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Direct insurance other than life assurance: freedom to provide services (until November 2012)

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Direct insurance other than life assurance: freedom to provide services (until November 2012)

The Directive lays down rules for the exercise of cross-frontier non-life insurance business which balance the needs of freedom to provide services and consumer protection.


Second Council Directive 88/357/EEC of 22 June 1988 on the coordination of laws, regulations and administrative provisions relating to direct insurance other than life assurance and laying down provisions to facilitate the effective exercise of freedom to provide services and amending Directive 73/239/EEC [See amending acts].


The Directive covers freedom to provide services, defined as the covering by an insurer established in one Member State of a risk situated in another (Member State of provision of services *), regardless of where the policy-holder is resident or established.

Some articles are of general application; others apply only to the provision of cross-frontier services. Some classes of business (e.g. accidents at work, nuclear liability, compulsory insurance of building works) are excluded from the freedom-of-services provisions and will be reviewed by the Council at a later date.

Directive 90/618/EEC brings compulsory motor-vehicle liability insurance within the scope of the second Directive.

The Directive lays down rules governing freedom to provide services. A firm wishing to do business by way of freedom to provide services in one or more Member States must notify the relevant authority in its home Member State. It must also inform that authority of changes in its activities.

In that event, the competent authority in the home Member State must inform within one month the competent authorities in the Member State or States where services are to be provided. The information must cover the firm itself, the business in which it intends to engage and the type of risks to be covered.


The concept of risk in Directive 73/239/EEC is also clarified. A distinction is made between large risk and mass risk business. Large risks are:

  • transport risks (including goods in transit), regardless of size;
  • credit and suretyship risks, if linked to a trade;
  • fire and other property damage, general liability, pecuniary loss, where the policy-holder, or group to which he belongs, meets two out of three conditions (relating to balance-sheet size, turnover and number of employees; the figures are found in accounts prepared in accordance with other Directives).

Mass risks are all other cases where there is considered to be greater need for consumer protection.

Large risks are subject to lighter controls than mass risks in both establishment * and services situations (in particular, no prior approval of policy conditions, premium rates or standard forms and letters which the insurer intends to use in relations with policy-holders).

Large risks benefit from home-country control in the case of services for businesses (all financial control is in the State of establishment). The insurer must, however, obtain a certificate of solvency from the State where his head office is located and send it to the Member State where services are to be provided, with notification of the intended activity.

Mass risks may be subject to heavy control in the State of provision of services, including:

  • authorization requirement (detailed information to be supplied which the host State has six months to consider);
  • technical reserves (needed to ensure that funds are available to meet claims) must be certified by the State where the head office is located;
  • that host State's rules apply to policy conditions (thus determining the nature of the products that may be sold).

Insurance contracts

Articles of general application include rules on choice of contract law (governing insurer/policy-holder relations). These rules are intended to protect the policy-holder: the amount of choice depends on the circumstances of the policy-holder and never on those of the insurer.

Special rules apply to compulsory insurances: policies must comply with the rules of the State which makes such insurances compulsory.

A number of rules strengthen and amplify those in the first non-life insurance coordination Directive of 1973. These concern in particular:

  • the powers of the supervisory authorities;
  • the determination of currencies in which assets have to be held;
  • the transfer of portfolios.

Insurance policies taken out under the freedom-of-services provisions are exclusively liable to the indirect taxes and parafiscal charges levied on insurance premiums in the Member State where the risk is situated.

Freedom to provide services and specific risks

There are special rules for firms that cover risks in class 10 of point A in the Annex to Directive 73/239/EEC in another Member State from an establishment in another Member State.

They must not only become members of the national bureau and national guarantee fund of the Member State where the services are to be provided and join in their financing but also become subject to the legislation governing aggravated risks in that Member State.

In addition, they must designate in the Member State where the services are to be provided a representative, responsible not only for the payment of claims but also for representing the firm in relation to the authorities of that Member State.

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

Key terms used in the act

  • Member State of provision of services: Member State in which the risk is situated when it is covered by an establishment situated in another Member State.
  • Establishment: the head office, agency or branch of an undertaking, account being taken of Article 3.



Entry into force

Deadline for transposition in the Member States

Official Journal

Directive 88/357/EEC

30.6.1988(date of notification)


OJ L 172 of 4.7.1988

Amending act(s)

Entry into force

Deadline for transposition in the Member States

Official Journal

Directive 90/618/EEC

20.11.1990(date of notification)


OJ L 330 of 29.11.1990

Directive 92/49/EEC

2.7.1992(date of notification)


OJ L 228 of 11.8.1992

Directive 2000/26/EC


19.7.2002(except specific provisions)

OJ L 181 of 20.7.2000

Directive 2005/14/EC



OJ L 149 of 11.6.2005

Successive amendments and corrections to Directive 88/357/EEC have been incorporated in the original text. This consolidated version is for reference purpose only.

Last updated: 25.10.2011