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Life assurance: freedom to provide services (until November 2012)

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Life assurance: freedom to provide services (until November 2012)

The European Union is recasting the special rules relating to the freedom to provide cross-border services in the life assurance field with a view to simplifying existing legislation.


Directive 2002/83/EC of the European Parliament and of the Council of 5 November 2002 concerning life assurance (recast) [See amending acts].



This Directive governs the taking-up and pursuit of the self-employed activity of direct insurance by undertakings established, or wish to become established, in a Member State. It particularly concerns life assurance based on a contract and certain savings operations based on a contract.

Conditions for obtaining authorisation

The taking-up and pursuit of direct insurance is subject to prior authorisation. Authorisation is sought from the authorities of the home Member State, is valid for the entire European Union (EU) and allows the insurance company to carry on business there, under either the right of establishment or the freedom to provide services.

In order to apply for and obtain authorisation, an insurance company must meet certain criteria: it must adopt the required legal form, possess the minimum guarantee fund, and provide the information required by the monitoring authorities. Any refusal of an authorisation must be explained and notified to the company concerned. If this is the case, the competent authority in the home Member State must inform the competent authorities in the other Member States, who must take appropriate action.

Agencies or branches established in the EU but belonging to companies whose head offices are outside the EU will be authorised subject to meeting certain conditions: they must be authorised under their national legislation, establish an agency or branch in the territory of the Member State, and designate a general representative who must be approved by the competent authority.

Financial supervision

Financial supervision is the responsibility of the home Member State’s authorities, which must monitor the insurance company’s entire business and its state of solvency. They must also ensure the existence of technical provisions, sound administrative and accounting procedures and adequate internal control mechanisms.

Prudential valuation

  • The Directive lays down precise criteria for the prudential valuation of shareholders and management in connection with a planned acquisition, together with clear rules for their application. This valuation procedure is undertaken by the competent authorities working together.

The Directive requires the competent authorities to appraise the suitability of the proposed acquirer and the financial soundness of the proposed acquisition against the following criteria:

  • the reputation and financial soundness of the proposed acquirer;
  • the reputation and experience of any person who will direct the business of the insurance company as a result of the proposed acquisition;
  • the ability of the insurance undertaking to comply, and continue to comply, with the prudential requirements;
  • the existence of reasonable grounds to suspect an operation or attempt to launder money or finance terrorism.

Professional secrecy

The Directive lays down strict conditions for the use of confidential information: the competent authorities may use such information only in the course of their duties, and persons working for them are bound by professional secrecy.

Technical provisions and investment diversification

Insurance companies must constitute technical provisions, the amount of which is calculated according to actuarial assumptions, and the interest rate for which is fixed by the competent authority in the home Member State. Insurance companies must make available to the public the bases and methods used to calculate technical provisions.

The Directive requires insurance companies to diversify their investments. In this connection it defines the thresholds which insurance companies must respect when investing the assets covering technical provisions.

Solvency margins and guarantee funds

Every insurance company must have an adequate solvency margin. This may consist of its assets — paid-up share capital, reserves and profit or loss brought forward — or other financial assets belonging to the insurance company.

One third of the solvency margin constitutes the guarantee fund, which must amount to a minimum of €3 million. The guarantee fund is reviewed each year.

Contract law and insurance conditions

The contracts referred to by this Directive are subject to the law of the ‘Member State of the commitment’. However, certain provisions offer the freedom to opt for a different contract law. An insured person who enters into an individual life assurance contract on his or her own initiative has a period of between 14 and 30 days to cancel the contract.

Right of establishment and freedom to provide services

Any insurance company that proposes to establish a branch within the territory of another Member State or which intends to carry out its business in one or more Member States under the freedom to provide services must notify the competent authority in its home Member State and provide it with the necessary information. It is the task of the Member State concerned to take the necessary measures to rectify any irregular situation in which an insurance company in its territory finds itself.

Cooperation between Member States and the Commission

The competent authorities in the Member States must work closely together with the Commission, assisted by the Insurance Committee, in order to facilitate the monitoring of insurance companies.

This Directive is repealed by Directive on the taking-up and pursuit of the business Insurance and Reinsurance from 1 November 2012.



Date of entry into force

Deadline for transposition in the Member States

Official Journal

Directive 2002/83/EC


Depending on the Article:19.6.200417.11.200220.9.2003

OJ L 345, 19.12.2002

Amending act(s)

Date of entry into force

Deadline for transposition in the Member States

Official Journal

Directive 2004/66/EC



OJ L 168, 1.5.2004

Directive 2005/1/EC



OJ L 79, 24.3.2005

Directive 2005/68/EC



OJ L 323, 9.12.2005

Directive 2006/101/EC



OJ L 363, 20.12.2006

Directive 2007/44/EC



OJ L 247, 21.9.2007

Directive 2008/19/EC



OJ L 76, 19.3.2008

The successive amendments and corrections to Directive 2002/83/EC have been incorporated in the original text. This consolidated version is for reference only.

Last updated: 26.10.2011