE
Negotiations in the field of insurance are conducted under Chapter 3: Freedom to provide
services.
Provided below are the summaries of the negotiating positions of the ten new Member States
of the European Union, the transitional arrangements they have requested in the field of
insurance under Chapter 3 and the present situation in their insurance sectors (in terms of
GDP, population, exchange rate, inflation rate, total premium (life and non-life)).5
a. Greek Cypriot Administration
The negotiations with the Greek Cypriot Administration under Chapter 3: Freedom to Provide
Services, were launched in July 1999, provisionally closed in May 2001 and definitely closed
in December 2002.
Requests for derogations or transition periods
During the negotiations for full membership, the Greek Cypriot Administration did not make
any request for permanent derogations or transition periods in the field of insurance. The only
request of the Cypriot government under freedom to provide services related to the permanent
exclusion of the Cypriot Co-operative Credit and Savings Societies from the application of the
provisions of the EC Directives on credit institutions. The government succeeded to get a
transition period in this field.
State of play during the negotiations
In the Greek Cypriot Administration, the legislation in the insurance sector is covered by the
Insurance Companies Laws of 1984 and 1990 and the Insurance Companies Regulations of
1995. The supervisory authority in the Greek Cypriot Administration is the Insurance
Companies Control Service which functions under the Ministry of Finance.
At the initial phase of the negotiations, almost all the basic elements of the EU supervision
system were covered by the existing Cypriot legislation but there were some prudential
provisions which were different from the ones provided in the acquis. To comply with the EU
acquis in this field, the Cypriot government worked in close co-operation with the UK
Government Actuary's Department and a study was conducted covering solvency margin
requirements, authorization requirements and the conditions under which information could
be exchanged. In early 1999, the Insurance Companies Control Service and the Insurance
Association of the Greek Cypriot Administration started to work in close co-operation for the
preparation of a draft law regulating the insurance sector (non-life insurance and life
assurance). The new Law was drafted to be in full compliance with the relevant EU
legislation.
At the initial phase of the negotiations, the Non-Life Insurance Directives were only partially
covered by the current legislation such as conditions of market access, supervision of the
5
These figures are taken from CEA Eco, European Union Enlargement 2004, Insurance in the New EU
Countries, No: 18, October 2003.
58
solvency margin, supervision of the calculation and investments of technical reserves and
supervision of insurance products offered in the market.
With respect to the minimum share capital, the legislation that was in force at the time being,
required the possession of a minimum share capital of CY £200.000 for all insurance
companies. With the new legislation, this minimum share capital was increased and a
minimum guarantee fund was introduced to achieve full compliance with the acquis.
Other discrepancies also existed. For instance, insurance undertakings were not obliged to
limit their business activities to the insurance business and there was no separation between
life and non-life business. The Cypriot legislation was not in full compliance with the EU
acquis in the valuation of both life and non-life liabilities and the special policy conditions
relating to life insurance.
The Cypriot legislation was to a large extent harmonized with the Motor Vehicles Directives
and the Directive on accounting of insurance companies. As for the supplementary
supervision of Insurance Groups, there was no legislation in the Greek Cypriot Administration
but harmonization was achieved in the form of orders.
Despite the above-mentioned discrepancies, the Greek Cypriot Administration possessed the
necessary administrative infrastructure and human resources required for the implementation
and enforcement of the acquis. The financial requirements of the acquis did not create
significant problems to existing companies because of the highly competitive and
sophisticated nature of the Greek Cypriot Administration insurance market and the country
did not face significant problems in the adoption of the acquis communautaire.
Current situation
The Cypriot insurance market shows similarities with the average European market
indications and there is a high level of competition and market penetration. However, the
small size of the market puts it in a less advantaged position in comparison with the ten new
Member States of the European Union.
GDP
Population
Exchange rate
Inflation rate
Total Premium
- Life Premium
- Non-life premium
1992
5,285
619
1.703
88.46
167
78
89
1996
7,030
652
1.700
104.03
285
149
136
1997
7,471
658
1.723
107.78
320
170
150
1998
7,993
663
1.719
110.15
351
191
160
1999
8,489
670
1.747
113.00
763
592
171
2000
8,878
675
1.743
117.63
568
382
186
2001
9,277
706
1.738
122.46
454
251
203
*GDP and pemium are in Euro million, population in thousands and axchange rate in base 100 in 1995.
b. Czech Republic
Under Chapter 3, negotiations with the Czech Republic started in July 1999, following the
submission of the position paper of the Czech Republic. The chapter was opened on 12
November 1999; it was provisionally closed on 29 March 2001 and totally concluded in
December 2002.
59
2002
9,582
715
1.742
126.00
486
260
226
Requests for derogations or transition periods
The Czech Republic, in its position paper on freedom to provide services, had clearly
indicated that it did not request any transitional arrangements and that all necessary
institutional infrastructures for implementation and enforcement would be operational at the
time of accession.
State of play during the negotiations
In the Czech Republic, the responsible authority in the fields of insurance and the accounting
of insurance companies is the Ministry of Finance. The Czech Republic had stated in its
position paper that it would be ready to implement the Community acquis concerning
insurance services by the date of accession. Within this context, a new Act on Insurance
against Liability in respect of the Use of Vehicles and a new Act on Insurance were adopted
and a "final" Act on Insurance was designed to cover all non-life insurance and life assurance
directives. A single license and home country supervision were introduced as well.
With the new Act on Insurance, the Czech Republic aimed at emphasizing the prudential and
solvency monitoring approach practiced in the EU countries and making substantial
improvement of insurance supervision. The staff of insurance supervision was gradually builtup and trained.
In 2001, the former monopoly state owned insurance company Ceska Pojistovna was
privatized.
In the field of accounting of insurance undertakings, no implementation problems were
identified. There were only partial differences and these were aligned in the drafted
amendments of the Czech accounting legislation and in special regulations of the Ministry of
Finance for accountancy on methodical procedures in accounting and instructions for
financial accounting statements for banks and insurance undertakings.
All in all, the Czech Republic did not face significant problems in adopting to the EU
legislation.
Current situation
Although it is relatively small, the Czech insurance market has promising growth rates and is
considered as second after Poland in terms of investment potential. Most insurers are
operating in the non-life arena and according to studies conducted by CEA (Comité Européen
des Assurances), the new EU solvency requirements will demand only an additional 2.8 % of
the capital of the Czech insurance companies.6
GDP
Population
Exchange rate
Inflation rate
6
1992
22,645
10,318
0.029
68.98
1996
46,056
10,314
0.029
108.80
1997
43,967
10,304
0.026
118.00
1998
52,256
10,294
0.028
130.60
1999
55,008
10,286
0.029
133.30
2000
56,612
10,272
0.029
138.50
2001
67,620
10,224
0.031
145.10
Ibid., p. 35.
60
2002
72,244
10,201
0.032
147.10
Total Premium
- Life Premium
- Non-life premium
591
150
441
1,194
322
872
1,256
332
924
1,565
425
1,140
1,824
576
1,248
2,013
649
1,364
2,510
879
1,631
2,885
1,085
1,799
*GDP and pemium are in Euro million, population in thousands and axchange rate in base 100 in 1995.
c. Estonia
In the case of Estonia, Chapter 3 was opened in August 1999; it was provisionally closed in
March 2001 and totally concluded in December 2002.
Requests for derogations or transition periods
Based upon the conclusions of the screening on freedom to provide services, Estonia was
prepared to accept the acquis on this Chapter and adopt it in full upon accession to the
European Union. There were no requests for transitional periods or derogations on insurance.
Estonia requested transitional periods only in respect of banking and investment services.
State of play during the negotiations
In the insurance sector, the Law of Obligations, which harmonised the provisions of the
insurance directives regulating insurance contracts, entered into force only in June 2002. To
complete its preparations for membership, Estonia also had to align its laws with EU
Directives on motor third party liability, life assurance and non-life insurance.
In comparison with the other new Member States of the EU, Estonia, together with Lithuania
and Latvia, was less adopted to the European insurance market and therefore, the process of
harmonization was not quite smooth.
Current situation
Today Estonia, as a new EU Member State, does not have a strong insurance market.
According to CEA estimates, Estonia might face difficulties to meet the new solvency
requirements of the European Union due to the comparatively low capital of Baltic insureres.
To raise the necessary capital, they will have to form alliances or be progressively taken over
by foreign investors.7
GDP
Population
Exchange rate
Inflation rate
Total Premium
- Life Premium
- Non-life premium
1992
842
1,500
0.064
28.00
1996
3,370
1,470
0.064
123.04
60
4
56
1997
4,051
1,460
0.063
136.80
67
8
59
1998
4,711
1,450
0.064
151.10
79
13
65
1999
4,816
1,441
0.064
156.10
86
14
72
2000
5,575
1,367
0.064
162.40
102
19
82
2001
6,172
1,361
0.064
171.70
114
23
91
*GDP and pemium are in Euro million, population in thousands and axchange rate in base 100 in 1995.
7
Ibid., p. 36.
61
2002
6,889
1,356
0.064
180.00
139
29
110
d. Hungary
The Chapter on freedom to provide services was opened in July 1999, provisionally closed in
February 2001 and closed in December 2002.
Requests for derogations or transition periods
The Hungarian request for transitional arrangements in the field of insurance was not under
Chapter 3 but under Chapter 4: Free Movement of Capital, regarding the maintenance of
certain restrictions on outward investment of insurance undertakings for a periof of five years.
In line with this request, Hungary intended to seek a “temporary exemption” from the
application of the obligation provided for in Article 17(3) of Directive 79/267/EEC, on the
taking up and pursuit of business of direct life assurance.
The European Union, on the other hand, stated in its own position that the implications of any
such request for this Chapter would need to be taken into account and the outcome considered
in the overall context of right of establishment and freedom to provide services.
However, Hungary was not able to benefit from any transitional arrangements in insurance
neither under Chapter 3 nor under Chapter 4.
State of play during the negotiations
The libaralization and the deregulation of the Hungarian insurance market had already started
in the 1990s through the removal of the barriers to market entry for foreign and domestic
companies and the alignment of the Hungarian legislation with EU law. Hungary did not face
problems in the negotiating process because the Hungarian insurance market, with its high
degree of competitiveness and stability, was regarded as the best prepared market for
enlargement.
Current situation
Its accession to the EU did not bring significant changes to the insurance sector in Hungary.
As for the implementation of the new solvency requirements of the European Union, Hungary
is not likely to face difficulties for most insurers are foreign-owned and will be able to acquire
the necessary capital via the parent company if necessary.
According to CEA studies, 90% of the market is taken by foreign companies and the former
state insurers are fully integrated into the new competitive market environment. The problem
of lower returns on life insurance policies was managed by the Hungarian supervisory
authorities through lowering the technical interest rate at the end of 2002.8
GDP
Population
Exchange rate
Inflation rate
8
1992
28,967
10,313
0.0098
53.53
1996
33,424
10,196
0.0048
123.50
1997
37,966
10,155
0.0044
146.10
1998
39,967
10,114
0.0040
166.70
1999
42,999
10,068
0.0038
183.40
2000
49,688
10,024
0.0038
201.40
2001
60,418
10,188
0.0041
219.90
Ibid., p. 36.
62
2002
72,047
10,155
0.0042
231.50
Total Premium
- Life Premium
- Non-life premium
586
121
465
686
234
452
863
283
579
969
352
617
1,124
453
671
1,449
670
779
1,707
712
995
*GDP and pemium are in Euro million, population in thousands and axchange rate in base 100 in 1995.
e. Latvia
The negotiations between Latvia and the European Union under Chapter 3, were opened in
August 2000, provisionally closed on 12 June 2001 and totally concluded in December 2002.
Requests for derogations or transition periods
Although Latvia accepted in full the EU acquis communautaire in the area of "Freedom to
Provide Services" it had requested transition periods under three headings, one of them
relating to insurance. Latvia's other requests related to deposit-guarantee schemes and
investor-compensation schemes.
Latvia requested until 1 January 2015 a transitional period for full implementation of
Directives 84/5 and 90/232 on the approximation of the laws of the Member States relating to
insurance against civil liability in respect of the use of motor vehicles. Latvia, in its position
paper, stated that the transitional period for implementation of these directives was necessary
because the increase of limits for the minimum cover would require considerable increase of
the insurance premiums. This would only be done in correlation with overall economic
development in Latvia, in particular with purchasing power. According to estimates, a
transitional period until 1 January 2015 would be required for the full implementation of the
limits for the minimum cover. However, Latvia also stated that it would be possible to
shorten this transitional period.
At the end of the negotiations, Latvia has succeeded to get transition periods under Chapter 3
but these transition periods related to deposit-guarantee schemes and investor-compensation
schemes, not to the insurance field.
State of play during the negotiations
The insurance services in Latvia are regulated by the Laws "On Insurance Companies and
Their Supervision", "On Insurance Contract", "On compulsory Third Party Liability Insurance
for Inland Motor Vehicle Owners", by the regulations of the Cabinet of Ministers as well as
by the normative acts of the Insurance Supervision Inspectorate.
In Latvia, the supervision of insurance companies was carried out by the Insurance
Supervision Inspectorate but starting from 1 July 2001, the single Finance and Capital Market
Supervision Inspectorate became responsible for the supervision of financial institutions
(banks, credit unions, insurance companies, private pension funds, broker and investment
companies)
In its position paper, Latvia had undertaken to remove technical barriers for foreign insurance
companies to establish their branches in Latvia and to implement the additional supervision of
insurers from insurance groups by amending its national legislation in accordance with
63
2,097
859
1,238
Directive 98/78. Latvia had also undertaken to make the necessary amendments in its "Law
on Insurance Companies and Their Supervision".
Current situation
According to studies conducted by CEA (Comité Européen des Assurances), Latvia held the
second place in the Baltic region with a total of 170 million Euro of life and non-life
insurance premiums in 2002. Today the EU solvency requirements are implemented in
Latvian insurance legislation and the calculations made by the Latvian National Association
show that the majority of Latvian insurers have already met new EU solvency requirements.9
GDP
Population
Exchange rate
Inflation rate
Total Premium
- Life Premium
- Non-life premium
1992
1,457
2,500
1.4500
22.99
1996
4,045
2,502
1.4297
117.61
61
13
49
1997
5,041
2,480
1.5390
127.50
103
10
92
1998
5,369
2,399
1.4948
133.50
131
12
120
1999
6,621
2,382
1.7021
136.60
161
11
150
2000
7,628
2,364
1.7543
140.20
168
7
161
2001
8,582
2,346
1.7830
143.70
174
6
168
*GDP and pemium are in Euro million, population in thousands and axchange rate in base 100 in 1995.
f. Lithuania
Negotiations with Lithuania under Chapter 3 were initiated in July 2000, the Chapter was
provisionally closed in June 2001 and totally closed in December 2002.
Requests for derogations or transition periods
For Lithuania, the object of negotiations in Chapter 3 was a transitional period for the
introduction of the system for compulsory third party liability insurance of owners and users
of motor vehicles. In the course of the negotiations, Lithuania requested for a transitional
period until 31 December 2009. However, the European Union disagreed with it and asked to
review the request. On 28 April 2001, the Government of the Republic of Lithuania adopted a
decision to withdraw the request for a transitional period.
The only transitional periods acquired by Lithuania under Chapter 3 related to bank deposit
guarantee and investor compensation.
State of play during the negotiations
In its negotiating position, Lithuania stated that its national legislation in this chapter was
mainly in compliance with the requirements of the acquis. The main tasks would be the
implementation of the system for compulsory third party liability insurance of owners and
users of motor vehicles and the adoption of the Law on Insurance Contract and Law on
Insurance Activities.
9
Ibid., p. 37.
64
2002
8,516
2,332
1.6393
147.00
169
7
162
Lithuania adopted in September 2001, Rules on Compulsory Motor Third Party Liability
Insurance of Vehicles Owners and Processors and established the Bureau of Compulsory
Motor Third Party Liability Insurance.
The Board of the State Insurance Supervisory Authority (SISA) adopted several regulations in
December 2001. The 1996 Law on Insurance was amended in February 2002 and entered into
force in June 2002, further aligning the legislation with the acquis.
During the negotiations, Lithuania was one of the most problematic countries in terms of
legislation and harmonization.
Current situation
The Lithuanian market is far from the average EU insurance market characteristics. To be
able to meet EU criteria, especially in terms of solvency requirements, Lithuanian insurers
will need to form alliances or they will be taken over by foreign investors.
GDP
Population
Exchange rate
Inflation rate
Total Premium
- Life Premium
- Non-life premium
1992
677
3,700
0.2000
1996
6,348
3,709
0.2011
124.60
73
1997
8,689
3,706
0.2266
135.70
86
14
73
1998
9,211
3,703
0.2143
142.60
85
14
71
1999
12,328
3,700
0.2890
143.70
118
21
96
2000
12,156
3,693
0.2693
145.00
111
21
90
2001
13,589
3,476
0.2834
146.90
126
26
99
*GDP and pemium are in Euro million, population in thousands and axchange rate in base 100 in 1995.
g. Malta
Under Chapter 3: Freedom to Provide Services, screening of laws started in October 1999, the
Chapter was opened in January 2001, they were provisionally closed in May 2001 and totally
concluded in December 2002.
Requests for derogations or transition periods
In the field of insurance, Malta did not have any requests for transitional periods. The only
request of Malta under Chapter 3 was a transitional period to allow for phasing out of
inheritance scheme applicable to the port workers' pool but this request was later withdrawn.
State of play during the negotiations
In Malta, the MFSC (Malta Financial Services Center) is the competent authority responsible
for regulating and supervising business of insurance and insurance intermediaries operating in
or from the country. It gives authorizations to insurers, registers and enrolls insurance
intermediaries. Applications are assessed taking into account the own funds held by the
company, solvency ratios, the status of shareholders, directors and controllers.
65
2002
13,901
3,460
0.2899
149.00
215
40
174
The MFSC also carries out off-site (analysis of annual audited financial and business
statements) and on-site (the inspection of books, records, accounts and other related
documents) monitoring of authorized and enrolled companies.
In case of problems involving authorized and enrolled persons, the MFSC has the powers to
take remedial action. It may impede the company from carrying out new business of insurance
as well as suspend or revoke an authorization or enrollment. In carrying out its functions, the
MFSC co-operates regularly with other local and foreign regulators.
In Malta, the Insurance Business Act and the Insurance Brokers and Other Intermediaries Act
regulate the business of insurance and insurance intermediaries operating in or from the
country. These Acts and the respective subsidiary legislation were broadly in line with the EU
acquis during the negotiations.
The Insurance Business Regulations relating to companies assets and liabilities and the
Insurance Business Regulations relating to long-term contracts transposed the provisions of
Directive 73/239/EEC, as well as its amendments relating to solvency margins, guarantee
fund and minimum guarantee fund, valuation of assets, determination of liabilities, etc. The
Insurance Business Regulations relating to the accounts of companies transposed the
provisions of Directive 91/674/EEC (annual accounts and consolidated accounts of insurance
undertakings), while the Insurance Business Regulations relating to long-term business
contract statutory notice transposed the life insurance directives.
The Maltese Motor Vehicles Insurance Ordinance and the Insurance Business Security Fund
Regulations were broadly in line with the Motor Insurance Directives and subsidiary
legislation was also adopted upon accession.
All in all, the negotiations were concluded without significant problems.
Current situation
The Maltese insurance market shows similarities with the Cypriot insurance market in the
sense that both are very close to the average European insurance market indications.
However, the small size of both markets put them in a less significant position compared to
the other enlargement countries.
GDP
Population
Exchange rate
Inflation rate
Total Premium
- Life Premium
- Non-life premium
1992
1996
1997
1998
1999
2000
2001
2002
370
2.2244
88.46
55
12
42
374
2.2198
104.03
94
26
68
377
2.3109
107.78
115
37
77
379
2.2645
110.15
112
36
75
380
2.5176
113.00
146
59
87
383
2.4564
115.00
175
83
92
384
2.5025
117.88
186
89
97
385
2.3887
120.00
185
85
100
*GDP and pemium are in Euro million, population in thousands and axchange rate in base 100 in 1995.
h. Poland
66
In the case of Poland, Chapter 3 was opened in July 1999, it was provisionally closed in
November 2000 and totally concluded in December 2002.
Requests for derogations or transition periods
The only transitional periods acquired by Poland in this Chapter related to co-operative credit
institutions and investor-compensation schemes.
State of play during the negotiations
In its position paper under Chapter 3, Poland stated that the provisions of the Polish insurance
legislation did not include restrictions related to a requirement of Polish nationality, residence
requirement and obligatory membership of professional organizations.
Poland had transposed into its national legislation a group of Directives relating to life
assurance and non-life insurance and undertook to implement legislation relating to
international agreements upon accession.
In accordance with EC Directives on insurance agents and brokers (Directive 77/92/EEC),
Poland undertook to establish a central register of insurance brokers and to introduce
appropriate regulations to that effect. In its position paper, Poland had also undertaken to
introduce regulations concerning insurance groups with the new Insurance Supervision Act.
At the time being, there existed no regulations in Polish law which would provide for direct
cross-border provision of insurance services. In its position, Poland stated that it would only
be possible to introduce the uniform insurer’s licensing system, full freedom to provide
services across borders and all connected regulations when Poland gained full membership to
the European Union.
In the EU, it is required that the compulsory liability insurance in respect of the use of motor
vehicles covers the whole territory of the European Union and is subject to no border controls
each time. The Polish Insurance legislation did not include such regulations either. The new
Polish Act on Compulsory Insurance was designed to include these provisions.
Current situation
Poland was the leading country in the Eastern enlargement wave of the European Union in
terms of territory, population and GDP. The country represents about 50% of the overall
insurance market of the 10 new members of the European Union. According to studies
conducted by CEA, there exists the risk that new EU solvency rules can create problems for
national insurers in Poland and the entire market needs an additional 1.5% of its current
equity capital to meet the new EU solvency requirements.10
Like in the rest of the new Member States, the non-life sector is the leading insurance
business in Poland but the promising potentials in the life insurance sector create
opportunities for foreign companies. Development in life insurance depends largely on
progress in increase average income in the country and overcoming economic stagnation.
10
Ibid., p. 38.
67
GDP
Population
Exchange rate
Inflation rate
Total Premium
- Life Premium
- Non-life premium
1992
60,399
38,360
0.5255
43.23
1,100
286
814
1996
109,246
38,636
0.2805
119.90
2,277
776
1,501
1997
123,312
38,650
0.2581
137.70
3,141
1,051
2,090
1998
135,372
38,663
0.2445
153.70
3,812
1,315
2,497
1999
158,539
38,654
0.2577
164.90
4,849
1,792
3,057
2000
177,968
38,646
0.2598
181.60
5,414
2,165
3,248
2001
204,988
38,641
0.2841
191.50
6,358
2,631
3,728
*GDP and pemium are in Euro million, population in thousands and axchange rate in base 100 in 1995.
i. Slovak Republic
In the case of the Slovak Republic, Chapter 3 was opened in July 2000, it was provisionally
closed in May 2001 and totally concluded in December 2002.
Requests for derogations or transition periods
In the field of insurance, the Slovak Republic did not make any requests for a transitional
period.
State of play during the negotiations
In its negotiating position, the Slovak Republic had stated that as far as fundamental
requirements were concerned (such as the taking up and pursuit of business of insurance
companies, the minimum equity of an insurance company, the obligations of insurance
companies and the powers of the supervisory body), there was full alignment with the acquis.
The Slovak Act no. 101 of 2000 amending Act No. 24 of 1991 on Insurance was designed to
be in compliance with Directives 73/239/EEC and 79/267/EEC. The amendment allowed the
branches of foreign insurance companies to pursue businesses of insurance, to insure risks not
covered by domestic insurers. The amendment also introduced the mandatory specialization
into life and non-life insurance and the classification of insurance type in accordance with
areas of insurance. The powers of the supervisory body were enhanced in the licensing
process and the body was also entitled to approve persons appointed to the statutory bodies of
insurance companies, the acquisition of shares of an insurance company, if such shares have
voting rights exceeding 10% of the sum of the nominal values of all the shares of the
insurance company.
When the Slovak Republic's position paper was submitted for Chapter 3, there were areas
where full harmonization was lacking, like insurance accounts, requirements for insurance
brokers and insurance supervision. The Slovak Republic had requested technical assistance
from the European Commission due to its lack of expertise in these areas, especially in
insurance supervision.
In the field of motor vehicle insurance, the Slovak Insurance Company had a monopolistic
position with regard to two types of statutory insurance- insurance against civil liability in
respect of the use of motor vehicles (third party liability insurance) and insurance against
68
2002
220,307
38,609
0.2950
195.20
6,790
2,883
3,907
liability in respect of accidents at work or occupational disease. The EU Directives were
gradually transposed into national law.
During the accession process, the Ministry of Finance was in charge of the implementation of
the acquis relating to the insurance sector in the Slovak Republic. A special supervisory body
for the financial markets (the Financial Market Office) was also established to work in close
co-operation with the Ministry of Finance.
Current situation
According to CEA, Slovakia is in fourth position after Slovenia, Poland and the Czech
Republic in the new Eastern European members of the EU in terms of real growth rates and
long-term trends in the life insurance sector. With accession to the European Union, it is
expected that competition on the Slovenian market will become more effective, while an
increase in the proportion of market share taken by foreign companies seems likely.11
GDP
Population
Exchange rate
Inflation rate
Total Premium
- Life Premium
- Non-life premium
1992
9,104
5,269
0.0274
65.09
172
47
125
1996
15,214
5,368
0.0251
105.77
346
89
257
1997
17,881
5,379
0.0261
112.20
442
123
319
1998
18,361
5,388
0.0237
119.70
504
154
351
1999
19,461
5,396
0.0233
132.40
551
198
353
2000
20,659
5,401
0.0227
148.40
621
258
363
2001
23,085
5,379
0.0233
159.20
743
324
420
*GDP and pemium are in Euro million, population in thousands and axchange rate in base 100 in 1995.
j. Slovenia
In the case of Slovenia, Chapter 3: Freedom to Provide Services was opened in July 1999, it
was provisionally closed in November 2000 and closed in December 2002.
Requests for derogations or transition periods
In its negotiating position on Chapter 3, Slovenia clearly stated that its legislation on
insurance only partly conformed to the acquis. Although requesting transitional periods in the
fields of banking and securities market, Slovenia did not have any such requests in the field of
insurance.
State of play during the negotiations
In the Republic of Slovenia, the insurance sector is regulated by the Insurance Companies Act
and the Act on Obligatory Insurance against Civil Liability in Traffic.
In its position paper, Slovenia stated that its legislation on insurance did not contain
provisions of Directives 92/49/EEC and 92/96/EEC establishing internal market for insurance
services. Inconsistencies also existed with regard to Directives 64/225/EEC, 73/239/EEC and
79/267/EEC, such as: property, property interests and persons in the Rapublic of Slovenia
11
Ibid., p. 39.
69
2002
25,788
5,378
0.0240
164.20
872
377
495
could only be insured with insurance undertakings with their head office in the Republic of
Slovenia; the supervisory authority was allowed to refuse to grant an authorization if the
director of an insurance undertaking was not a Slovenian national; an insurance public limited
company holding a majority or controlling foreign equity share was not allowed to perform
reinsurance operations; members of the mutual insurance company could only be Slovenian
nationals and insurance undertakings could only invest in the Republic of Slovenia.
In harmonization with the EU, an Insurance Act taking into account of the acquis was adopted
and implemented progressively. However, Slovenia undertook to implement certain
provisions regulating single license, home country control and cross-border provision of
services only upon actual accession to the European Union.
The new Act not only set out detailed rules for safe and prudent management and supervision
of insurance and reinsurance undertakings, agents and brokers and insurance agencies and
brokerage companies but also abolished the discriminatory treatment against foreign natural
and legal persons with regard to establishment of subsidiaries of insurance and reinsurance
undertakings and with regard to the acquisition of holdings. The Act also abolished the
possibility of a refusal to grant an authorization if the director of an insurance undertaking is
not a Slovenian national and enabled the insurance undertakings with a head office in the
Republic of Slovenia to also invest in Member States of the European Union and OECD
countries.
The Act on Obligatory Insurance against Civil Liability in Traffic almost fully complied with
the acquis, except for the part relating to minimum amounts for personal injuries.
In its position paper, Slovenia stated that it would fully align its legislation on insurance with
the acquis by the date of accession to the European Union and that it would strengthen the
professional capacity of its institutions (the Ministry of Finance, the Insurance Supervisory
Authority within the Ministry of Finance and the Slovenian Insurance Association) and ensure
their more efficient operations.
Current situation
According to studies conducted by CEA (Comité Européen des Assurances), the EU solvency
laws are not likely to cause problems to the Slovenian insurance companies. The Slovenian
non-life insurance market has a high penetration level of 4 %, where in the life sector the
country has the lowest market penetration of all the new EU Member States.
GDP
Population
Exchange rate
Inflation rate
Total Premium
- Life Premium
- Non-life premium
1992
6,786
1,990
0.0067
59.71
219
16
203
1996
14,434
1,993
0.0056
109.90
688
114
574
1997
15,714
1,973
0.0054
119.10
700
124
577
1998
17,233
1,969
0.0053
128.50
816
139
676
1999
17,192
1,966
0.0047
136.40
808
146
662
2000
18,893
1,990
0.0047
148.50
903
175
728
2001
20,868
1,994
0.0046
161.00
1,051
225
827
*GDP and pemium are in Euro million, population in thousands and axchange rate in base 100 in 1995.
70
2002
24,579
1,996
0.0047
173.00
1,242
282
960
71
BIBLIOGRAPHY
BOOKS:
Comité Européen des Assurances (CEA), European Insurance in Figures, June 2004.
Comité Européen des Assurances (CEA), European Union Enlargement 2004: Insurance
in the New EU Countries: 1992-2002 Data and CEA Comments, CEA ECO, No: 18,
October 2003.
Economic Development Foundation (IKV), Avrupa Birliği ile Katılım Müzakereleri
Rehberi, İKV Yayınları No: 184, Istanbul: 2005.
Paul Craig ve Gráinne de Búrca, EU Law: Text, Cases and Materials, Oxford: 1998.
WEBSITES:
Secretariat Affairs for the EU Affairs
http://www.abgs.gov.tr
Delegation of the European Commission to Turkey
http://www.deltur.cec.eu.int
Ministry of Foreign Affairs
http://www.mfa.gov.tr
EU Acquis List (2003 National Program Priorities)
http://www.abgs.gov.tr/UVT/UPoncelik.htm
European Commission DG Internal Market (Freedom to Provide Services and
Insurance) Website
http://www.europa.eu.int/comm/internal_market/insurance/index_en.htm
European Commission DG Enlargement
http://www.europa.eu.int/comm/enlargement
Negotiating Position of the Czech Republic in Insırance
http://www.euroskop.cz/eng
Negotiating Position of Estonia in Insırance
http://www.vm.ee/eng/euro/aken_prindi/3454.html
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Negotiating Position of the Greek Cypriot Administration in Insırance
http://www.eucoordinator.gov.cy/Harmonization/Harmonization.nsf/0/00AD857B46C1AFD9C2256E4B00
24FBCD/$file/common%20position%203%20freedom%20to%20provide%20services.doc
Negotiating Position of Latvia in Insırance
http://www.am.gov.lv/en/eu/4358/4359/4362/?print=on
Negotiating Position of Lithuania in Insırance
http://www.euro.lt/showitems.php?TopMenuID=41&MenuItemID=53&ItemID=478&LangI
D=2
Negotiating Position of Hungary in Insırance
http://www.kum.hu/euint/index_access.html
Negotiating Position of Malta in Insırance
http://www.mic.org.mt/Malta-EU/position_papers/chap_03.htm
Negotiating Position of Poland in Insırance
http://www.negocjacje.gov.pl/neg/stne/pdf/stne3en.pdf
Negotiating Position of the Slovak Republic in Insırance
http://www.foreign.gov.sk/En/files/add.php3?text=Slovakia%20and%20EU&file=eu_poz3e.h
tml
Negotiating Position of Slovenia in Insırance
http://www.uvi.si/eng/slovenia/publications/facts/eu-negotiations/
73