Erste Bank JPMorgan Merrill Lynch International

Specific Areas
Alongside these “major” directives, the EC has adopted rules in the following areas: motor vehicle
liability insurance, annual financial statements and consolidated financial statements of insurance
companies, legal costs insurance, credit and surety insurance and reinsurance. In addition, it has also
set up an Insurance Committee to assist the Commission in its task of cooperating with national
supervisory authorities in this area. There is also a directive on the coordination of legal regulations
and administrative provisions relating to the compulsory liquidation of direct insurance companies. In
order to give supervisory authorities more effective instruments to evaluate the actual solvency of the
insurance companies that are part of a given insurance group, a directive on additional supervision of
insurance companies was also adopted. This directive expands supervision to all activities which could
have an impact on the financial position and the activity of the supervised insurance company. Also,
pursuant to the directive, reinsurance, holding and insurance companies with their registered offices in
a non-member state, in which a company subject to supervision holds a interest or is in a parent/
affiliated company relationship are subject to supervision. The focus of the supervision is that the
insurance group maintains adequate capital reserves on a consolidated basis and that intra-group
transactions do not impact the solvency of the insurance company. Furthermore, procedures for the
calculation of the solvency standards and own capital standards at group level have been established,
and qualitative norms for “intra-group transactions” and “risk concentration” at the group level
introduced. On July 10, 2007, the EU Commission proposed a directive to improve solvency
supervision, referred to as Solvency II that proposes a revision of the insurance supervision law with
the goals of improving consumer protection, modernizing supervision, deepening the integration of the
markets, and improving the ability of European insurance companies to compete internationally. Under
the new system, insurers and reinsurers will be obligated to take into account all types of risks and to
manage them effectively. One of the options available to insurance and reinsurance companies under
the Solvency II reform is the choice of calculating the Solvency Capital Requirements (SCR) using
either the “European Standard Formula” or by applying an “Internal Model”. Additionally, insurance
groups will get a group supervisor, which should facilitate monitoring the group as a whole. Negotiations
regarding the proposed directive are currently in progress in the European Council and the
European Parliament. It is expected that the directive will be adopted in 2009.
The national implementing measures for the directive on the principle of equal treatment for men
and women (2004/113/EC) came into effect on December 1, 2007. These measures prescribe equal
treatment for men and women with respect to access to insurance services. As a result, different
pricing is only permitted in exceptional cases, where an actuarial basis can be shown. In the area of
health insurance, an exception has been introduced, so that the costs of pregnancy, childbirth and
maternity are borne jointly by men and women.
In January 2001, the European Commission set up a network for out-of-court settlements
(FIN-NET) in the financial services industry. The network is designed to help dissatisfied consumers
find an amicable solution to a problem where the supplier has its registered office in another member
state.
Insurance License
Every insurance company must be licensed for business operations. As a rule, the FMA will issue
a license if the necessary legal conditions are fulfilled (for example sufficient capital reserves, a
suitable business plan, proper qualifications of the management board members). An insurance
company which has its registered office in another EEA member state only needs authorization from
the competent supervisory authority in its home country, which authority will then primarily be in
charge of the supervision of the company. Insurance companies that have their registered office in an
EEA member state are authorized to operate in Austria or another EEA member state either by
establishing a branch office or pursuant to the freedom to provide services, as long as they have
notified the competent authority in their home country, which in turn notifies the FMA.
Supervision of the Operations of Insurance Companies
The insurance supervisory authority monitors compliance with the licensing requirements not only
at the time when the license is granted but throughout the entire duration of the company’s business
activities. In doing so, the authority has to take all measures necessary to protect the interests of
policyholders, in particular to ensure that claims arising under the insurance contracts can be met on
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