Reinsurance Directive (RID) / Solvency II

On 16 November 2005, the Council and the European Parliament adopted Directive 2005/68/EC on reinsurance. The Directive forms part of the European Union’s Financial Services Action Plan, which aims to create a single market in financial services in the European Union.

According to Article 64 (1), the deadline for transposing the Directive is the 10th of December 2007

There are definitely challenges, but also opportunities after December, 2007. This directive gives you the freedom to passport your services. Upon authorization, reinsurers are able to carry out business in any of the EEA States either through a branch, or directly under the freedom to provide services.

Although Special Purpose Vehicles (SPVs) are not reinsurance undertakings, they do conduct reinsurance-like activities. SPVs receive their authorisation in accordance with Article 46. Member States can ask for supplementary supervision within the scope of their national legislation. We will discuss the risks and the opportunities of using SPVs.

Reinsurance allows direct insurance undertakings have a higher underwriting capacity and reduce their capital costs.

The European Commission has welcomed the approval of the Reinsurance Directive by the
EU's Council of Ministers on its meeting on 17 October.

On June 2005, the European Parliament approved the proposed Directive on reinsurance.

The Directive requires that all reinsurance undertakings be authorised in their home Member State.

To obtain that authorisation, they will need to meet strict requirements.

Once they have done so, they will be free to carry out their activity anywhere in the EU
through the single passport.

The Directive fills the gap in current European insurance legislation which does not provide for regulation of specialised reinsurers whilst activities of reinsurance carried out by direct insurers are subjected to regulation.

It also contributes to reinforce international financial stability.

This is a priority measure under the EU's Financial Services Action Plan, which ultimately aims to establish a truly integrated European market for financial services in which customers can have confidence.

The Directive also updates EU's life, non-life and insurance Groups directives in line with the supervision rules for reinsurance undertakings.

Why did the original Insurance Directives not cover reinsurers?

The third generation Insurance Directives principally cover life and non-life insurance activities by direct insurance undertakings. They also cover reinsurance activities by direct insurers. However, "pure" reinsurance companies were not covered.

Harmonisation work started in the direct insurance field becasue the protection of policyholders and customers of insurance companies was paramount.

Reinsurance is a business transaction between two professional, knowledgeable parties, and there is hence less need to protect a "weaker" party, such as consumers.

However, recent developments in the reinsurance markets show that the reinsurance sector would benefit from suitable and harmonised supervision.

Among other things, this would mean insurance companies could be more certain of the quality of reinsurance companies and have access to more information about them.

That will make their choice of reinsurers easier and ultimately benefit policyholders.

The Solvency ii Association has signed an exclusive worldwide partner agreement with Solvency II Training Ltd, so the Association will provide Solvency II Training classes worldwide only in cooperation with Solvency II Training Ltd.

Solvency II Training Ltd is a niche training consultancy, specialising in the provision of Solvency II training programs to organisations & individuals within the European Union (EU), European Economic Area (EEA) & Non-EEA Countries, including the Offshore Financial Centres (OFCs).

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