The reinsurance sector has seen important changes during the last few years. The concentration to a few large players has continued through mergers and acquisition, new financial products have been developed and new information technology tools have emerged. The tragic events of 11 September 2001 will also have strong repercussions on the reinsurance industry, both as regards practices and available capacity. These developments make it even more important that a solid system of reinsurance supervision is in place to ensure that companies fulfil their obligations.
The lack of an EU regulatory framework for reinsurance has resulted in significant differences in the level of supervision of reinsurance undertakings in the EU.
Certain EU countries use collateralised systems, making optimal investment management more difficult and thus resulting in higher operational costs for reinsurance undertakings.
The lack of mutual recognition between EU supervisory authorities in reinsurance in certain cases could lead to significant extra costs and administrative burdens for reinsurance undertakings operating in several Member States and being subject to different supervisory rules.
It is also argued that the lack of a harmonised EU system makes international mutual recognition agreements more difficult.
The proposed Directive would establish supervision of re-insurers by competent authorities in their ‘home’ country, on the basis of which they could operate throughout the EU, using a fast-track approach based primarily on current direct supervision rules. It will also include a mandatory licensing system, and solvency margin requirements in line with those of direct insurance, however with the possibility to increase this margin up to 50 % through comitology for non-life reinsurance when this is objectively justified.
The proposed Directive requires reinsurance undertakings to be licensed to conduct reinsurance business and lays down the minimum conditions necessary to obtain the official
authorisation requiring an enhanced cooperation between Member States%%%% competent authorities.
The proposal also provides for the subsequent adaptations to the non-life insurance and life assurance Directive. Accordingly, insurance undertakings that conduct reinsurance by way of acceptances activities will be subject to the provisions of the reinsurance directive in respect of the required solvency margin, where the volume of their reinsurance activities represents a significant part of their entire business. These provisions will only be applicable when the Commission has adopted the decision adjusting the required solvency margin for non-life reinsurance activities.