Council Directive 92/49/EEC (repealed)Show full title

Article 21 U.K.

[F1 1. The home Member State may not authorise insurance undertakings to cover their technical provisions and equalisation reserves with any assets other than those in the following categories:]

A.

Investments

(a)

debt securities, bonds and other money and capital market instruments;

(b)

loans;

(c)

shares and other variable yield participations;

(d)

units in undertakings for collective investment in transferable securities and other investment funds;

(e)

land, buildings and immovable property rights;

B.

Debts and claims

(f)

[F1 debts owed by reinsurers, including reinsurers shares of technical provisions, and by the special purpose vehicles referred to in Article 46 of Directive 2005/68/EC of the European Parliament and of the Council of 16 November 2005 on reinsurance (1) ;]

(g)

deposits with and debts owed by ceding undertakings;

(h)

debts owed by policyholders and intermediaries arising out of direct and reinsurance operations;

(i)

claims arising out of salvage and subrogation;

(j)

tax recoveries;

(k)

claims against guarantee funds;

C.

Others

(l)

tangible fixed assets, other than land and buildings, valued on the basis of prudent amortization;

(m)

cash at bank and in hand, deposits with credit institutions and any other bodies authorized to receive deposits;

(n)

deferred acquisition costs;

(o)

accrued interest and rent, other accrued income and prepayments;

In the case of the association of underwriters know as Lloyd's, asset categories shall also include guarantees and letters of credit issued by credit institutions within the meaning of Directive 77/780/EEC(2) or by assurance undertakings, together with verifiable sums arising out of life assurance policies, to the extent that they represent funds belonging to members.

[F1 The inclusion of any asset or category of assets listed in the first subparagraph shall not mean that all those assets should automatically be accepted as cover for technical provisions. The home Member State shall lay down more detailed rules setting the conditions for the use of acceptable assets.]

In the determination and the application of the rules which it lays down, the home Member State shall, in particular, ensure that the following principles are complied with:

(i)

assets covering technical provisions shall be valued net of any debts arising out of their acquisition;

(ii)

all assets must be valued on a prudent basis, allowing for the risk of any amounts' not being realizable. In particular, tangible fixed assets other than land and buildings may be accepted as cover for technical provisions only if they are valued on the basis of prudent amortization;

(iii)

loans, whether to undertakings, to State authorities or international organizations, to local or regional authorities or to natural persons, may be accepted as cover for technical provisions only if there are sufficient guarantees as to their security, whether these are based on the status of the borrower, mortgages, bank guarantees or guarantees granted by insurance undertakings or other forms of security;

(iv)

derivative instruments such as options, futures and swaps in connection with assets covering technical provisions may be used in so far as they contribute to a reduction of investment risks or facilitate efficient portfolio management. They must be valued on a prudent basis and may be taken into account in the valuation of the underlying assets;

(v)

transferrable securities which are not dealt in on a regulated market may be accepted as cover for technical provisions only if they can be realized in the short term;

(vi)

debts owed by and claims against a third party may be accepted as cover for technical provisions only after deduction of all amounts owed to the same third party;

(vii)

the value of any debts and claims accepted as cover for technical provisions must be calculated on a prudent basis, with due allowance for the risk of any amounts not being realizable. In particular, debts owed by policyholders and intermediaries arising out of insurance and reinsurance operations may be accepted only in so far as they have been outstanding for not more than three months;

(viii)

where the assets held include an investment in a subsidiary undertaking which manages all or part of the insurance undertaking's investments on its behalf, the home Member State must, when applying the rules and principles laid down in this Article, take into account the underlying assets held by the subsidiary undertaking; the home Member State may treat the assets of other subsidiaries in the same way;

(ix)

deferred acquisition costs may be accepted as cover for technical provisions only to the extent that that is consistent with the calculation of the technical provision for unearned premiums.

2. Notwithstanding paragraph 1, in exceptional circumstances and at an insurance undertaking's request, the home Member State may, temporarily and under a properly reasoned decision, accept other categories of assets as cover for technical provisions, subject to Article 20.

Textual Amendments

F1 Substituted by 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 (Text with EEA relevance).

(1)

[F1 OJ L 323, 9.12.2005, p. 1 .]

(2)

OJ No L 322, 17.12.1977, p. 30. Last amended by Directive 89/646/EEC (OJ No L 386, 30.12.1989, p. 1).

Textual Amendments

F1 Substituted by 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 (Text with EEA relevance).