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Insurance and reinsurance

The European Commission wishes to harmonise the laws of the Member States on the rules governing insurance and reinsurance undertakings in order to facilitate the taking-up of these activities. In this regard, this Directive provides a legal framework for these undertakings and permits them to pursue business throughout the internal market.


Directive 2009/138/EC of the European Parliament and of the Council of 25 November 2009 on the taking-up and pursuit of the business of Insurance and Reinsurance (Solvency II) (Text with EEA relevance).


This Directive aims at introducing a legal framework enabling insurance * and reinsurance * undertakings to provide services throughout the internal market.

General rules

Which sectors are covered?

This Directive lays down rules concerning:

  • the taking-up of the self-employed activities of direct insurance and reinsurance;
  • the supervision of insurance and reinsurance groups;
  • the reorganisation and winding-up of direct insurance undertakings.

Which entities are concerned?

The scope of this Directive covers:

  • non-life insurance undertakings: these include in particular health, accident, motor, civil liability, house or fire insurance;
  • life insurance undertakings including in particular:
    1. activities on a contractual basis such as assurance on death only, assurance on survival to a stipulated age or on earlier death, life assurance with return of premiums, marriage assurance, birth assurance, annuities or supplementary insurance;
    2. operations on a contractual basis such as operations whereby associations are set up, capital redemption operations or management of group pension funds;
    3. operations relating to the length of human life.
  • reinsurance undertakings.

How can authorisation to pursue the business of insurance be obtained?

An undertaking can conduct insurance or reinsurance activities after having obtained prior authorisation from the supervisory authorities * of its home Member State. This authorisation is valid throughout the Union. It covers the right of establishment and freedom to provide services. If authorisation is refused, each Member State may appeal.

Insurance undertakings must however preclude any commercial business, and reinsurance undertakings must pursue reinsurance activities as well as related operations.

How are these undertakings monitored?

The supervisory authorities shall ensure the protection of insurance policy holders and beneficiaries. They shall apply a risk-based method which includes the verification on a continuous basis of the operation of the undertaking, namely through off-site activities and on-site inspections.

Can an undertaking simultaneously pursue life and non-life insurance activities?

Insurance undertakings are not authorised to pursue life and non-life insurance activities simultaneously. However, undertakings pursuing insurance activities may obtain authorisation to carry out restricted non-life insurance activities (accident and sickness). Conversely, undertakings authorised for accident and sickness risks may obtain authorisation to carry out life insurance activities.

What are the rules relating to the valuation of assets and liabilities, technical provisions, own funds, the Solvency Capital Requirement, the Minimum Capital Requirement and investment rules?

The value of assets shall correspond to the amount for which they could be exchanged in a transaction, whilst liabilities shall be valued at the amount for which they could be transferred in a transaction.

Technical provisions have been established with respect to all of insurance and reinsurance obligations towards policy holders and beneficiaries of insurance or reinsurance contracts. The value of technical provisions shall correspond to the amount insurance and reinsurance undertakings would have to pay if they were to transfer their insurance and reinsurance obligations immediately to another undertaking. This value shall be equal to the sum of a best estimate and a risk margin.

Own funds shall consist of:

  • basic own funds consisting of the excess of assets over liabilities and subordinated liabilities;
  • ancillary own funds consisting of items other than basic own funds which can be called up to absorb losses.

The Solvency Capital Requirement shall be covered by the eligible own funds required by Member States for insurance and reinsurance undertakings. It shall cover the following risks:

  • non-life underwriting risk;
  • life underwriting risk;
  • health underwriting risk;
  • market risk;
  • credit risk;
  • operational risk.

Eligible basic funds must cover the Minimum Capital Requirement. This minimum corresponds to an amount of eligible basic own funds below which policy holders and beneficiaries would be exposed to a high level of risk. The Minimum Capital Requirement shall have an absolute floor of:

  • EUR 2.2 million for non-life insurance undertakings;
  • EUR 3.2 million for life insurance undertakings;
  • EUR 3.2 million for reinsurance undertakings.

As regards investments, insurance and reinsurance undertakings must invest only in assets and instruments whose risks can easily be identified. Undertakings have a certain freedom of investment notwithstanding.

How can insurance and reinsurance undertakings in difficulty be detected?

If the value of technical provisions does not correspond to the amount insurance and reinsurance undertakings would have to pay if they were to transfer their insurance and reinsurance obligations immediately to another undertaking, the supervisory authorities of the undertaking’s home Member State may prohibit the free disposal of assets.

If the Solvency Capital Requirement for an undertaking is no longer complied with, it must inform the supervisory authority rapidly. The undertaking must then submit a recovery plan once the non-compliance of the solvency capital has been recorded. Furthermore, if the Solvency Capital Requirement is no longer complied with, the undertaking must submit a short-term finance scheme.

How is the right of establishment and freedom to provide services to be exercised?

If an insurance undertaking wishes to establish a branch, it must notify the supervisory authorities of its home Member State. A branch is a permanent representative of the undertaking and may consist merely of an office managed by the staff of the undertaking or an independent person with authority to act.

What are the rules framing branches established in the Union with head offices situated outside the Union?

A Member State may authorise the branch of a third-country undertaking on its own territory if it fulfils the following conditions inter alia:

  • it is entitled to pursue insurance business under its national law;
  • it undertakes to cover the Solvency Capital Requirement and the Minimum Capital Requirement;
  • it fulfils the applicable governance requirements;
  • it submits a scheme of operations.

The branch of a third-country undertaking may transfer its portfolio of contracts to an accepting undertaking established in the same Member State.

Monitoring of insurance and reinsurance undertakings belonging to a group

The term "group" means a group of undertakings that:

  • is composed of a participating undertaking, its subsidiaries and entities in which it holds a participation;
  • is based on the establishment on a contractual basis of financial relationships between these undertakings.

Member States shall require the participating insurance or reinsurance undertakings to ensure that eligible own funds are available in the group which are always at least equal to the group Solvency Capital Requirement.

Member States shall provide for means of exercising control over groups. A single supervisor is to be designated from among the supervisory authorities of the Member States concerned. The supervisor shall be responsible in particular for:

  • coordinating the gathering and dissemination of information;
  • supervisory review and assessment of the financial situation of the group;
  • assessment of compliance with the rules on solvency and on risk concentration and intra-group transactions;
  • assessing the system of governance of the group.

If a parent undertaking has its head office outside the European Union, the undertaking shall be subject to supervision carried out by an authority of a third country.

Reorganisation and winding-up of insurance undertakings

Reorganisation measures correspond to intervention by the competent authorities. They are intended to preserve or restore the financial situation of an insurance undertaking. Only the competent authorities of the home Member State shall be entitled to decide on reorganisation measures with respect to an insurance undertaking. These measures shall be governed by the law of the home Member State.

Winding-up proceedings shall involve the realisation of the assets of an insurance undertaking and the distribution of the proceeds among the creditors, shareholders or members. As for reorganisation measures, only the competent authorities of the home Member State shall be entitled to decide on winding-up proceedings with respect to an insurance undertaking.


The Commission shall be assisted by the European Insurance and Occupational Pensions Committee (EIOPC).


This Directive repeals Directives 64/225/EEC, 73/239/EEC, 73/240/EEC, 76/580/EEC, 78/473/EEC, 84/641/EEC, 87/344/EEC, 88/357/EEC, 92/49/EEC, 98/78/EC, 2001/17/EC, 2002/83/EC and 2005/68/EC.

Key terms of the Act
  • Insurance undertaking: a direct life or non-life insurance undertaking which has received authorisation;
  • Reinsurance: the activity consisting in accepting risks ceded by an insurance undertaking or third-country insurance undertaking, or by another reinsurance undertaking or third-country reinsurance undertaking;
  • Supervisory authority: the national authority or the national authorities empowered by law or regulation to supervise insurance or reinsurance undertakings.


ActEntry into forceDeadline for transposition in the Member StatesOfficial Journal

Directive 2009/138/EC



OJ L 335 of 17.12.2009

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

Directive 2011/89/EU



OJ L 326 of 8.12.2011

Directive 2012/23/EU



OJ L 249 of 14.9.2012

Successive amendments and corrections to Directive 2009/138/EC have been incorporated in the basic text. This consolidated version is for reference purpose only.

Last updated: 21.12.2012
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