Insurance is an area so permeated with EU legislation that there is a general description of the EU legislative structure as providing a "single insurance passport" to Europe. (Although Norway and Switzerland fall outside the official EU framework, their national laws regarding insurance follow the EU patterns very closely and the New EU Accession Countries have adopted or will adopt all the EU rules as part of the acquis communautaire.)

The basic EU regulatory architecture is as follows. (Please also see the Chart on pages 90-97.) Directive 77/92/EEC (freedom of establishment, insurance brokers); Directive 2002/83/EC (life insurance, replaces "First Life Insurance Directive"); Directive 90/619/EEC ("Second Life Directive"); Directive 92/96/EEC ("Third Life Directive"); Directive 88/357/EEC ("Second Non-Life Directive"); Directive 92/49/EEC ("Third Non-Life Directive"); Directive 78/473/EEC (co-insurance); Directive 91/674/EEC (consolidated insurance accounts); Directive 2002/12/EC (solvency margins, life insurance enterprises); Directive 2002/13/EC (solvency margins, non-life insurance enterprises); Directive 95/26/EEC (reinforcing prudential supervision of credit establishments, including insurance and UCITS or "undertakings for collective investments in transferable securities"); Directive 2001/17/EC (rehabilitation and liquidation, life insurance enterprises); Directive 90/618/EEC (civil responsibility in insurance matters (automobile)); Directive 2000/26/EC (harmonisation regarding automobile insurance ("Fourth Automobile Directive")); Directive 2002/92/EC (insurance mediation); Regulation 358/2003/EC (replacing block exemption for certain insurance agreements (Regulation 3932/9), on 1 April 2003).

The key point of the "single passport" structure is that an insurer which is seeking to establish itself in the EU market place is only required to obtain one authorisation or licence to be able to carry on insurance business both throughout the EU as well as in the EEA countries (Iceland, Liechtenstein and Norway). The authorisation is valid for the entire region, whether business is carried on through a branch or agency establishment or by the provision of cross-border services. Where an insurer already licenced in one EU member country establishes a subsidiary in another EU member country, that subsidiary is treated as another "head office establishment" of the insurer and will require separate authorisation. It is thus possible for an insurer located and licenced in, say Dublin, to write, for example, direct motor insurance coverage for insureds throughout the EEA on a cross-border basis and where a group or association is insured coverage can often be provided by effectively issuing a single policy. This avoids the necessity of paying fronting fees or using a multiplicity of local insurers and this helps to control the service levels supplied to a multinational client base.

The licensing requirements for insurers are based on the need to demonstrate to the regulatory authorities that the insurer in question has available to it adequate financial resources to support the proposed level of business. This is measured by the requirement to maintain assets in excess of liabilities by a specified margin known as the "minimum margin of solvency". The authorities will also look at the reinsurance arrangements of the insurer to determine that they are adequate and suitable and will look at the appropriateness of the assets covering the insurance technical provisions. There are also "matching" and "localisation requirements",

although this is now of less significance, since so many countries use the Euro as their currency. In addition to the financial requirements, the regulators will need to be satisfied that the insurer is soundly and prudently managed and that directors, controllers and managers are "fit and proper" to hold their position and have appropriate experience in the insurance industry. Life insurers will need to appoint an "Appointed Actuary". As mentioned above, a branch establishment of an EU insurer will be regulated by the regulator of the home country (the regulator where the insurer is incorporated) and not by the regulator of the host country (the country of the branch). The same principle applies to the cross-border provision of services.

Insurance agents are not directly regulated by the authorities in every country but they come under effective regulation by the obligation placed upon insurers to disclose for approval their main agency contracts. The EU has taken a major step in the direction of Europe-wide harmonisation through the "Insurance Mediation Directive" ("IMD") adopted in January 2003 (Directive 2002/92/EC). The IMD will improve choice and reinforce protection for consumers while also assisting insurance intermediaries such as insurance brokers, banks and car dealers to provide their services across borders. The IMD requires that all intermediaries be registered in their home member country. To obtain that registration, they need to meet strict requirements. Once registered, intermediaries will be entitled to sell their services anywhere in the EU by providing their services across country borders. The IMD will come into force in the EU by January 2005.

The practical result of the Single Market changes is that there is now fully active competition in the non-life insurance classes in those countries which have traditionally followed a free trade persuasion and a gradual dismantling of protection in some classes of insurance in those countries which have favoured protection, all of which is designed to reach a position of harmony throughout Europe. Insurance companies are subject to EU laws regarding antitrust, mergers and competition, in general. Please see the Chapter on "Antitrust/Competition". Some insurance agreements and arrangements may be able to benefit from exemptions granted by the European Commission, such as regarding common risk-premiums tariffs, standard policy conditions, common coverage of certain types of risks and exchange of information regarding aggravated risks.

With the exception of certain forms of social insurance (i.e., healthcare), market forces and traditional risk factors dictate the level of insurance premiums throughout the EU. In this area also, the IMD is intended to provide a common standard for the regulation of the activities of insurance brokers and those considered to be carrying out insurance intermediary activities.


The "Unfair Terms in Consumer Contracts Directive" (Directive 93/13/EEC) had the aim of requiring EU member countries to introduce provisions into their laws removing unfair terms in consumer contracts. The Directive was implemented in the UK, for example, by the Unfair Terms in Consumer Regulations 1994/1999 and introduced a requirement of good faith substantially in line with other European countries, such as Germany, Italy and France. Terms in consumer contracts of any kind may be invalidated if, contrary to this requirement of good faith, they create a significant imbalance between the parties, to the detriment of the consumer.

In addition to special areas, such as marine insurance, other special insurance and/or risk allocation mechanisms are well known in Europe, such as the York-Antwerp Rules, ECGD, COFACE, HERMES, SACE and similar government supported programs related to trade.

The York-Antwerp Rules (first adopted as the "York Rules" in 1864 and as the "York-Antwerp Rules" since 1877, with numerous amendments) are a code governing the adjustment of general average, incorporated into contracts by agreement. The law of general average deals with losses or damage arising from an event at sea and relates to losses that are borne proportionately by all those whose property has been saved by a "general average act" consisting of any sacrifice or expenditure made intentionally and reasonably to preserve property in a sea voyage. The Comite Maritime

Internationale is the "guardian of the York-Antwerp Rules" and responsible for the relevance of the wording of the current set of Rules.

The "Export Credits & Guarantee Department" ("ECGD") is the UK's official export credit agency and is a typical example of similar regimes in other European countries. A UK exporter meeting the necessary criteria has the opportunity to take out an "Export Insurance Policy" ("EXIP") from the ECGD. An exporter can insure itself against the principal political and commercial risks of not being paid in connection with individual capital goods or services contracts. ECGD insurance can cover up to 95 per cent of the value of loss suffered by an exporter. Similarly, COFACE ("Compagnie Franchise d'Assurances du Commerce Exterieure", private since 1994, but government controlled) is an insurance group that provides French companies with a range of trade credit, such as credit insurance policies and guarantees. HERMES provides similar services in Germany, with the management of the German government's official export guarantee scheme being delegated to a consortium consisting of HERMES Kreditver-sicherungs-AG and PwC Deutsche Revision AG. SACE ("Istituto per i Servizi Assicurativi del Commercio Estero") is the Italian export credit insurance agency. It is an autonomous section of the Istituto Nazionale delle Assicurazioni (the National Insurance Institute). SACE is empowered to insure and reinsure political risks, natural disasters, economic and commercial risks as well as exchange rate risks.

Interesting Europe-fact: + Some common insurance terms in Danish, Norwegian and Swedish (and Czech, Hungarian, Polish)

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