20.3.2002 Official Journal of the European Communities L77/17 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 THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION, Having regard to the Treaty establishing the European Community, and in particular Article 47(2) and Article 55 thereof, Having regard to the proposal from the Commission ('), Having regard to the opinion of the Economic and Social Committee (%), Acting in accordance with the procedure laid down in Article 251 of the Treaty (%), Whereas: (1)  The financial services action plan, as endorsed by the European Council meetings in Cologne on 3 and 4 June 1999 and in Lisbon on 23 and 24 March 2000, recog- nises the importance of the solvency margin for insur- ance undertakings to protect policyholders in the single market by ensuring that insurance undertakings have adequate capital requirements in relation to the nature of their risks. (2)  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 (%) requires insurance undertakings to have solvency margins. (3)  The requirement that insurance undertakings establish, over and above the technical provisions to meet their underwriting liabilities, a solvency margin to act as a buffer against adverse business fluctuations is an impor- tant element in the system of prudential supervision for the protection of insured persons and policyholders. (4)  The existing solvency margin rules as established by Directive ~ 73/239/EEC  have been substantially unchanged by subsequent Community legislation and 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 (third non-life insurance Directive) (°) required the Commission to submit a report to the Insurance Committee set up by Council Directive 91/675/EEC (%), () O] C 96 E, 27.3.2001, p. 129. () O] C 193, 10.7.2001, p. 16. (*) Opinion of the European Parliament of 4 July 2001 (not yet published in the Official Journal) and Decision of the Council of 14 February 2002. () O] L 228, 16.8.1973, p. 3. Directive as last amended by Directive 2000/26/EC of the European Parliament and of the Council (O] L 181, 20.7.2000, p. 65). () O] L 228, 11.8.1992, p. 1. Directive as last amended by Directive 2000/64/EC of European Parliament and of the Council (O] L 290, 17.11.2000, p. 27). () O] L 374, 31.12.1991, p. 32. (10) (11) on the need for further harmonisation of the solvency margin. The Commission has prepared that report in the light of the recommendations of the report on the solvency of insurance undertakings prepared by the Conference of the Insurance Supervisory Authorities of the Member States of the European Union. While the report concluded that the simple, robust nature of the current system has operated satisfactorily and is based on sound principles benefiting from wide transparency, certain weaknesses have been identified in specific cases, particularly for sensitive risk profiles. There is a need to simplify and increase the existing minimum guarantee funds, in particular as a result of inflation in claim levels and operational expenses since their original adoption. The thresholds above which the lower percentage rate applies for the determination of the solvency margin requirement on the premiums and claims basis should also be increased accordingly. To avoid major and sharp increases in the amount of the minimum guarantee funds and the thresholds in the future, a mechanism should be established providing for their increase in line with the European index of consumer prices. In specific situations where policyholders' rights are threatened, there is a need for the competent authorities to be empowered to intervene at a sufficiently early stage, but in the exercise of those powers, competent authorities should inform the insurance undertakings of the reasons motivating such supervisory action, in accordance with the principles of sound administration and due process. As long as such a situation exists, the competent authorities should be prevented from certi- fying that the insurance undertaking has a sufficient solvency margin. In the light of market developments in the nature of reinsurance cover purchased by primary insurers, there is a need for the competent authorities to be empowered to decrease the reduction to the solvency margin requirement in certain circumstances. Where an insurer substantially reduces or ceases the writing of new business, there is a need to establish an adequate solvency margin in respect of the residual liabilities for existing business as reflected by the level of technical provisions.