Freedom of establishment and freedom to provide services. In legislative terms, the European passport issued by the home member state enables an insurance undertaking to carry on its insurance business anywhere in the EU in one of two ways: either under the rules on freedom of establishment by opening agencies or branches in other member states or under the rules on the freedom to provide services by operating in one member state while being established in another.
The dividing line between the concepts of freedom of establishment and freedom to provide services can however become blurred. For example, recourse by an insurance undertaking to an independent person such as an intermediary established in the host member state might bring the insurance undertaking within the scope of the rules governing the right of establishment, but for that to be the case such independent persons must meet the following three cumulative conditions:.
The third generation directives abolished all restrictions on simultaneous exercise of the freedom to provide services and the right of establishment in the host member state. Any insurance undertaking can therefore simultaneously carry on business in the same country under the freedom to provide services and through a branch, even if it is the same activity. Under the insurance directives, the home member state is alone responsible for checking compliance by an insurance undertaking it has authorised with the conditions under which the authorisation was granted. The host member state is not entitled to carry out any such checks and cannot question the authorisation.
The Commission has said that it considers that it would in all likelihood be contrary to Community law, in a situation where an insurance undertaking had for a certain period carried on business in a member state's territory under the freedom to provide services, for that state to compel it to establish itself there in order to be able to continue in business.
Cross-border insurance business carried on remotely, in particular via electronic commerce, should be regarded as insurance business carried on under the freedom to provide services. The member state of establishment of the insurance undertaking with which a policy is concluded in this way is the member state of establishment of the insurer that effectively carries on the insurance activity head office or branch and not the place where the technological means used for providing the service are located probably the place where the Internet server is installed.
Anyone wishing to research further into the relationship between freedom of establishment and freedom to provide services is advised to check Title IV in the proposed consolidation of the main directives COM referred to below. Consolidating the main directives. In June , the Commission decided to modify the life assurance directives and bring them into one text.
This includes a useful contents page which divides the text into eight "titles", which are sections containing the articles covering:. All the original implementation dates for these directives still apply. Annex VI to the new directive is a correlation table which lists its articles, and their parts, and shows which of the superseded directives provided that text. All member states except Greece with regard to rules imposing a mandatory membership in the Greek National Association of Insurers for all undertakings providing motor insurance services.
In November , the Commission formally requested Ireland to bring the Irish Voluntary Health Insurance Board within the scope of the directive, as amended and supplemented.
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Ireland has been asked to change its legislation to abolish the board's current exemption. This followed a complaint to the Commission alleging that the VHI was unlawfully pursuing insurance activities without being subject to the First Non-Life Insurance Directive in particular. Another of the FSAP's key proposals is for a directive on the distance selling of financial services, which is described in the next section.
In October , the Commission announced that it was setting up four expert groups of market practitioners in the fields of banking, insurance, asset management, and securities trading to provide an in-depth assessment of the state of integration of European financial markets.
This assessment process began as the five-year legislative phase of the FSAP drew to a close and the groups' deliberations prepared the ground for a wider strategic debate. It should be stressed that the process is not necessarily the prelude to a comprehensive new legislative programme along the lines of the FSAP. The results of the consultation process may serve as the basis for further debate on specific areas where carefully targeted legislation is necessary.
It may equally, however, identify areas where further EU-level legislative action is not considered necessary or productive. The most significant strategy document for the sector since the Financial Services Action Plan was issued by the Commission in Unlike the FSAP, which led to a raft of new legislation, the white paper, Financial services policy , is more concerned with improving the implementation of existing laws than introducing new ones. Asked whether the new document showed sufficient ambition, the Commission replied: "What could be more ambitious than to make all the FSAP measures actually work on the ground; creating real financial integration?
What is needed now is practical implementation of the agreed measures - not a swathe of new legislation. In this context, the paper has few direct proposals affecting the insurance industry. Of significance however is the indication that, under the Solvency II project see below , a major codification exercise was begun.
This eventually led to 16 insurance directives feeding into a new single insurance directive. The Solvency II project see below also saw the introduction of risk-oriented calculations of the solvency requirements for insurance undertakings. Calculation of insurance liabilities technical provisions have been further harmonised under the project as part of the convergence of supervisory practices. National regulators can block potential investments, mergers and takeovers in the financial sector.
There is therefore, the white paper claims, a demonstrable need for regulators to be clearer and more open when reviewing qualifying shareholdings. In insurance this work has been taking place in the context of Solvency II. With regard to practical steps to improve the efficiency of supervision, the white paper also suggests that, from , all EU banks, insurance and major investment companies should be able to fulfil their reporting requirements by sending only one complete reporting package, at a consolidated level, to the competent regulator.
In , the Commission launched a package of seven measures - a proposal for a directive and six Commission decisions - to allow the EU to respond far more quickly to developments in the financial sector. The package would, it claimed, create a modern and streamlined decision-making structure for financial services with the aim of improved regulatory and supervisory co-operation.
It aimed to extend the committee structure and approach already used in the securities sector since to banking, insurance and investment funds which the Commission calls UCITS. Under the new approach, framework directives - such as those adopted on market abuse and on prospectuses - set out clear principles to be followed.
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They also define the scope for technical implementing measures to be decided by the Commission, with the assistance in the case of securities of the European Securities Committee ESC made up of member state representatives, and taking into account technical advice received from the Committee of European Securities Regulators CESR , composed of national supervisory authorities.
The package extends this approach to banking, insurance and collective investment funds.
The first four decisions were suspended and would only come into effect if and when the directive was adopted. This is to avoid duplication with the existing committees and to avoid pre-empting the views of the European Parliament. For this reason, and in view of the urgency of the package as a whole, the Commission said it saw no benefit in delaying the entry into force of these measures. In September , COM was published, setting out a proposal for a directive amending various financial services directives.
The proposal relates to procedural rules and evaluation criteria for the prudential assessment of acquisitions and increases of shareholdings in the financial sector. The aim is to improve the legal certainty, clarity and transparency of the supervisory approval process. This directive was required to be implemented in member state law by 21 March In March , the Commission adopted a package of measures to stimulate new and different ways of unlocking long-term financing and to supportEurope's return to sustainable economic growth.
This included a legislative proposal for new rules for occupational pension funds. The then Internal Market and Services Commissioner Michel Barnier explained: "All European societies face a combined challenge of provision for retirement against a background of an ageing population, and of investing long-term to create growth. Occupational pension funds are at the junction of those two challenges. Today's legislative proposal will improve governance and transparency of such funds inEurope, improving financial stability as well as promoting cross-border activity, to further develop occupational pension funds as a key long-term investors.
The aim is to introduce:.
Employers, including SMEs, are expected to benefit through the reduced cost of joining an existing occupational pension fund. Moreover, employers joining a pension scheme in an established market can expect to see a reduction in their administration and investment costs. Multinational companies would also benefit from more easily consolidating their existing pension schemes possibly in different Member States into one occupational pension fund.
- The number of Solvency II insurance entities in Europe – Page – Solvency II Wire;
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Member States would benefit because well-governed occupational pension funds, and wider geographic coverage, are expected to reduce some of the fiscal pressure on state pension systems. This lays down that competent authorities must transmit the information on national prudential provisions to EIOPA for the first time within six months from the entry into force of this regulation on 6 July and then, annually, by 30 June of each calendar year subsequent to the year in which that six month period ends. Experience of the financial crisis exposed important failures in financial supervision, both in particular cases and in relation to the financial system as a whole.
The Group presented its report on 25 February Along with those regulations, and in order for the European System of Financial Supervisors ESFS to work effectively, changes to the sectoral legislation were considered necessary. The areas in which amendments are proposed fall broadly into the following categories:.
Member States were required to implement its provisions in national law by 31 December The directive applies to risks classified under headings A. The amount of technical reserves are to be determined by the different co-insurers according to the rules of the member states in which they are established. The reserve for outstanding claims must, however, be at least equal to that determined by the leading insurer, fixed according to the rules of practice of its home state.
The technical reserves established by the different co-insurers must also be 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 coinsurance operations. If an insurance undertaking is wound up, then liabilities arising from participation in community coinsurance contracts are to be met in the same way as those arising under that undertaking's other insurance contracts.
According to the directive, when an insurance company having branches in many countries is declared insolvent, the whole liquidation process is subject to uniform proceedings to be initiated in the country where the company has its headquarters and according to that country's bankruptcy regulations.