Outline of the Community (European Union) legislation about Reinsurance


These categories group together and put in context the legislative and non-legislative initiatives which deal with the same topic.

Internal market > Single market for services > Financial services: insurance

Reinsurance (until November 2012)

Document or Iniciative

Directive 2005/68/EC of the European Parliament and of the Council of 16 November 2005 on reinsurance and amending Council Directives 73/239/EEC, 92/49/EEC as well as Directives 98/78/EC and 2002/83/EC [See amending act(s)].


This Directive, provided for in the Action Plan for Financial Services (APFS), provides a harmonised regulatory framework for reinsurance in the European Union (EU). By establishing a system of specific supervision for the cross-border reinsurance market, the Directive aims to strengthen insurance markets. According to the Commission, the Directive will help to reduce the administrative charges and costs resulting from different national rules.

This Directive follows the approach adopted by European legislation on insurance by bringing about such harmonisation as is essential, necessary and sufficient to achieve the mutual recognition of authorisations and prudential supervision systems, thereby making it possible to grant a single authorisation valid throughout the EU and to apply the principle of supervision by the home Member State.


This Directive provides general provisions for the taking up of the self-employed activity of reinsurance carried out exclusively by undertakings, which are established in a Member State or wish to become established there.

This Directive will not apply to:

  • direct insurance undertakings to which Directives 73/239/EEC or 2002/83/EC apply (Life assurance and non-life insurance);
  • activities and bodies referred to in Articles 2 and 3 of Directive 73/239/EEC;
  • activities and bodies referred to in Article 3 of Directive 2002/83/EC;
  • the activity of reinsurance conducted or fully guaranteed by the government of a Member State acting, for reasons of substantial public interest, as a last resort reinsurer, including when such a role is required by a situation whereby adequate reinsurance cover cannot be provided on the commercial market.

Taking up the business of reinsurance

The taking up of the business of reinsurance is to be subject to prior administrative authorisation granted by the competent authorities of the home Member State. Such authorisation, valid throughout the EU, will permit a reinsurance undertaking to operate, under either the right of establishment or the freedom to provide services.

Authorisation is provided for all types of reinsurance business (life assurance, non-life insurance, etc.) and granted to any reinsurance undertaking adopting one of the forms set out in Annex 1 to the Directive or, alternatively, that of European Company (SE).

All reinsurance undertakings must:

  • limit their activities to reinsurance and related business;
  • submit a scheme of operations;
  • possess the minimum guarantee fund (set at €3 million), subject to certain exceptions;
  • be run by “qualified” persons “of good repute”. The identities of the shareholders or members must also be made known.

Conditions for conducting reinsurance business

As regards the principles and methods of financial supervision, this Directive stresses that the financial supervision of reinsurance undertakings is the sole responsibility of the home Member State and involves the verification of solvency (in other words, the undertaking’s ability to fund expenses), technical provisions (the amount which a reinsurance undertaking must provide for in order to meet its underwriting liabilities) and the assets of reinsurance undertakings. Particular attention is given to professional confidentiality obligations and to the exchange of information between competent authorities.

Conditions relating to acquisitions and qualified shares

The Directive lays down specific criteria for implementing the prudential evaluation of shareholders and management at the time of a planned acquisition, defining a clear procedure for this to be implemented. The competent authorities must be given prior notice of all acquisitions or transfers of qualified shares in reinsurance undertakings, before conducting an agreed evaluation.

The competent authorities will decide on the appropriate repute of the potential purchaser, its potential influence and financial health of the acquisition.

Rules relating to technical provisions

The Directive provides for:

  • the establishment of technical provisions by reinsurance undertakings in accordance with Directives 91/674/EEC or 2002/83/EC. Authorised reinsurance undertakings do not need to pledge assets to cover reserves. The State may allow technical provisions to be covered by claims against reinsurers or insurers who are not authorised;
  • the establishment of equalisation reserves in order to offset deficits recorded in each financial year under five heads of credit: general insolvency, export credit, instalment credit, mortgages and agricultural credit. In certain cases, the Member State may grant an exemption from the obligation to establish an equalisation reserve;
  • freedom to invest assets covering the technical provisions and equalisation reserves, provided it is diversified and prudent. The aim is to reduce the risk of volatility in the financial markets and to secure the sufficiency, liquidity, security and matching of investments;
  • notification by the acquirer in writing of the intended amount of his participation to the relevant authorities.

Solvency margin and guarantee fund

Each Member State is to require of every reinsurance undertaking whose head office is situated in its territory an adequate available solvency margin in respect of its entire business at all times, which is at least equal to the requirements of this Directive.

The Directive provides that the required solvency margin in respect of both non-life and life reinsurance business should be determined on the basis either of the annual amount of premiums or contributions, or of the average burden of claims for the past three financial years.

Reinsurance undertakings transacting both non-life and life reinsurance business must have an available solvency margin to cover the total sum of required solvency margins in respect of both non-life and life reinsurance activities; otherwise, an undertaking will be deemed to be in difficulty or in an irregular situation.

The guarantee fund corresponds to a third of the required solvency margin. It may not be less than €3 million, while any Member State may provide that, for captive reinsurance undertakings *, the minimum guarantee fund be not less than €1 million.

Reinsurance undertakings in difficulty

The competent authorities in the home Member State may restrict or prohibit the free disposal of assets belonging to reinsurance undertakings in difficulty or in an irregular situation. The competent authorities must be empowered to require reinsurance undertakings to have a financial recovery plan of reinsurance undertakings (which must contain an estimate of management costs, forecast revenue and expenditure, a forecast balance sheet, estimates of the financial resources intended to cover underwriting liabilities and the requisite solvency margin and the overall retrocession policy). In exceptional cases, the authorisation granted to a reinsurance undertaking may be withdrawn by the home Member State.

Other provisions

In certain cases, the home Member State may lay down specific provisions concerning the pursuit of “finite” reinsurance activities *. As regards special purpose vehicles *, the Member State where the vehicle is established is to lay down the conditions under which the activities of such an undertaking is to be carried out.

Where a reinsurance undertaking with a branch or carrying on business under the freedom to provide services does not comply with the law of the host Member State, the local authorities may first call upon the undertaking to remedy that irregular situation; if the infringement continues, they may intervene in order to prevent or penalise the new irregular situation.

Reinsurance undertakings whose head offices are outside the European Union (EU) are not to be more favourably treated than reinsurance undertakings that have their head office in the EU.

Where a third country fails to grant EU reinsurance undertakings effective access to its market, the EU may negotiate with a view to obtaining improved access to that third-country market. In comitology, the Commission is to be assisted by the European Insurance and Occupational Pensions Committee.

This Directive is repealed by the Directive on the taking-up and pursuit of the business of insurance and reinsurance as of 1 November 2012.

Key terms used in the act
  • Reinsurance: the activity consisting of accepting risks ceded by an insurance undertaking or by another reinsurance undertaking.
  • Captive reinsurance undertaking: a reinsurance undertaking owned either by a financial undertaking other than an insurance or a reinsurance undertaking or a group of insurance or reinsurance undertakings to which Directive 98/78/EC applies, or by a non-financial undertaking, the purpose of which is to provide reinsurance cover exclusively for the risks of the undertaking or undertakings to which it belongs or of an undertaking or undertakings of the group of which the captive reinsurance undertaking is a member;
  • “Finite” reinsurance: reinsurance under which the maximum loss potential exceeds the premium over the lifetime of the contract by a limited but significant amount, together with at least one of the following two features: i) explicit and material consideration of the time value of money; ii) contractual provisions to moderate the balance of economic experience between the parties over time to achieve the target risk transfer.
  • Special purpose vehicles: any undertaking which assumes risks from insurance or reinsurance undertakings and which covers such risks through the proceeds of a debt issuance or some other financing mechanism.


Act Entry into force Deadline for transposition in the Member States Official Journal

Directive 2005/68/EC



OJ L 323-1, of 9.12.2005

Amending Act(s) Entry into force Deadline for transposition in the Member States Official Journal

Directive 2007/44/EC



OJ L 247 of 21.9.2007

Directive 2008/37/EC


OJ L 81 of 20.3.2008

Successive amendments and corrections to Directive 2005/68/EC have been incorporated in the basic text. This consolidated version  is for reference purpose only.

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