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Insurance undertakings: supervision

The European Union would like insurance supervisory authorities to be better equipped to assess the true solvency of an insurance undertaking that is part of a group.


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 [See amending acts].


The Directive applies to insurance undertakings * with their registered office in the European Union (EU).

The Directive requires Member States to extend supervision ("supplementary supervision") to all other entities that could have a bearing on the financial and operating position of a supervised insurance undertaking, including undertakings related to * or participating in * the insurance undertaking. Its scope extends to the following enterprises with which an insurer may have a parent/subsidiary relationship, or in which a participation * exists:

  • reinsurance undertakings *;
  • holding companies * (a distinction is made between financial holding companies with subsidiaries operating principally or exclusively in the insurance sector and mixed-activity holding companies with a broader range of activity);
  • non-member-country insurance and reinsurance undertakings *.

The Member States or the competent authorities * responsible for exercising supplementary supervision may waive supervision if it is deemed inappropriate or if the undertaking is of negligible interest.

Adequate internal mechanisms must exist for the production of relevant information in each insurance undertaking subject to supplementary supervision.

The competent authorities may carry out within their territory, themselves or through the intermediary of persons whom they appoint for that purpose, on-the-spot verification of information received by them.

Should the competent authorities of a Member State wish to verify information concerning an insurance undertaking situated in another Member State, they must ask the competent authorities of that other Member State to have that verification carried out.

Intra-group transactions must not jeopardise the solvency of the insurance undertaking. This applies to transactions between an insurance undertaking and its parent or subsidiaries as well as to transactions with an enterprise in which an insurance undertaking holds a participation.

The competent authorities are informed of intra-group transactions by way of an annual reporting requirement. Only significant transactions (loans, investments, etc) must be notified. The competent authorities must take appropriate measures at the level of the insurance undertaking when its solvency cannot be adequately guaranteed.

The Member States must ensure that an adjusted solvency calculation is carried out in compliance with Annex I to the Directive.

Directive 2002/87/EC amends the Directive in order to establish common standards for the prudential supervision of financial conglomerates and to create a level playing field and legal certainty for the financial institutions concerned.

The aim of Directive 2005/1/EC is to ensure institutional and legal coherence with the approach taken in the financial services industry. As of its entry into force, the European Insurance and Occupational Pensions Committee, established by Decision 2004/9/EC, replaces the Insurance Committee as the advisory body responsible for supporting the Commission in this area.

This Directive is repealed by the Directive on the taking-up and pursuit of the business of insurance and reinsurance as of 1 November 2012.

Key terms used in the act
  • Insurance undertaking: an undertaking which has received official authorisation in accordance with Article 6 of Directive 73/239/EEC.
  • Related undertaking: an undertaking which is either a subsidiary or another undertaking in which a participation is held.
  • Participating undertaking: either a parent undertaking or another undertaking which holds a participation.
  • Participation: participation within the meaning of Article 17, first sentence, of Directive 78/660/EEC or the holding, directly or indirectly, of 20 % or more of the voting rights or capital of an undertaking.
  • Reinsurance undertaking: an undertaking, other than an insurance undertaking or a non-member-country insurance undertaking, the main business of which consists in accepting risks ceded by an insurance undertaking, a non-member-country insurance undertaking or other reinsurance undertakings.
  • Insurance Holding Company: a parent undertaking the main business of which is to acquire and hold participations in subsidiary undertakings, where those subsidiary undertakings are exclusively or mainly insurance undertakings, reinsurance undertakings or non-member-country insurance undertakings, one at least of such subsidiary undertakings being an insurance undertaking.
  • Non-member-country insurance undertaking: an undertaking which would require authorisation in accordance with Article 6 of Directive 73/239/EEC if it had its registered office in the Community.
  • Competent authorities: the national authorities which are empowered by law or regulation to supervise insurance undertakings.


ActEntry into forceDeadline for transposition in the Member StatesOfficial Journal

Directive 98/78/EC



OJ L 330 of 5.12.1998

Amending act(s)Entry into forceDeadline for transposition in the Member StatesOfficial Journal

Directive 2002/87/EC



OJ L 35 of 11.2.2003

Directive 2005/1/EC



OJ L 79 of 24.3.2005

Directive 2005/68/EC



OJ L 323 of 9.12.2005

Successive amendments and corrections to Directive 98/78/EC have been incorporated in the basic text. This consolidated version  is for reference purpose only.


Council Directive 2005/68/EC 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 [Official Journal L 323 of 9.12.2005].
This Directive specifically mentions Directive 98/78/EC in Article 59 and provides for specific amendments in the fields of "supplementary supervision of insurance and reinsurance undertakings" (application, scope and competent authorities). Specific rules are laid down for access to information, cooperation between competent authorities and intra-group transactions.

Last updated: 25.10.2011
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