Introduction
The Reinsurance Directive develops a European Single Market for reinsurance by establishing a licensing system, a supervisory approach and solvency margin requirements for EU-based pure reinsurers. Under the Directive, once a reinsurer is authorised in one Member State, it can do business in all other EU Member States. The reinsurer is subject to financial regulation only in its home state and will not be required to make financial filings or to maintain assets in other Member States. The legal text was published in the Official Journal of 9 December 2005.
Key issues
Although the Reinsurance Directive is a significant development for pure reinsurers in Europe, most of its provisions have little direct impact on the regulation of Lloyd’s and Lloyd’s managing agents. This is because ‘the Association of Underwriters known as Lloyd’s’ is treated as a single entity and is already subject to the existing Life and Non-Life Directives in relation to all business written, whether primary insurance or reinsurance. Nevertheless, the Directive may lead to changes in the regulation of leading global reinsurers, from which Lloyd’s syndicates purchase reinsurance.
Implementation
Member states were required to implement its provisions by 10 December 2007.
The UK has implemented the Reinsurance Directive, however, not all other Member States have yet done so.
In Mid-October the Commission has sent formal requests to Belgium, Czech Republic, France, Greece, Latvia, the Netherlands, Poland, Portugal and Romania to implement the Reinsurance Directive. These formal requests take the form of "reasoned opinions", the second stage of the infringement procedure laid down in Article 226 of the EC Treaty. If there is no satisfactory reply within two months, the Commission may refer the matter to the European Court of Justice. Subsequently, on 7 November, the French government passed the decree finalising the implementation of the Reinsurance Directive into French legislation.
The Reinsurance Directive will be incorporated into the Solvency II Framework Directive, when the latter comes in force.
Further information
Copy of the Reinsurance Directive.
