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New phase in the insurance Internal Market

I  don t  want to  repeat  to you  my  conviction of  the  importance  of the
internal  market.     Its   importance  for   jobs.     Its  importance   for
competitiveness.   Its importance for consumers.  In short its importance for
Europe s future.  It is so important that we cannot afford to  fail.  History
would judge  us severely  if  we fail,  as would  our children  whose  future
prosperity depends on it.

However, insurance  has been identified as an area  where the expected fruits
of  the  Single Market  Programme have  not been  realised   We have  no real
internal market in  insurance.  We are  failing.  I want to  benefit from the
coming together tonight of  industry representatives, the national regulators
and the Commission officials responsible for the sector.  All have a  role to
play.  I want to ask you all to play an active role if we are to succeed.
Why are  we failing  in insurance  ?  Partly  it is  a question  of effective
implementation of our  Insurance Directives.  We  will of course  continue to
use all means to ensure  their effective implementation.   Unfortunately this
is not the  end of the story.   Much as they  may want to, my  civil servants
cannot now  sit back.   They  cannot sit  and watch  you insurance  companies
competing vigorously  on  a level  playing  field  giving consumers  all  the
advantages of a real internal market.

Of course, we are  probably too impatient and it will  take time.  But it  is
not  just a question of  time.  We are now  discovering other barriers coming
to  the surface.  You in the industry who  try to sell your products in other
Member States  probably know  these barriers  better than  I do.   It is  the
reality of the market place that counts.

We  must find  a way  for my  services to  tap  in more  effectively to  your
experience  to help  us  define  our priorities  and  guide our  action.   We
welcome your complaints  - not just general dissatisfaction but hard examples
on which we can take concrete action.

I count on you here tonight to help us to help you .
General good - no general excuse not to compete

One area  we already  know is  creating impediments is  that of  the  general
good .   Today I have  evidence that  there is  abuse in  the  general  good 
concept by  Member States.   Let  me take  the example  of tax  restrictions.
Cross-border services  are severely  restricted if  Member States allow  tax-
deductibility  of  premiums only  when  the  contract  is  concluded with  an
established company.   Indeed, the   Bachmann  judgement of  the EC Court  of
Justice  indicates  that Member  States  can  maintain,  for  reasons of  the
 general good ,  such a restriction if necessary  to protect the coherence of
their fiscal  system.  The Court  accepted this  for reasons of  the  general
good .  In  a more recent court  case against the Netherlands  the effects of
Bachmann  have fortunately been nuanced.   The Court will  now also take into
consideration any  bilateral  tax  treaties  between  countries  -  and  most
European  countries have already concluded  such treaties amongst themselves.
Although our  first aim is  to approach  these general good  obstacles in  as
non-litigious  a way  as  possible, the  Commission  is clearly  committed to
taking  offending Member States to  the European Court of  Justice if they do
not fall into line.

However taxation is by no means the only example: 

- -  Do you consider that contracts must be written in the  official language
     of the Member State where the risk is located ?

-    Do you consider that  compulsory deductibles from insurance cover should
     be laid down by law ?

-    Do you consider it necessary  that life insurance policies  must contain
     a surrender value ?

I am not convinced that such rules can be justified by the  general good .

In view of the  widespread abuse of the concept  of  general good  to  create
barriers, I attach  importance to our forthcoming Draft Communication on this
subject.  It is scheduled  for next year.   Your input will be vital if  this
Communication  is to be an effective instrument  in creating a single market.
But I want it to be  clear.  I am resolved that the  general  good  reasoning
must be very limited  and strictly applied.  Otherwise we we  will never have
our holy  grail - the  internal market.   The general  good is not  a general
excuse not to compete.

Proposal for a Directive on Insurance Groups

I must now draw your attention  to a situation where more work must be done -
the Draft Directive on insurance  groups currently before Parliament  and the
Work in the Council  is going rather well.  The discussions are constructive.
The overall  support exists  to  fill in  the regulatory  gaps in  groups  to
prevent double-gearing  and other potential loopholes.   Of  course there are
different views on how to translate this  in practice.  The Dutch  Presidency
is committed to finding a solution.   I am quietly confident of progress even
if hard work is still to be done.

The picture  with the Parliament, as you may know, is  less clear.  The draft
document  being  presented  to  the  Legal  Affairs  Committee in  Parliament
diverges  somewhat from  the  Commission s position.    If followed  it could
waken  to  some  extent  the  efficiency  of our  Directive.    I  hope  this
preliminary position of Parliament can  be nuanced.  We still have a long way
to  go -  the Report must  be adopted  first by the  Legal Affairs Committee.
Then by plenary.  What can we do ?

First I address you regulators-members of the Insurance  Committee.  You have
recognised the need to eliminate  double gearing and intra-group  creation of
capital to monitor intra-group transactions and to take into account, in  one
way or another,  reinsurance risks.  Your work  in the Insurance Committee is
witness to this.

Now I  address the industry representatives.   I  am informed that  the draft
Parliamentary Report does  not fully reflect the  full diversity of  views of
the  European  industry in  the  Hearing that  was held.    Perhaps  also the
Commission did not present its views clearly enough. 
Why is this Directive so important to me ?

One of the cornerstones of  the internal market in insurance is harmonisation
of  the solvency  margin.   Solvency  requirements are  essential  prudential
elements.    They are  crucial  for  the  mutual  recognition of  supervisory
controls and consequently for the   European Passport .  Bank  and securities
groups are covered by European rules.

Only insurance groups remain in a legislative vacuum.   Several Member States
but not all  have already  supervisory rules for  insurance groups.   Thereby
eliminating double  gearing  and  other  loopholes.    I  am  convinced  that
effective solvency supervision  must take account of the real capital present
in a  group and  compare it  with the  total risks.   Our proposed  Directive
therefore  not  only  protects  consumers  better.    It  protects  financial
stability.  It re-establishes a  level playing field for  competition between
companies from  different Member States.   And finally  it allows supervisors
and regulators  to  have confidence  in the  European Passport.    It is  not
legislation  for legislation s sake. But a minimum  set of rules necessary to
achieve our objectives.
The current proposals  coming from Parliament require  further work.   We all
have  an  interest  in  a  better  report.    It  is  possible  that  some of
Parliament s  proposals would  be difficult  for the  Council to accept.   We
must  all use the  remaining time and expertise  to help  Parliament to bring
about a more  balanced approach and so allow  the positions to be reconciled.
It requires action from us all now.


I started my speech by referring  to the Single Market and I will end  in the
same vein.  Our  commitment in  the Commission is to  make the Single  Market
work.  We have removed the barriers to market access by insurance companies -
 setting  up  branches  abroad can  be  done faster,  more  cheaply  and more
efficiently  than only two years  ago.  We must now  focus all our efforts on
reducing the  obstacles to  marketing insurance  across borders.   The  draft
Directive on  groups and work on   general good  are two areas  where work is
under way.   The success  of this task  cannot come about  by the efforts  of
Brussels alone.  We  need the active participation and input of Member States
and industry.  The  European insurance industry in addition to  consumers has
everything to gain from  the benefits of a truly open and  competitive single
insurance market.   I  have highlighted  areas where  you can  help.  I  have
given you my commitment to act. I am now calling on your practical support.


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