Amended proposal for a European Parliament and Council Directive on the supplementary supervision of insurance undertakings in an insurance group
COMMISSION OF THE EUROPEAN COMMUNITIES Brussels, 28. 01. 1998 COM(1998) 38 final 95/ 0245 (COD) Amended proposal for a EUROPEAN PARLIAMENT AND COUNCIL DIRECTIVE ON THE SUPPLEMENTARY SUPERVISION OF INSURANCE UNDERTAKINGS IN AN INSURANCE GROUP (presented by the Commission pursuant to Article 189 a (2) of the EC-Treaty) EXPLANATORY MEMORANDUM INTRODUCTION 1. On 4 October 1995 the Commission adopted a Proposal for a Directive on the supplementary supervision of insurance undertakings in an insurance group1. The proposal was submitted to Parliament and Council by letter on 20 October 1995. 2. At its 334th plenary session on 27 March 1996, the Economic and Social Committee adopted a favourable opinion2 on the Proposal for a Directive and suggested certain amendments. 3. The Parliament adopted a legislative resolution embodying its opinion3 on the Commission's Proposal for a Directive at its plenary session on 23 October 1997. The Parliament's opinion includes 24 amendments. A large number of these amendments, which will contribute to clarify and improve the Proposal, were accepted by the Commission, some totally, others in part, either in accordance with their spirit or with some adaptation of their text. 4. The amended proposal has been drafted to take account of the opinions of both institutions. COMMKNTS ON THE AMENDMENTS INTRODUCED INTO THE PROPOSAL 5. Article 1 (b) [new] A definition of 'third country insurance undertaking' has been introduced in the text in order to be able to incorporate Parliament's Amendment N° 7, relating to the definition of'mixed activity insurance holding company'. This amendment refers to third country insurance undertakings, a term which was not defined in the initial Proposal, although it was implicitly referred to in Article 9(2). The definition will also contribute to a clearer understanding of Annex I. 6. Article 1 (d) and (e) [formerly, Article 1(c) and (d)] A reference to the whole of Article 1 of Directive 83/349/RKC4 (the initial Proposal only referred to paragraph 1) has been introduced in the definitions of 'parent undertaking' and 'subsidiary' to take partial account of Parliaments' Amendment Nos 1 and 2. This change will permit the inclusion in the definition of cases of in Article 1(2) of Directive effective dominant 83/349/EEC. However, since the application of Article 1(2) depends on Member States' discretion, the last sentence of the definitions contained in the initial influence as provided for 1 OJN°C341, Î9. 12. 1995, p. 16. 2 OJN°C 174, 17. 06. 1996, p. 16. 3 A4-0295/97. Minutes of the plenary session of 23. 10. 1997 (PE 262. 699). 4 Seventh Company Law Directive: OJ N° 1-193, 18. 07. 1983, p. 1. 1 Proposal has been maintained in order to permit the competent authorities to assess where a dominant is exercised. This assessment by the competent authorities is considered necessary so that they can properly perform their prudential duties. influence 7. Article I (0 |formerly. Article l(e)| lo Article 17, lirsl sentence, of Directive 7X/660/f l',Cs has been A reference introduced into the definition of a "participation" in order to take partial account of Amendment N" 3 adopted by the Parliament. In this way the qualitative criterion of ""durable link" provided for in this Article is rellected in the definition. Nevertheless, the automatic criterion of the 20% threshold has been kept in the text. Legal certainty is required on such an important element to determine the scope of application of the Directive. 8. Article 1 (j) [formerly, Article l(i)] In accordance with Amendment N° 7 as proposed by Parliament, the definition of 'mixed activity insurance holding company' has been clarified by specifically excluding from its scope "third country insurance undertakings' and "reinsurance undertakings". 9. Article 6 As suggested by the Parliament (Amendment N" 10) changes have been introduced I of this Article in order to ensure that direct access to the into paragraph information concerning an undertaking of the group is only granted when such information to supplementary supervision. Minor drafting changes have also been made in this paragraph to avoid unnecessary repetition. insurance undertaking subject is not communicated by the A reference to paragraph 1 has been introduced into paragraph 3 of this Article to correct an omission in the initial Proposal. 10. Article 9(1) The text has been improved to take account of Parliament's Amendment N° 11. 11. Article II In paragraph 1 of this Article, the date of implementation of the Directive has been revised to lake account of the expected timetable. A new paragraph 2 has been introduced in order lo specify the lirsl financial year for which the supplementary supervision provided for in the Directive should apply. As requested by Parliament (Amendment N° 12) a new paragraph 6 has been included whereby the Commission shall submit a report to the Insurance Committee on the implementation of the Directive and, where appropriate, on any need for 5 Fourth Company Law Directive: OJ N° L 222, 14. 08. 1978, p. 11. 2 further harmonization in this area. The deadline for the preparation of this report is live years. After consultation with the national experts, this deadline has been considered more appropriate in order properly to assess the functioning of the supervisory mechanism provided for in the Directive. 12. Annex I, section l. A References lo the First Insurance Directives have been introduced in order to take account of Amendment N° 13 by Parliament. References to the Third Insurance Directives, also requested by Parliament, have not been included since, in accordance with the usual rules for drafting legal instruments in the Community, a reference to the original Directive is sufficient where a reference to the amending Directive is already contained in the recital or in other parts of the text. 13. Annex I, section l. C [formerly, second part of section l. B] Changes to this section have been made in order to take partial account of Amendment N° 14 by Parliament, and have been incorporated in a separate section, under "C". Elements that were totally excluded from the calculation in accordance with the initial Proposal are now accepted with no restriction where they concern the participating insurance undertaking at the level of which the calculation of the adjusted solvency situation is being performed. They are also accepted, where they concern related insurance undertakings, insofar as they are eligible to cover the solvency margin requirement of that related undertaking. In addition, the admissibility of these elements must be consistent with the elimination of double gearing of capital: a sentence making reference to section B has therefore been introduced at the beginning of the new section C. Other elements whose inclusion was requested by the Parliament have not been mentioned in this section, since either they are already included in the general references contained in section LA of Annex I, or they are not admissible under the insurance directives for the cover of the solvency margin requirement. 14. Annex I, section l. D [formerly, section l. C] The wording of this section has been modified as requested by Parliament (Amendment N° 15). The definition of the 'proportional share' (a footnote in the initial Proposal) has been inserted in the main text. In order to clarify the initial Proposal, explicit references have been made to the different calculation methods laid down in Annex I. 15. Annex I, section l. K [formerly, section l. D| A reference to the Insurance Accounts Directive (Directive 91/674/EEC6) has been introduced in order to take into account Amendment N° 16 as requested by Parliament. OJN°L 374, 31. 12. 91, p. 7. 16. Annex I, section 2. 1 The wording of the last paragraph of this section has been modified as also requested by Parliament (Amendment N° 17). The waiver provided for in the initial Proposal where participations are held within one Member State has been extended to the case where the participating undertaking of the insurance undertaking is located in another Member Stale. However, the use of the waiver in cross-border situations has been made subject to the condition that the competent authorities concerned have reached an agreement, in order to ensure that supervision is effective. Drafting changes have also been made with a view to facilitating the understanding of this section. 17. Annex 1, section 2. 3 As requested by Parliament (Amendment Nos 18 and 19), funds of an insurance holding company arising from outside the group have been recognised. In order to avoid that any kind of debt held by an insurance holding company is automatically considered as equivalent to own funds, it has been provided that the debt has to fulfil the same conditions as in the First Insurance Directives (as amended by the Third Insurance Directives) concerning subordinated loan capital, cumulative preferential shares, other securities with no specified maturity date and other instruments. 18. Annex I, section 3 Following Amendment N° 27 requested by Parliament, the exact treatment of related third country insurance undertakings, which was implicit in Annex I of the initial Proposal, has been specified. In principle, the EU solvency margin rules, which apply to the participating insurance undertaking, should also be used in relation to related insurance undertakings in order to assess the adjusted solvency situation of that participating undertaking. However, where a related insurance undertaking is situated in a third country in which a solvency margin requirement comparable to that of the HU is enforced, that requirement may be recognised in performing the calculation. 19. Annex I, section 4 This section has been deleted in accordance with Amendment N° 21 of Parliament. 20. Annex II, sections 2. 1 and 2. 2 Changes have been made to these sections in order to take into account Amendment Nos 23 and 24 as requested by Parliament. The same comments as for section 2. 3 of Annex I (paragraph 17 of this Explanatory Memorandum) apply. Amended Proposal for a European Parliament and Council Directive on the supplementary supervision of insurance undertakings in an insurance group INITIAL PROPOSAL AMUNDttl) PROPOSAL THE EUROPEAN PARLIAMENT AND THE THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION, COUNCIL OF THE EUROPEAN UNION, in and regard particular Having regard to the Treaty establishing the UNCHANGED European Community, Article 57 (2) thereof, Having Commission, Having regard to the opinion of the Economic and Social Committee, Acting in accordance with the procedure referred to in Article 1 89b of the Treaty, the proposal from the to UNCHANGED and 1973 on the coordination of Whereas Council Directive 73/239/EEC of 24 July laws, provisions regulations administrative to the taking-up and pursuit of the relating business of direct life insurance other assurance(1), as last amended by European Parliament and Council Directive 95/26/EC(2) and 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 a s s u r a n c e, as last amended by Directive 95/26/EC to possess a solvency margin; insurance undertakings require than of and and laws, assurance regulations regulations Whereas, as a result of Council Directive UNCHANGED 92/49/EEC of IK June 1992 (in the coordination of administrative provisions relating to direct insurance other than amending Directives life 73/239/EEC and 88/357/EEC (third non-life assurance Directive)'4', and Council Directive the 92/96/EEC of 10 November 1992 on coordination and laws, administrative provisions relating to direct life assurance and amending Directives 79/267/EEC and assurance Directive)(D), the taking-up and the pursuit of the business of insurance is subject to the granting of a single authorization issued by the competent authorities of the Member State in which an its head office; insurance undertaking has an allows such whereas undertaking to carry on business throughout the Community, under the right of establishment or the freedom to provide services; whereas the competent authorities of home Member States financial are responsible for monitoring authorization 90/619/EEC (third life the INITIAL PROPOSAL health of insurance undertakings, including their state of solvency; AMKNDKI) PROPOSAL UNCHANGED UNCHANGED involving insurance undertakings supplementary Whereas measures supervision on in a group should enable the authorities supervising a parent insurance undertaking to make a more soundly based judgement about the financial situation of that insurance undertaking; whereas into supplementary account certain undertakings which are presently not subject to supervision under Community directives; whereas this Directive does not in any way imply thai Member Stales are required to play a supervisory role in relation to those undertakings standing alone; supervision should take therefore requirements must insurance undertakings Whereas in a single insurance market engage in direct competition with each other and the standards pertaining to capital be equivalent; whereas, to that end, the criteria for determining supplementary supervision must not be left solely to Member States; whereas the adoption of common basic standards will be in the best interests of the Community in that it will prevent Distortions of competition and will insurance system; strengthen whereas to eliminate certain differences between the laws of the Member States as regards the prudential rules to which insurance undertakings that arc part of a group are subject; the Community it is necessary Whereas it is necessary to calculate an adjusted solvency situation for insurance undertakings in a group; whereas different methods are applied by some authorities in the Community to take into account the effects on the financial position of an insurance undertaking in a group; whereas the principle is accepted that these methods are prudentially equivalent; UNCHANGED the approach adopted consists as about Whereas in is bringing essential, necessary and sufficient to achieve the mutual recognition of prudential control systems in this field; such harmonization UNCHANGED Whereas certain provisions of this Directive define minimum standards; whereas a home Member State may lay down stricter rules for insurance undertakings authorized by its own competent authorities; UNCHANGED AMENDED PROPOSAL UNCHANGED UNCHANGED INITIAL PROPOSAL WTiereas this Directive is concerned solely with cases where one insurance undertaking is owned wholly or insurance in part by another undertaking or holding company; whereas the supervision of individual insurance undertakings by an remains essential principle of insurance supervision; the competent authorities from the means Whereas the competent authorities must at least have all of obtaining undertakings within a group (he information necessary for the performance of their function; the authorities whereas cooperation between responsible for insurance undertakings as well as between the authorities responsible the supervision of different financial sectors must be established; the supervision of for intra-group UNCHANGED of types certain insurance transactions undertaking; whereas WTiereas transactions can affect the financial position of the an competent authorities should determine whether intra-group in principle according to normal market conditions; whereas the application of this general principle does not transactions concluded on other terms should be prohibited under all circumstances; whereas it is therefore desirable that the competent authorities monitor such transactions; intra-group concluded imply that are throughout Whereas this Directive will, in particular, ensure UNCHANGED the homogeneous application the Community of prudential rules established by other Community legislation and facilitate the taking-up and pursuit of the business of insurance; whereas application of this Directive must be aimed at, in particular, protecting the interests of insurance undertakings; the policyholders of this Directive UNCHANGED the application of Whereas requires complicated adaptations to be made to the laws of certain Member States in the fields law and of prudential supervision, company taxation, and that these adaptations therefore justify that these Member States may apply the definition another undertaking at the level of 25 % of the capital or the voting rights until 1 July 2001 at the latest, participation of in a INITIAL PROPOSAL AMENDED PROPOSAL HAVE ADOPTED THIS DIRECTIVE: HAVE ADOPTED THIS DIRECTIVE: Article 1 Definitions Article 1 Definitions For the purpose of this Directive: UNCHANGED undertaking' means 'insurance (a) undertaking which official authorization in accordance with Article 6 of Directive 73/239/EEC or Article 6 of Directive 79/267/EEC; received has an UNCHANGED (b) 'third country insurance underlaking, means an undertaking which if IT had its registered office require iiT~lhc Comnuiniy would authorization in accordance with Article 6 of Directive or Article 6 of Directive 79/z67/EEC; 'reinsurance undertaking' means an (c) undertaking which only accepts risks ceded by an insurance undertaking or other reinsurance undertakings established in the Community or in a third country; 'parent (d) a parent undertaking means undertaking within the meaning of Article 1 [. ] of Council Directive 83/349/EEC(6) and any the in undertaking which, competent authorities, effectively exercises a dominant influence over another undertaking; the opinion of 'reinsurance undertaking' means an (b) undertaking which only accepts risks ceded by an insurance undertaking or other reinsurance undertakings established in the Community or in a third country; 'parent undertaking' means (c) a parent undertaking within the meaning of Article 1 (1) of Council Directive 83/349/EEC(6) and any the in undertaking which, competent authorities, effectively exercises a dominant influence over another undertaking; the opinion of (d) 'subsidiary' means a subsidiary undertaking within the meaning of Article 1(1) of Directive 83/349/EEC and any undertaking over which, in the competent authorities, a the opinion of exercises a parent undertaking dominant of subsidiary undertakings shall also be considered subsidiaries of the undertaking that is their original parent; influence. All subsidiaries effectively (e) 'subsidiary' means a subsidiary undertaking within the meaning of Article 1 [. "] of Directive 83/349/EEC and any undertaking over which, in the competent authorities, a the opinion of a parent undertaking dominant of subsidiary undertakings shall also be considered subsidiaries of the undertaking their original parent; influence. All subsidiaries effectively exercises that is (e) 'participation' means the ownership, direct or indirect, of 20 % or more of the voting rights or capital of an undertaking; (f) 'participation' means participation within the meaning of Article 17, sentence oT Directive 78/660/EEO/; or the ownershipTlïïrëct or indirect, of 20% or more of the voting rights or capital of an undertaking; first 'participating (f) an undertaking which is cither a parent undertaking or an undertaking which holds a participation; undertaking' means 'participating (g) an undertaking which is either a parent undertaking or an undertaking which holds a participation; undertaking' means INITIAL PROPOSAL 'related undertaking' means (g) a subsidiary or any other undertaking in which a subsidiary or any other undertaking in which a participation is held; 'related undertaking' means participation is held either either (h) a AMENDED PROPOSAL subsidiary undertakings of which are 'insurance holding company' means an (h) 'insurance holding company' means an undertaking other than an insurance undertaking, undertaking other than an insurance undertaking, the are exclusively or mainly insurance or reinsurance exclusively or mainly insurance or reinsurance undertakings, one at least of such subsidiaries undertakings, one at least of such subsidiaries being an insurance undertaking; subsidiary undertakings of which being an insurance undertaking; the (j) (i) 'mixed activity insurance holding company' than an means a parent undertaking, other insurance holding company or an insurance undertaking, the subsidiaries of which include at least one insurance undertaking; Q} 'mixed activity insurance holding company' than an means a parent undertaking, other insurance undertaking, a third country insurance undertaking, a reinsurance undertaking or an insurance holding company, the subsidiaries of insurance which undertaking; include least one at (j) 'competent authorities' means the national (k) 'competent authorities' means the national authorities which are empowered by law or authorities which are empowered by law or regulation to supervise insurance undertakings. regulation to supervise insurance undertakings Article 2 >e Article 2 Scope to the provisions of Article 3, this UNCHANGED Subject Directive shall apply to insurance undertakings which have the Community. registered offices their in Article 3 Supplementary supervision of insurance undertakings in a group Article 3 Supplementary supervision of insurance undertakings in a group UNCHANGED of for the 1. In addition to the provisions of Directives 73/239/EEC and 79/267/EEC laying down the rules insurance supervision undertakings, Member States shall provide that the supervision of any insurance undertaking which is a participating undertaking of at least one reinsurance undertaking undertaking shall be supplemented to the extent and in the manner prescribed in Articles 5, 6, 8 and 9. insurance or the parent insurance undertaking 2. Every undertaking of which is an insurance holding company which has its registered office in the Community shall be subject, to the extent and in the manner prescribed in Articles 5 (2), 6, 8 and 10, to supplementary supervision. UNCHANGED INITIAL PROPOSAL insurance undertaking livery 3. undertaking of which insurance holding company which has registered office subject, prescribed supplementary supervision. the parent is a mixed activity its in the Community shall be the manner in to in Articles 5 (2), 6 and 8, the extenl and to AMENDED PROPOSAL l INCHANGE! 4. The exercise of supplementary supervision in accordance with this Article shall not in any way imply that the competent authorities are required to play a supervisory role in relation to the insurance holding company or mixed activity insurance holding company or reinsurance undertaking standing alone. UNCHANGED for exercising 5. Member States or the competent authorities responsible supplementary supervision may decide that in the cases listed below an insurance undertaking or other undertaking which is a subsidiary or in which a participation is held need not be included in the supplementary supervision: JNCHANGED - if the undertaking thai should be included is situated in a third country where there are legal impediments to the transfer of the necessary information; - if, in the opinion of the competent authorities, the undertaking that should be included is of negligible the objective of monitoring insurance undertakings; or interest only with respect to - if, in the opinion of the competent authorities, the inclusion of the financial situation of the undertaking in the calculation of the adjusted solvency situation would be inappropriate or misleading as the supplementary insurance undertakings are concerned. the objectives of of supervision far as Article 4 Competent authorities for exercising supplementary supervision Article 4 Competent authorities for exercising supplementary supervision 1. The supervision referred to in Article 3 shall be exercised by the competent authorities of the Member State insurance that authorized undertaking under Article 6 of Directive 73/239/EEC of Directive 79/267/EEC. or Article the 6 UNCHANGED 2. Where Member States have more than one UNCHANGED 10 INITIAL PROPOSAI, competent prudential the authority insurance undertakings and supervision of reinsurance undertakings. Member States shall take to organize coordination between such authorities. requisite measures the for AMKNDKI) PROPOSAL Article 5 Availability and quality of information Availability and quality of information Article 5 the UNCHANGED that 1. Member States shall prescribe competent authorities shall require that, in any insurance undertaking, which is a participating undertaking or related undertaking of one or more insurance undertakings, insurance holding companies or reinsurance undertakings, there are adequate internal control mechanisms for the production of any data and information which would be the purposes of supervision in accordance with this Directive. relevant for UNCHANGED 2. Member States shall take the necessary steps to ensure that there are no legal impediments preventing the undertakings that are subject to the supervision referred to in Article 3, and their participating related undertakings, amongst themselves any information which would be relevant for the purposes of supervision in accordance with this Directive. and exchanging undertakings from Article 6 Access to information Article 6 Access to information that 1. Member States shall provide their competent authorities responsible for exercising the supervision referred to in Article 3 shall have access to any information which wouid be relevant for the purpose of supervision of an insurance undertaking which has participating undertakings, related undertakings or related undertakings of participating undertakings in the competent insurance undertaking. authorities may address the to undertakings concerned directly to ensure the communication of the required information, or they may receive such information through the insurance undertaking. themselves The to that referred supervision 1. Member Slates shall provide their competent authorities responsible for exercising in supplementary Article 3 shall have access to any information which would be relevant for the purpose of supervision of an insurance undertaking [. ] subject to such supplementary supervision. The competent authorities may address themselves to the undertakings concerned directly to ensure the communication of the required information, [. ] only when such information has been requested from the insurance undertaking and it has not been supplied by it! that their 2. Member States shall provide competent authorities may carry out, within their territory, themselves or through the intermediary of persons they appoint for that purpose, an-the- spot verification of the information received under paragraph 1. UNCHANGED 3. Where, the competent authorities of one Member State wish in applying paragraph 2, 3. Where, in applying paragraphs 1 and 2, the competent authorities of one Member State wish 11 INITIAL PROPOSAL the in specific cases to verify information concerning an insurance undertaking situated in another Member Slate, they must ask the competent authorities of that other Member State to have that verification carried out. The authorities which receive such a request, must, within the framework of their competence, act upon it either by carrying out the verification themselves, by allowing the authorities who made the request to carry it out, or by allowing an auditor or expert to carry it out. AMENDED PROPOSAL the in specific cases to verify information concerning an insurance undertaking situated in another Member State, they must ask the competent authorities of rhat other Member State to have that verification carried out. The authorities which receive such a request, must, within the framework of their competence, act upon it either by carrying out the verification themselves, by allowing the authorities who made the request to carry it out, or by allowing an auditor or expert to carry it out. Article 7 * dopera lie m between competent authorities Article 7 Cooperation between competent authorities a have related, or 1. Where insurance undertakings are directly or indirectly common participating undertaking and are established in competent different Member States, shall authorities of each Member State communicate relevant information which may allow or aid the exercise this the of supervision Directive. to each other all framework cf the in have related, or 2. Where an insurance undertaking and a credit in Council Directive institution as defined 77/780/EEC(7) or investment firm as defined in Council Directive 93/22/EECw are directly or common indirectly participating competent authorities and the authorities entrusted with the public ihose other undertakings shall cooperate closely. Without prejudice to their respective responsibilities, those authorities shall provide one another with any information likely to simplify their task, in particular in the framework of this Directive. undertaking, supervising task of the a UNCHANGED related, or have 2. WTiere an insurance undertaking and a credit in Council Directive institution as defined 77/780/EECffi or investment firm as defined in Council Directive 93/22/EEC® are directly or common indirectly competent participating authorities and the authorities entrusted with the public those other undertakings shall cooperate closely. Without prejudice to their respective responsibilities, those authorities shall provide one another with any information likely to simplify their task, in particular in the framework of this Directive. undertaking, supervising task of the a to Information received pursuant 3. Directive and, in particular, any exchange of information between competent authorities which is provided for in this Directive shall be subject to the obligation of professional secrecy defined in Article 16 of Directive 92/49/EEC and Article 15 of Directive 92/96/EEC. this UNCHANGED 12 INITIAL PROPOSAI, AMENDED PROPOSAL Article 8 Intra-group transactions Article 8 Intra-group transactions to establishing whether UNCHANGED a view arc, 1. With transactions in principle, carried out according lo normal market conditions. Member Stales competent shall authorities monitor: provide that the (a) the transactions referred to in paragraph 2 between an insurance undertaking and: the related undertaking of (i) a undertaking; (ii) a participating undertaking in the insurance undertaking; (iii) a related undertaking of a participating undertaking in the insurance undertaking; insurance (b) the transactions referred to in paragraph 2 between the insurance undertaking and a natural person which holds a participation in: (i) the insurance undertaking or any of its related undertakings; (ii) a participating undertaking in the insurance undertaking; (iii) a related undertaking of a participating undertaking in the insurance undertaking. in paragraph 2. Member States shall require at least an annual UNCHANGED reporting by the insurance undertaking to the transactions as competent authorities of the described in particular significant: - loans, - guarantees transactions, - elements eligible for the solvency margin, - investments. and other off-balance 1, concerning sheet 13 INITIAL PROPOSAI, Article 9 Aili"sled solvency requirement AMENDED PROPOSAI, Article 9 Adjusted solvency requirement to in Article 3 (1). 1. Subject to Article 3 (1), Member Stales shall require that an adjusted solvency calculation Member Stales shall require thai an adjusted in shall be carried out in accordance with Annex I. 1. In the cases referred solvency calculation shall be carried out accordance with Annex I. 2. The calculation described in Annex 1 shall include a related undertaking or participating undertaking which has its registered office in a third country and which is: - an undertaking which, if it were established in the Community, would be required to have an authorization in accordance with Article 6 of Directive 73/239/EEC or Article 6 of Directive 79/267/EEC, - a reinsurance undertaking, or - an insurance holding company. 3. If the adjusted solvency situation is negative, the competent authorities shall take appropriate measures at the level of the relevant insurance undertaking. JNC1IANGED UNCHANGED Article 10 Insurance holding companies Article 10 Insurance holding companies 1. In the case referred Member States shall require the application of one of supervision in accordance with Annex II. supplementary methods the of to in Article 3 (2), UNCHANGED 2. In the case referred to in Article 3 (2), the UNCHANGED calculation shall include all related undertakings of the insurance holding company referred to in Article 9 (2). 3. If, as a result, the competent authorities are of UNCHANGED the opinion that the state of solvency of a related insurance undertaking of the insurance holding company is affected, the competent authorities shall take appropriate measures at the level of that insurance undertaking. Article 11 Implementation Article ! 1 Implementation and shall adopt administrative the laws, 1. Member States provisions regulations necessary to comply with this Directive no later necessary to comply with this Directive no later than ! January 1997, and bring them into force shall no shall 1 July immediately inform the Commission thereof. than immediately inform ihc Commission thereof, adopt administrative laws, 1. Member States the provisions 1997. They regulations Januarv They 1999 shall '•••). later than and I 14 INITIAL PROPOSAI, AMUNDFJ) PROPOSAL shall provide the 2. Member_ States provisï(>ns refcijed^ io in paragraph I shall first apply to the supervision of accounts for financial years beginning on I January 2000 or during that calendar year. that 2. Member States may decide to apply the definition of a 'participation' at a level of 25 % definition of a 'participation' at a level of 25 % for a period expiring not later than 1 July 2001. the 3. Member States may decide to apply for a period expiring not later than 1 July 2001. 3. When Member States adopt the measures referred to in paragraph 1, these shall contain a reference shall be accompanied by such reference at the time of their official publication. The procedure for such reference shall be adopted by Member States. this Directive, or to 4. When Member States adopt the measures referred to in paragraph 1, these shall contain a reference shall be accompanied by such reference at the time of their olTicial publication. The procedure for such reference shall be adopted by Member States. this Directive, or to 4. Member States shall communicate Commission the texts of the main provisions of national covered by this Directive. they adopt law which in to the 5. Member States shall communicate to the rommission the texts of the main provisions of the field the field national they adopt law which in covered by this Directive. of this Directive, 6. hive years at the latest after the deadline for implementation the Commission shall submit Insurance Committee a report on its implementation and, if further iurther appropriate, harmonization of supplementary supervision of insurance undertakings in an insurance group. need need any for tor the on to Article 12 Entry into force Article 12 Entry into force This Directive shall enter into force on the twentieth day following that of its publication in the Official European Communities. Journal the of UNCHANGED Article 13 Addressees Article 13 Addressees This Directive States. is addressed to the Member UNCHANGED (1) OJ No L 228, 16. 8. 1973, p. 3. ( 2 ) O J N o L 1 6 8, 18. 7. 1995, p. 7. (3) OJ No L 63, 13. 3. 1979, p. 1. (4) OJ No L 228, 11. 8. 1992, p. 1. (5) OJ No L 360, 9. 12. 1992, p. 1. ( 6 ) O J N oL 193, 18. 7. 1983, p. 1. (7) OJ No L 322, 17. 12. 1977, p. 30. ( 8 ) O J N oL 141, 11. 6. 1993, p. 27. ( l ) O J N o L 2 2 8, 16. 8. 1973, p. 3. ( 2 ) O J N o L 1 6 8, 18. 7. 1995, p. 7. ( 3 ) O J N o L 6 3, 13. 3. 1979, p. 1. (4) OJ No L 228, 11. 8. 1992, p. 1. (5) OJ No L 360, 9. 12. 1992, p. 1. ( 6 ) O J N o L 1 9 3, 18. 7. 1983, p. 1. (7) OJ No L 222, 14. 08. 1978, p. 11. (8} OJ No L 322, 17. 12. 1977, p. 30. ( 9 } O J N oL 141, 11. 6. 1993, p. 27. 15 INITIAL PROPOSAL AMENDED PROPOSAL ANNEX I ANNEX I CALCULATION OF T HE ADJUSTED SOLVENCY SITUATION CALCULATION OF T HE ADJUSTED SOLVENCY SITUATION 1. Choice of method gene nil principles of calculation and I. Choice of method of calculation general principles and for solvency One or more of the methods described below A the shall be applied adjusted insurance undertakings referred to in Article 3(1). For this purpose, the elements eligible for the solvency margin shall be adjusted an compared with an adjusted solvency margin. the calculation of of situation for situation solvency the calculation of of A. One or more of the methods described below the shall be applied adjusted insurance undertakings referred to in Article 3 (1). For this purpose, the elements eligible for the solvency margin mentioned in Article 16 paragraph 1 of Directive 73/239/EEC or in Article 18 of Directive 79/267/EEC shall be adjusted an compared with an adjusted solvency margin. B. Regardless of the method applied, the intra- the group creation of elements eligible for the in solvency margin must be eliminated calculation of the adjusted solvency situation. B. UNCHANGED For this purpose, where the methods do not UNCHANGED already provide for this, for Ihe calculation of the elements eligible for the adjusted solvency situation no account shall be taken of: the insurance undertaking for which (i) all elements eligible for the solvency margin UNCHANGED the of adjusted solvency situation is calculated, which ultimately originate from: - a undertaking, or - a undertaking in the insurance undertaking; related undertaking of a participating related undertaking of insurance this UNCHANGED and related situation insurance undertaking or requirement of a (ii) all elements eligible for the solvency margin the of a notional solvency related reinsurance undertaking, of a participating insurance undertaking for which the adjusted solvency is calculated, originating from: - the participating insurance undertaking, - insurance undertaking, related undertaking of a participating - a insurance the participating undertaking undertaking for which the adjusted solvency situation is calculated. related undertakings of the participating in Applying the same rules mutatis mutandis, the calculation shall also not take into account: C. Without prejudice section B of this Annex: "thi to the provisions of 16 INITIAL PROPOSAI, AMENDED PROPOSAL - all subscribed but non paid-in parts ol capital. the - [. J subscribed but non paid-in parts of the capital of a related insurance undertaking of the insimmcc undertaking for which the adjusted solvency is calculated" and - pro lit reserves and assurance undertakings. future profits of life - profit reserves and future profits arising in a related the insurance undertaking for which the adjusted solvency is calculated insurance undertaking of life may only be included in the calculation insofar is they are eligible to cover the solvency margin requirement of that related undertaking C. With the exception of calculating a solvency deficit in a subsidiary, the calculation shall be carried out on a proportional basis(1) taking into account the relevant the mediating participations. percentages of (I) Where this Annex refers to a proportional the calculation share or relevant percentage, shall be based on the basis of the percentage used for the establishment of the consolidated accounts. for D. The competent authorities shall ensure that the adjusted solvency situation is calculated at the same frequency as the calculation of the insurance undertakings solvency margin according and 73/239/EEC the assets and 79/267/EEC. The value of liabilities shall be assessed according to the relevant provisions of Directives 73/239/EEC and Directive 79/267/EEC, as amended by Directives 92/49/EEC and 92/96/EEC. to Directives D. The calculation of the adjusted solvency of an insurance undertaking shall take account of the relevant held proportional share participating related undertaking undertakings concerned. the the by in Proportional share means either, where method 1 is used, the proportion of the or method~2 that is owned, directly "or subscribed capital indirectly, participating undertaking or, where method 3 is used, the percentages used in drawing up the consolidated accounts. relevant the by However, whichever method is used, when the related undertaking is a subsidiary and has~i solvency deficit, the total solvency deficit of the ~ subsidiary has to be taken into account. E. The competent authorities shall ensure that the adjusted solvency situation is calculated at the same frequency as the calculation of the insurance undertakings solvency margin according and 73/239/EEC the assets and 79/267/EEC. The value of liabilities shall be assessed according to the relevant provisions of Directives 73/239/EEC, J _] 79/267/EEC \. ] and 91/674/EEC. to Directives for 2. Methods and relevant situations 2. Methods and relevant situations 2. 1. Related insurance undertakings 2. 1. Related insurance undertakings In the case of an insurance undertaking which is UNCHANGED a directly participating undertaking in another insurance undertaking, the adjusted solvency calculation shall be carried out in accordance with one of the following methods. In all methods and in the case that the insurance UNCHANGED undertaking has more than one directly related 17 INITIAL PROPOSAL AMENDED PROPOSAL insurance undertaking, the adjusted solvency calculation shall be carried out by integrating each of these directly related undertakings. a is In cases of successive participations (c. g. an participating insurance undertaking undertaking in another insurance undertaking which is also a participating undertaking in an insurance undertaking) the adjusted solvency calculation shall be carried out at the level of each participating undertaking which has at least one reinsurance undertaking. insurance related or related insurance undertakings If method 3 is applied, and without prejudice to specific provisions contained in other Directives, Member States may waive calculation of the adjusted solvency situation for an insurance is a related if this undertaking undertaking, undertaking of another insurance undertaking in the same Member State, which calculates an adjusted solvency situation taking into account its and reinsurance undertakings. The same waiver shall be allowed where the participating undertaking is an insurance holding company which has its head office in the same Member State as the insurance undertaking, provided that it is subject to the same standard of supervision as that exercised over insurance undertakings. In both cases, steps must be taken to ensure that capital is distributed adequately within the insurance group, and is genuinely available for transfer between participating undertaking or undertakings concerned. related and the UNCHANGED [. ] Member States may waive calculation of the adjusted insurance undertaking^ solvency [. ] of an if is a related the undertaking - either undertaking of another insurance undertaking authorized in the same Member State, and that related undertaking is taken into account in the the adjusted solvency of The calculation of participating insurance undertaTcmg; - or if the undertaking is a related undertaking of an insurance holding company which has its registered office in the same Member State as the insurance undertaking, and both the holding company and the related insurance undertaking are taken into account in the calculation carried out. undertaking Member State may also provide for the waiver involved in the above two cases to be granted in the case of an insurance undertaking which is a related insurance of undertaking or insurance holding company that has its registered office in another Member Stated IT the competent authorities of ~thc Ivlcinber States conccrnëdlïavc agreed to allow the competent authorities of the other Member State to carry out supplementary supervision. another In all cases, the waiver may only be granted if the competent authorities are satisfied that the elements eligible for the solvency margin of the insurance undertakings to be included in the calculation are distributed adequately [. l~and genuinely available for transfer between those undertakings. METHOD method 1: Deduction and aggregation METHOD 1: Deduction. and aggregation method adjusted The participating solvency situation insurance undertaking of is the UNCHANGED the INITIAL PROPOSAI, AMENDED PROPOSAL di(Terence between: (i) the sum of: 1. (he elements eligible lor the solvency margin of the participating undertaking; 2. the proportional share of the participating undertaking the related undertaking, which originates from the participating undertaking; the solvency margin of in and (ii) the sum of: in the book value the participating the (a) undertaking of all elements eligible for solvency margin of the related undertaking; (b) the solvency requirement of the participating undertaking; (c) the solvency requirement of the related undertaking; if the related undertaking is a subsidiary and has a solvency deficit, the total requirement has to be taken into account. the proportional share of METHOD 2: Requirement deduction method METHOD 2: Requirement deduction method adjusted The participating difference between(2): solvency situation insurance undertaking of is the UNCHANGED the (i) the sum of the elements eligible for the solvency margin participating of undertaking; the and (ii) the sum of: the proportional (a) the solvency requirement of the participating undertaking; (b) the solvency requirement of the related undertaking; if the related undertaking is a subsidiary and has a solvency deficit, the total requirement has to be taken into account. share of (2) The participation in a related undertaking must be included at the net asset value of shares. METHOD 3: Accounting method consolidation-based METHOD 3: Accounting consolidation-based method The calculation of situation of the participating undertaking shall start from the consolidated accounts in order to the adjusted solvency UNCHANGED 19 INITIAL PROPOSAL calculate the consolidated elements eligible for the solvency margin of the participating and the in accordance related undertakings concerned with Directive 9Î/674/EEC and Directive 73/239/EEC and Directive 79/267/EEC, as and amended 92/96/EEC. by Directives 92/49/EEC AMENDED PROPOSAL adjusted The solvency participating undertaking between: situation is the of the difference (i) the elements eligible for the solvency margin as shown in the consolidated accounts; and (ii) the sum of the solvency requirement of the (he participating undertaking, and full or relevant proportional share of the solvency requirement of the related undertaking. If the related undertaking is a subsidiary and has a solvency deficit, its solvency requirement shall be taken into account in full. 2. 2. Related reinsurance undertaking 2. 2. Related reinsurance undertaking For each related reinsurance undertaking of an insurance undertaking, a notional solvency requirement shall be established according to the same rules that have been laid down in Article 16 (3) of Directive 73/239/EEC or Article 18 (3) of Directive 79/267/EIIC. The same own funds elements for the reiaied reinsurance undertaking shall be recognized as eligible for its national own funds, as those according to the rules laid down in Article 24 of Directive 92/49/EEC or Article 25 of Directive 92/96/EEC. The value of the assets and liabilities shall be assessed according to the same rules that have been laid down in Directive 73/239/EEC and Directive 79/267/EEC, by Directives amended 92/49/EEC and 92/96/EEC. as adjusted solvency The the participating insurance undertaking is obtained by applying the methods and general principles described above. situation of UNCHANGED UNCHANGED 2. 3. Intermediate insurance holding company 2. 3. Intermediate insurance holding company Methods 1 and 2 Methods 1 and 2 insurance holding company which For each participating insurance undertaking in For each participating insurance undertaking in is a is a an an insurance participating undertaking or the adjusted solvency situation shall be calculated adjusted solvency situation shall be calculated the methods and general principles applying the methods and genera! principles applying in reinsurance undertaking, in reinsurance undertaking, insurance holding company which insurance participating the undertaking or undertaking undertaking an an 20 INITIAL PROPOSAL described above, mutatis mutandis. AMENDED PROPOSAL described above, mutatis mutandis. When carrying out this calculation, resources of the insurance holding company which fulfil the same conditions as laid down in Article 15 paragraph 1 of Directive 73/239/EEC or in Article 18 of Directive 79/267/EEC shall be recognized as elements eligible for the solvency margin. Method 3 Method 3 The insurance holding company shall be taken into account in the assessment by integration in the accounting consolidation applying the methods and general principles described above, mutatis mutandis. The insurance holding company shall be taken into account in the assessment by integration in the accounting consolidation applying the methods and general principles described above, mutatis mutandis. When carrying out this calculation, resources of the insurance holding company which fulfil the same conditions as laid down in Article 16 paragraph 1 of Directive 73/239/EEC or in Article 18 of Directive 79/267/E"EC shall be recognized as elements eligible for the solvency margin. 3. Undertakings in third countries 3. Undertakings in third countries W1 îen calculating the adjusted solvency of an insurance undertaking w nich is a participating undertaking m a insurance undertaking, the latter shall be treated, for the sole purpose of that calculation, in a similar way to a related insurance undertaking, by applying the general principles and methods described m this Annexe third country )ds However, when the third country in which that undertaking is established makes it subject "to authorization and imposes on it a solvency requirement comparable to that laid down In Directives 73/239/EEC or 79/267/EEC, taking into account the elements of cover of that requirement, Member States may provide that the calculation shall take into account, as regards that undertaking, the solvency requirement and the elements eligible to satisfy that requirement as laid down by the third country in question. UNCHANGED legal there are impediments Where to the transfer of the information necessary for the inclusion of a related undertaking situated in a third country as referred to in Article 9 (2), the calculation shall, the methods referred to in this Annex, deduct from the the adjusted solvency elements eligible for margin, the book value in the participating undertaking- of all elements eligible for the solvency margin of the related undertaking. in applying 21 INITIAL PROPOSAL AMENDED PROPOSAL 4. Non-spcciHed cases DELETED The competent authorities shall require in cases that are not covered in 2. 1-2. 3, an appropriate combination of the described methods. ANNEX II ANNEX II SUPPLEMENTARY SUPERVISORY METHODS FOR INSURANCE UNDERTAKINGS THAT ARE SUBSIDIARIES OF AN INSURANCE HOLDING COMPANY WHICH IS THE ULTIMATE PARENT OF AN INSURANCE UNDERTAKING IN A GROUP SUPPLEMENTARY SUPERVISORY METHODS FOR INSURANCE UNDERTAKINGS THAT ARE SUBSIDIARIES OF AN INSURANCE HOLDING COMPANY WHICH !S T HE ULTIMATE PARENT OF AN INSURANCE UNDERTAKING IN A GROUP 1. Choice of supplementary supervisory method 1. UNCHANGED - One of the methods described below shall be applied in order to check that its capital is sufficient. - In the case of insurance undertakings referred to in Article 3 paragraph 2, which are the subsidiaries of an insurance holding company and which are established in different Member States, the competent authorities shall ensure that the methods described in this Annex are applied in a coherent manner. - The competent authorities shall exercise the same supervision supplementary frequency as (he calculation of the solvency margin for insurance undertakings according to Directives 73/239/1 -EC and 79/267/EEC. the in 2. Methods 2. Methods 2. I. 'Solvency warning test ' 2. 1. 'Solvency warning tesf The capital of an insurance holding company shall equal or exceed the sum of the solvency insurance its requirements the undertakings solvency reinsurance its requirements undertakings. related notional of and of related The resources of an insurance holding company which fulfil the same conditions as laid down in Article 16 paragraph 1 of Directive 73/23 9/EEC or in Article 18 of Directive 79/267/EEC shall the sum oT~tEë sôTv ency equal or exceed insurance of requirements solvency and. undertakings requirements reinsurance of undertakings, related notional its the its related 2. 2. 'Accounting consolidation test * 2. 2. 'Accountingconsolidation lest^ The capital situation of an insurance holding The resources of an insurance holding company company must equal or exceed the sum of the must equaF or exceed the sum of the solvency insurance solvency requirements of its related insurance solvency the undertakings reinsurance its requirements requirements solvency undertakings requirements related notional its the its of and of reinsurance notional and of related related 22 INITIAL PROPOSAL this undertakings. The capital situation of in insurance holding company accordance with the accounting consolidation method in Annex 1, under 2. 3, method 3. is calculated AMENDED PROPOSAL undertakings. The resources of this insurance holding company, including the elements which fulfil the same conditions as laid down in Article 16 paragraph 1 of Directive 73/239/EEC orTn Article 18 of Directive 79/267/EEC, are calculated in accordance with the accounting consolidation method in Annex 1, under 2. 3, method 3. 3. Undertakings in third countries 3. Undertakings in third countries legal there are impediments Where to the transfer of the information necessary for the inclusion of a related undertaking situated in a third country as referred to in Article 10 (2), the calculation shall, the methods referred to in this Annex, deduct from the elements eligible for the adjusted solvency margin the book value of the participation and of all other elements eligible for the solvency margin of the related undertaking, which are held by the insurance undertaking. in applying UNCHANGED 23 ISSN 0254-1475 COM(98) 38 final DOCUMENTS EN 10 09 Catalogue number : CB-CO-98-036-EN-C ISBN 92-78-30358-5 Office for Official Publications of the European Communities L-2985 Luxembourg o£y