Directive 2005/68/EC of the European Parliament and of the Council of 16 November 2005 on reinsurance and amending Council Directives 73/239/EEC, 92/49/EEC as well as Directives 98/78/EC and 2002/83/EC (Text with EEA relevance)

Coming into Force10 December 2005
End of Effective Date31 December 2015
Celex Number32005L0068
Published date09 December 2005
Date16 November 2005
Official Gazette PublicationOfficial Journal of the European Union, L 323, 09 December 2005
9.12.2005 EN Official Journal of the European Union L 323/1


of 16 November 2005

on reinsurance and amending Council Directives 73/239/EEC, 92/49/EEC as well as Directives 98/78/EC and 2002/83/EC

(Text with EEA relevance)


Having regard to the Treaty establishing the European Community, and in particular Articles 47(2) and 55 thereof,

Having regard to the proposal from the Commission,

Having regard to the opinion of the European Economic and Social Committee (1),

After consulting the Committee of the Regions,

Acting in accordance with the procedure laid down in Article 251 of the Treaty (2),


(1) Council Directive 73/239/EEC of 24 July 1973 on the coordination of laws, regulations and administrative provisions relating to the taking-up and pursuit of the business of direct insurance other than life assurance (3), Council Directive 92/49/EEC of 18 June 1992 on the coordination of laws, regulations and administrative provisions relating to direct insurance other than life assurance (4) and Directive 2002/83/EC of the European Parliament and of the Council of 5 November 2002 concerning life assurance (5) have laid down the provisions relating to the taking-up and pursuit of direct insurance in the Community.
(2) Those Directives provide for the legal framework for insurance undertakings to conduct insurance business in the internal market, from the point of view both of the right of establishment and of the freedom to provide services, in order to make it easier for insurance undertakings with head offices in the Community to cover commitments situated within the Community and to make it possible for policy holders to have recourse not only to insurers established in their own country, but also to insurers which have their head office in the Community and are established in other Member States.
(3) The regime laid down by those Directives applies to direct insurance undertakings in respect of their entire business carried on, both direct insurance activities as well as reinsurance activities by way of acceptances; however reinsurance activities conducted by specialised reinsurance undertakings are neither subject to that regime nor any other regime provided for by Community law.
(4) Reinsurance is a major financial activity as it allows direct insurance undertakings, by facilitating a wider distribution of risks at worldwide level, to have a higher underwriting capacity to engage in insurance business and provide insurance cover and also to reduce their capital costs; furthermore, reinsurance plays a fundamental role in financial stability, since it is an essential element in ensuring the financial soundness and the stability of direct insurance markets as well as the financial system as a whole, because it involves major financial intermediaries and institutional investors.
(5) Council Directive 64/225/EEC of 25 February 1964 on the abolition of restrictions on freedom of establishment and freedom to provide services in respect of reinsurance and retrocession (6) has removed the restrictions on the right of establishment and the freedom to provide services related to the nationality or residence of the provider of reinsurance. It has not however removed restrictions caused by divergences between national provisions as regards prudential regulation of reinsurance. This situation has resulted in significant differences in the level of supervision of reinsurance undertakings in the Community, which create barriers to the pursuit of reinsurance business, such as the obligation for the reinsurance undertaking to pledge assets in order to cover its part of the technical provisions of the direct insurance undertaking, as well as the compliance by reinsurance undertakings with different supervisory rules in the various Member States in which they conduct business or an indirect supervision of the various aspects of a reinsurance undertaking by the competent authorities of direct insurance undertakings.
(6) The Action Plan for Financial Services has identified reinsurance as a sector which requires action at Community level in order to complete the internal market for financial services. Moreover, major financial fora, such as the International Monetary Fund and the International Association of Insurance Supervisors (IAIS) have highlighted the lack of harmonised reinsurance supervision rules at Community level as an important gap in the financial services regulatory framework that should be filled.
(7) This Directive aims at establishing a prudential regulatory framework for reinsurance activities in the Community. It forms part of the body of Community legislation in the field of insurance aimed at establishing the Internal Market in the insurance sector.
(8) This Directive is consistent with major international work carried out on reinsurance prudential rules, in particular the IAIS.
(9) This Directive follows the approach of Community legislation adopted in respect of direct insurance by carrying out the harmonisation which is essential, necessary and sufficient to ensure the mutual recognition of authorisations and prudential control systems, thereby making it possible to grant a single authorisation valid throughout the Community and apply the principle of supervision by the home Member State.
(10) As a result, the taking up and the pursuit of the business of reinsurance are subject to the grant of a single official authorisation issued by the competent authorities of the Member State in which a reinsurance undertaking has its head office. Such authorisation enables an undertaking to carry on business throughout the Community, under the right of establishment or the freedom to provide services. The Member State of the branch or of the provision of services may not require a reinsurance undertaking which wishes to carry on reinsurance business in its territory and which has already been authorised in its home Member State to seek fresh authorisation. Furthermore a reinsurance undertaking which has already been authorised in its home Member State should not be subject to additional supervision or checks related to its financial soundness performed by the competent authorities of an insurance undertaking which is reinsured by that reinsurance undertaking. In addition, Member States should not be allowed to require a reinsurance undertaking authorised in the Community to pledge assets in order to cover its part of the cedant's technical provisions. The conditions for the granting or withdrawal of such authorisation should be defined. The competent authorities should not authorise or continue the authorisation of a reinsurance undertaking which does not fulfil the conditions laid down in this Directive.
(11) This Directive should apply to reinsurance undertakings which conduct exclusively reinsurance business and do not engage in direct insurance business; it should also apply to the so-called ‘captive’ reinsurance undertakings created or owned by either a financial undertaking other than an insurance or reinsurance undertaking or a group of insurance or reinsurance undertakings to which Directive 98/78/EC of the European Parliament and of the Council of 27 October 1998 on the supplementary supervision of insurance undertakings in an insurance group (7) applies, or by one or several non-financial undertakings, the purpose of which is to provide reinsurance cover exclusively for the risks of the undertakings to which they belong. When in this Directive reference is made to reinsurance undertakings, it should include captive reinsurance undertakings, except where special provision is made for captive reinsurance undertakings. Captive reinsurance undertakings do not cover risks deriving from the external direct insurance or reinsurance business of an insurance or reinsurance undertaking belonging to the group. Furthermore, insurance or reinsurance undertakings belonging to a financial conglomerate may not own a captive undertaking.
(12) This Directive should however not apply to insurance undertakings which are already subject to Directives 73/239/EEC or 2002/83/EC; however, in order to ensure the financial soundness of insurance undertakings which also carry on reinsurance business and that the specific characteristics of those activities is duly taken into account by the capital requirements of those insurance undertakings, the provisions relating to the solvency margin of reinsurance undertakings contained in this Directive should apply to reinsurance business of those insurance undertakings, if the volume of their reinsurance activities represents a significant part of their entire business.
(13) This Directive should not apply to the provision of reinsurance cover carried out or fully guaranteed by a Member State for reasons of substantial public interest, in the capacity of reinsurer of last resort, in particular where because of a specific situation in a market, it is not feasible to obtain adequate commercial cover; in this regard, a lack of ‘adequate commercial cover’ should mainly mean a market failure which is characterised by an evident lack of a sufficient range of insurance offers, although excessive premiums should not per se imply inadequacy of that commercial cover. Article 1(2)(d) of this Directive also applies to arrangements between insurance undertakings to which Directives 73/239/EEC or 2002/83/EC apply and which aim to pool financial claims ensuing from major risks such as terrorism.
(14) Reinsurance undertakings are to limit their objects to the business of reinsurance and related operations.

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