14 February 2002

LIFE AND NON-LIFE INSURANCE DIRECTIVES ADOPTED

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The Council of Ministers adopted on 14th February two Directives to reinforce safeguards for policyholders by strengthening the solvency margin requirements for life and non-life assurance undertakings. The Directives could be adopted by the Council without the need for a second reading in the European Parliament, as the Council was able to endorse the amendments sought by the Parliament at its first reading. The Directives must be implemented by Member States within 18 months of their publication although there are transitional arrangements for certain measures and applied to accounts for financial years beginning on 1 January 2004 or during 2004.

The proposals significantly strengthen and improve the current rules that date back to 1973 (non-life) and 1979 (life) respectively. Under the Directives:

to take account of specific local risks, Member States will be free to establish more stringent rules than the harmonised solvency ratio rules laid down in the Directives

the absolute minimum amounts of capital required (the so-called minimum guarantee fund) are substantially increased and will be indexed in future in line with inflation. The new absolute minimum would be set at ԃ million (Ԃ million for some classes of non-life insurance) compared to the previous amounts which ranged between € 200 000 and € 1.4 million

the thresholds based on levels of premiums and claims below which a higher solvency margin is required have also been increased. The required solvency margin on a premium basis will now be 18 % up to the first € 50 million of premium – this figure has been increased from ㈊ million and will be indexed in future - and 16 % above € 50 million. On a claims basis, the margin will be 26 % on the first € 35 million, up from ԇ million and also indexed in future, and 23 % above € 35 million

supervisory bodies will now have increased powers to intervene early to take remedial action where policyholders’ interests are threatened. For example, in a situation where an insurance undertaking currently satisfied the solvency margin requirements, but its financial position was deteriorating rapidly, the supervisor will now be able to take action

for certain categories of non-life business which have a particularly volatile risk profile (marine, aviation and general liability), the required solvency margin will be increased by 50%. Apart from reinforcing solvency requirements, the objective is to better match regulatory capital requirements to the real risk profile of the undertaking.

See Council decission
The Commission also released a ‘frequently asked questions’ paper on these issues.
See also Commission press release (including links to the draft Directives).

© Council of the European Union