Brussels, 15th February 2001
Financial services: Commission welcomes adoption of Directive on reorganisation and winding up of insurance undertakings
The European Commission has welcomed the approval by the European Parliament at its 15th February Strasbourg plenary session of the Council common position on a Directive on Reorganisation and Winding-up of Insurance Undertakings. With this approval, the Directive has now been adopted, without the need for a second reading by the Council. The Directive fills a major gap in the European Union's financial services legislation and forms part of the Financial Services Action Plan, endorsed at the Lisbon European Council. Under the Directive, where an insurance undertaking with branches in other Member States fails, the winding up process will be subject to a single bankruptcy proceeding initiated in the Member State where it has its registered office. While winding up proceedings are, hopefully, rare, the Directive is designed to guarantee consumer protection in such instances. Improved consumer protection is particularly important given the expansion in financial services and the growth in personal investment and savings plans.
Internal Market Commissioner Frits Bolkestein said: "This Directive ensures that in the case of the failure of an insurance undertaking, there is a clearly established procedure, equally valid for all policyholders for the distribution of assets This will be an important contribution to ensuring that consumers feel more confident that he or she is adequately protected. Such consumer confidence is essential if the full potential for cross-border trade in financial services is to be developed."
Under the Directive, where an insurance undertaking with branches in other Member States fails, the winding up process will be subject to a single bankruptcy proceeding initiated in the Member State where it has its registered office (known as the home state) and governed by a single bankruptcy law that of the home state. This approach is consistent with the home country control principle that is the basis for the EU's insurance directives. By having one winding-up proceeding rather than several, costs will be lower and the procedure quicker.
Currently, if an insurance undertaking with branches across Europe has to be wound up and its assets distributed among its creditors, the authorities in each Member State where the undertaking is represented can open separate insolvency proceedings. This can lead to conflicts of jurisdiction and means that policyholders are not equally treated. Similarly, if an undertaking has to be reorganised to restore its financial health, approaches in different Member States can be divergent.
The Directive was first proposed in 1987 but has proved extremely lengthy to negotiate, due to the complexity of the insolvency regimes of 15 Member States. The European Parliament agreed on the second reading of the proposal not to amend the common position reached in Council on 10 October 2000 and voted on February 15 2001 in favour of its immediate adoption.