EUROPEAN INTEGRATION AND INSURANCE (Creating a Common Insurance Market) InsuranceWITHERBY Witherby Insurance and Legal A Division of Witherby Publishing Group Ltd 4 Dunlop Square, Livingston, Edinburgh, EH54 8SB, Scotland, UK Tel No: +44(0)1506 463 227 - Fax No: +44(0)1506 468 999 Email: info@emailws.com - Web: www.witherbyseamanship.com First edition published 1980 Reprinted 2009 Reprinted 2010 ISBN 0 900886 42 0 © T.H. ELLIS 1980 British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library. Notice of Terms of Use “Whilst the [advice and] information in this book is believed to be true and accurate at the date of going to press, neither the author nor the publisher can accept any legal responsibility or liability for any errors or omissions that may be made.” Published by Witherby Publishing Group Ltd 4 Dunlop Square, Livingston Edinburgh, EH54 8SB Scotland, UK Tel No: +44(0)1506 463 227 Fax No: +44(0)1506 468 999 Email: info@emailws.com www.witherbys.com W ITHERBY P U BLISHING GRO U PSince-1740 European Integration and Insurance (Creating a Common Insurance Market) by T. H. ELLIS, Ph.D.(Lon.), LL.M., F.C.I.I., Grad.Cert.Ed. Senior Lecturer, European Studies Department National Institute for Higher Education, Limerick Foreword The process of European integration, in general terms, involves interaction between legal, economic and political influences in the formulation of new Community legislation. The application of this process to a technical and abstruse field of international business produces a complex subject matter. In synthesising European integration and insurance, the author has woven a clear and logical pattern through this complicated area of European economic law. As a result the book forms a most useful case study in the creation of an important element of one of the aspects of the common market in the E.E.C. The publication of this book is timely. On 5 March 1979 the Council approved the important Life Assurance Establishment Directive. On 28 May 1979 the Prime Minister of Greece signed the Act of Accession to the Community. Negotiations are getting under way with Spain and Portugal. The potential size of the common insurance market is increasing again. This book is of immediate interest to all those involved with insurance in the Community, and indeed, throughout Western Europe. It can also be recommended to practitioners, teachers and students of economics, law, politics and European studies as a complete and authoritative work on a significant component of European economic integration. I commend Dr. Ellis for the care, thought and effort which he has put into this work and for his initiative in producing it. Michael O’Kennedy Minister for Foreign Affairs President-in-Office of the Council of the European Communities. Dublin August 1979 v vi Preface Even a cursory look at the Treaty establishing the European Economic Community will reveal that it is an unusual constitutional document. National constitutions normally provide essentially for the setting up of government institutions and the guaranteeing of fundamental human rights. The Treaty of Rome contains the institutional framework but otherwise deals largely with economic matters; specifically the creation of a common market amongst the Member States. Many barriers and obstacles exist preventing the liberalisation of trade within the Community. Because of this there are few specific areas (outside of agriculture) in which progress towards a common market has been notable. The international business of insurance is emerging as an exception. Over the last two decades, considerable amounts of time and energy have been expended by various national representatives in negotiating a liberalisation of Community insurance markets. This book records their progress and successes. In my treatment of the subject I have isolated the various obstacles preventing economic integration and examined the progress made in overcoming them. Such progress includes, for example, Community legislation in the field of establishment, and the current negotiations in the sphere of non-life services and insurance contract law. I have moved on to spell out possible implications of closer European integration. In particular the evolution of a Community policy on external insurance trade — a development which would need much political goodwill to become a reality. Progress towards integration in the field of insurance, as in other trading areas, is dependent upon a consensus being reached between differing interests in different and independent Member States. This factor highlights the political aspect to the formulation of legislation necessary to implement the economic aims of the Rome Treaty. Insurance activities can be classified as services. Thus the barriers to market integration associated with free movement of goods (customs duties, etc.) do not apply. Instead the obstacles to insurance integration are differing laws in vii each Member State. Economists and lawyers may be interested to note how much approximation of laws is the key to integrating Community insurance markets. There are over one million people directly employed in the insurance markets of the Community. It is hoped that this book will assist decision-makers associated with these markets appreciate the short, medium and long term implications of European economic integration for their national insurance markets and organisations. This book is an adaptation of my doctoral thesis which was presented to the University of London in 1975, and entitled “State Control of Insurance Companies in the E.E.C.” However, whilst the thesis was concerned primarily with the concept of government control of insurers and freedom of establishment, this work is intended to cover all aspects of integration for the insurance industries of the Community. I am indebted to a number of people who helped in the writing and production of this book. From amongst those with whom I discussed aspects of the subject matter I would like to mention Mr. A.R. Beadle and Mr. Wm. Pool. I should like to thank Dr. P. Doran for his encouragement and assistance with this project, and Mrs. Mary Murphy who typed the final manuscript. My thanks are due to Miss Brid Houlihan and Mr. Sean Murray who read the manuscript and made many helpful suggestions. I should also like to thank the Commission of the European Communities for their grant which helped make publication possible, and record my appreciation of the libraries of the Chartered Insurance Institute, London and the National Institute for Higher Education, Limerick (particularly the European Documentation Centre there). I have tried to state developments from inception of the Community to 31 May 1979. The manuscript went to the printers on 18 July 1979. T.H.E. European Studies Department N.I.H.E., Limerick 26 July 1979 Table of Contents Page FOREWORD v PREFACE vi INTRODUCTION xv Non-Life Insurance xix Life Assurance xix Chapter 1 THE CONCEPT OF A COMMON INSURANCE 1 MARKET European Economic Integration 1 A Common Insurance Market 5 Freedom of Establishment 7 What this freedom means 7 Eligible Persons 8 Implementation for Insurance Undertakings 10 Freedom of Services 12 What is meant by “services” 13 Which “restrictions” need to be abolished 14 Means of Implementation 16 Free Movement of Capital 17 Free Movement of Workers 18 Chapter 2 OBSTACLES IN THE WAY OF A COMMON 19 INSURANCE MARKET Preventing Freedom of Establishment 19 Government Control — its aims and extent 20 Authoritative Statements 23 Government Controls. A general classification 27 European Preventive Controls in 1973 31 (a) Legal Requirements 33 (b) Financial Requirements 35 (i) Minimum Share Capital 35 (ii) Guarantee Deposits 36 (c) Accounting Requirements 37 (d) Technical Requirements 38 viii (e) Economic Requirements 38 European Concurrent Controls in 1973 38 Accounts Required 39 Financial Guarantees Required 40 (a) Nature and Amount 41 (b) Covering Assets 43 European Final Controls in 1973 45 Preventing Freedom of Services 47 General Obstacles 47 Chapter 3 OVERCOMING THE OBSTACLES TO 51 INTEGRATION How — The Approximation of Laws 51 When — The General Programme 52 By Whom — Institutional and Organisational 53 Structures (i) The Commission 54 (ii) The Control Authorities of the Member State Governments 55 (iii) Representatives of the Private Enterprise Insurance Industry 55 (iv) Representatives of Insurance Purchasers Interests 57 (v) Interaction with Community Institutions 57 Chapter 4 FREEDOM OF ESTABLISHMENT AND 61 SERVICES FOR REINSURERS AND REINSURANCE TRANSACTIONS Chapter 5 INTRODUCING FREEDOM OF 63 ESTABLISHMENT FOR NON-LIFE INSURERS Progress Prior to 1973 63 The 1973 Directive on Approximation of Laws 66 Scope of Directive 66 Definitions 67 The General System of Control within the Community 70 Official Authorisations 70 Preventive Controls — Domestic Insurers 71 (i) Legal Requirements 71 (a) Constitution of the Company 71 (b) Scheme of Operations 72 ix (ii) Financial Requirements 73 Minimum Guarantee Fund 73 Preventive Conditions for establishing agencies and branch offices 74 Procedures 75 Common Provisions 76 Concurrent Controls 76 Financial Guarantees required whilst transacting non-life business 77 (a) Nature and Amount 77 (i) Technical Reserves 77 (ii) Solvency Margin 78 (b) Allocation of Assets in the Balance Sheet to cover these Guarantees 82 (c) Verification and Valuation 83 (d) Remedial Action by Controlling Authorities 83 (e) Co-operation between Member States 84 Final Controls 84 Withdrawal of an Authorisation 84 Third Country Insurers 85 Preventive Controls 85 Concurrent Controls 86 Remedial Action by Control Authorities 86 Final Controls 86 Activities in more than one Member State 87 Special Agreements with Third Countries 87 Transitional and other Provisions 87 Freedom of Establishment Directive, 1973 88 Proof of a Good Business Reputation 89 Membership of Professional or Trade Organisations 90 Implementation 90 Chapter 6 FREEDOM OF SERVICES FOR NON-LIFE 91 INSURANCE ACTIVITIES The Draft Non-Life Services Directive, 1975 91 Contents Generally 92 Definition of Freedom to Provide Services 92 Other Definitions 93 Scope of Directive 94 (a) Compulsory Insurances 94 (b) Large Risks 95 Opinions of the European Parliament and the Economic and Social Committee 96 x Other Provisions Supplementing the First Establishment Directive 97 (i) Insurance Contract Law 97 (ii) State Control of Insurers 98 (iii) Eligible Insurance Undertakings 99 Provisions to Facilitate the Effective Exercise of Freedom to Provide Services 99 Entitlement to Freedom of Services 99 Controlling the Exercise of this Freedom 100 (i) Technical Reserves 101 (ii) Special Accounts Required 102 (iii) Third Country Insurers 102 (iv) Premium Taxes 102 (v) Notification of Policyholders 102 Final Provisions 102 The Future of this Draft Directive 103 Chapter 7 INTRODUCING FREEDOM OF 105 ESTABLISHMENT FOR LIFE ASSURERS The Life Approximation of Laws Directive of 1979 105 Scope 106 Definitions 107 The General System of Control Within the Community 108 Official Authorisation 108 Preventive Controls — Establishing New Life Assurance Undertakings or Branches 109 (i) Legal Requirements 109 Constitution of the Company 109 Scheme of Operations 109 Specialisation and Separate Management 109 New Undertakings 110 Existing Composites 110 (ii) Financial Requirements 112 Minimum Guarantee Fund 112 Concurrent Controls 112 Financial Guarantees Generally 112 (a) Nature and Amounts 113 (i) Technical Reserves 113 (ii) Solvency Margin 113 Composition 114 Amount 115 xi (iii) Guarantee Fund 116 (b) Allocation of Assets in the Balance Sheet to Cover these Guarantees 116 (c) Compulsory Reassurance 117 (d) Verification of Financial Guarantees 117 Final Controls 117 Withdrawal of Official Authorisation 117 Third Country Assurers 117 Preventive and Concurrent Controls 117 Transitional and Final Provisions 118 Chapter 8 FREEDOM OF SERVICES FOR LIFE 121 ASSURANCE ACTIVITIES Chapter 9 LIQUIDATING COMMUNITY INSURANCE 123 UNDERTAKINGS The Approximation of Member State Final Control Laws 123 General Provisions 123 Advertisement 124 The Trustee and the Receiver 125 Effect of Winding Up on Insurance Contracts (including Transfer of Portfolio) 126 Transfer of Portfolio 127 Assets — Handling and Distribution 128 Lodging the Register 129 Collection of Assets 129 Distribution of Assets 131 Termination of Special Compulsory Winding Up 131 Chapter 10 INTEGRATION AND INSURANCE 133 INTERMEDIARIES The 1976 Directive 134 Transitional Professional Qualifications 134 Authority of Insurance Intermediaries 136 Documentation and Proof 137 The Freedoms Involved 137 Implementation 138 Future Developments 133 Chapter 11 INTEGRATION AND INSURANCE 141 PERSONNEL Free Movement of Workers 141 What this Freedom Implies 142 xii Insurance Workers 142 Freedom of Establishment 142 Chapter 12 INTEGRATION AND INSURANCE 145 CONTRACTS Approximation of Insurance Contract Law 145 Formation of Contract 147 Declaration of Risk (Duty of Disclosure) 147 Onus of Proof 149 Material Alterations in the Risk 149 United Kingdom Law Commission Working Paper No.73 150 Standardised Documentation (including Policy Language) 152 Alterations 152 Temporary Cover 152 Short Period Policies 152 Policy Language 153 Standard Policy Terms 153 Payment of Premium 153 Claims Conditions 153 Minimisation of Loss 153 Claims Notification 154 Cancellation Conditions 154 Cancellation without Notice 155 Renewal 155 Long Term Contracts 155 Non-cancellable Contracts 155 Third Party Rights 155 Liability Insurances 156 Other Third Party Rights 156 Consumer Protection and Insurance Contracts 156 (i) The Statement of Insurance Practice of 4 May 1977 157 (ii) The Statement of Long-Term Insurance Practice of 28 July 1977 157 Law Commission Criticisms 158 Disclosure to Insurance Intermediaries 159 Future Developments 159 Chapter 13 THE PATH AHEAD 161 The Prospects of Creating a Common Insurance Market 161 Other Associated Community Developments 164 xiii Prospects for Integration 165 Implications for World Insurance Markets 166 Developed Countries 166 Developing Countries 169 Future Community Policy on External Insurance Trade 172 APPENDICES A THE 1964 REINSURANCE DIRECTIVE 175 B CLASSIFICATION OF NON-LIFE INSURANCE 179 BUSINESS Section A — General Classification 179 Section B — Description of Authorisations Granted for more than One Class of Insurance 181 Section C — Ancillary Risks 181 C IMPLEMENTING THE NON-LIFE DIRECTIVE 183 A Summary of Member State Legislation 183 Member State publication offices 185 D FREEDOM OF SERVICES — PROPOSED NON-LIFE 187 LARGE RISKS TRADING ACCOUNT E CLASSIFICATION OF LIFE ASSURANCE BUSINESS 191 and CALCULATION OF SOLVENCY MARGINS 194 F REPRESENT ACTIVES OF GOVERNMENT 197 DEPARTMENTS AND PRIVATE ENTERPRISE INSURANCE ORGANISATIONS IN WESTERN EUROPE Representatives of: (i) E.E.C. Member State Control Authorities 197 (ii) Council of Europe Member State Control Authorities 200 Private Enterprise Representation: 201 (i) C.E.A. Officials in E.E.C. Member States and in 201 Council of Europe Member States 203 (ii) National Members of B.I.P.A.R. representing: — E.E.C. Member States 205 — Council of Europe Member States 209 INDEX 211 xiv Introduction The constitution of the European Economic Community, the Treaty of Rome, specifies as fundamental Community aims, the promotion of a harmonious development of economic activities and an accelerated raising of living standards. Article 2 of the Treaty further provides that the Community is to pursue the task of implementing these aims by establishing a common market1. Since the Community was created in 1958, the Commission has been spearheading this task in many areas of trade and business, including insurance. Insurance is a service. Unlike product sales across national frontiers it attracts neither tariffs nor customs duties. Nevertheless as late as 1973 a common market for insurance did not exist in Western Europe, largely because of the extent of state control of national insurance companies and markets. Following enlargement of the Community on 1 January 1973, Community legislation has been passed which, for example, entitles Non-Life insurance undertakings to enjoy freedom of establishment throughout the EEC. As a result, United Kingdom based Non-Life insurers now enjoy ease of access to many continental insurance markets which had hitherto been, if not inaccessible, then at least very difficult to enter. Part of the price to be paid for the freedom of establishment included a new solvency margin which will be the same in all Member States. Recent rights issues to shareholders by large United Kingdom and Irish insurers can be seen as examples of gearing companies finances to the new levels of the common Community solvency margins, or free reserves. During the last century, many United Kingdom insurers established branches in Ireland, and carried on business there with but the minimum of government interference. Recently, though, the Irish governments’ control of insurers has stiffened. 1 and progressively approximating the economic policies of Member States — outside the scope of this book. xv INTRODUCTION As a result, the United Kingdom insurers operating in Ireland must now appoint a universal agent to represent them there. Again foreign insurers will have to deposit assets in Ireland to match their technical reserves. For example, a U.K. insurer with Non-Life technical reserves of say, £10 million, would have been expected to maintain assets in Ireland of up to £5 million2 in 1978. Before the Non-Life establishment directives had been implemented in this country, Non-Life insurers, having made their initial guarantee deposits, were not subjected to any controls as to the location of assets representing their technical reserves. In the United Kingdom, also, the last six years have seen an unprecedented amount of legislation affecting insurance. This legislation included the Insurance Companies Amendment Act 1973, the Policyholders Protection Act, 1975, and a host of statutory instruments, including the Insurance Companies (Solvency; General Business) Regulations 1977/No.1533 which introduced the common E.E.C. solvency margins. The resulting increase in government powers have necessitated a large increase in the staff of the Department of Trade and Industry; the government department responsible for controlling insurance undertakings in the United Kingdom. The practical implications of Community membership mentioned above illustrate the profound changes which have taken place in the Non-Life sector over the last six years. What other changes are likely to take place in the future and how will they influence insurance company planning and business strategy? To answer questions like these we must look again to the Treaty of Rome. In practical terms, the introduction of a common insurance market means implementation of the “economic” freedoms set out in the Treaty of Rome. Accordingly, we begin Chapter 1 by looking at the economic concept of a common insurance market and then examining what is meant in the Rome Treaty by “freedom of establishment”. We also look at relevant case law and whether and why this freedom should be implemented for insurance undertakings. Articles 59 to 66 of the Rome Treaty provide for the abolition of restrictions on freedom to provide services. Once again we examine why this freedom should be introduced for insurance activities, and also look at the effect of recent decisions of the European Court of Justice on the interpretation of these Articles. We conclude the first chapter by examining the remaining two economic freedoms, i.e. free movement of capital and free movement of workers. It is worth emphasising that the economic freedoms enunciated in the Treaty of Rome are intended to apply to all classes of international business, including, of course, international insurance operations. 2 i.e. amounting to 50% of technical reserves. This figure is expected eventually to rise to a level of about 80% xvi INTRODUCTION As late as 1972, very little progress had been made towards introducing a common insurance market in Western Europe. In Chapter 2, therefore we isolate and analyse the main obstacles preventing the introduction of freedom of establishment and freedom of services. The chief obstacles to freedom of establishment were the varying degrees of individual government control of insurance companies operating within the Community. The main barriers to freedom of services lay in the areas of policy taxes, calculation of technical reserves, and insurance contract law. The legislative developments of the last six years emphasise the increasingly important role played by governments in acting as “watch dogs” over insurers on behalf of the policyholders and general public. Accordingly, we make an analysis of the control laws prevailing in the market economies of Western Europe. We find that all these laws can be classified into three common constituent components which we have styled preventive, concurrent and final controls. Preventive controls are those laws in each state designed to prevent unsuitable associations from being formed to transact insurance business, e.g. those with insufficient paid up share capital. Most governments will only allow an insurance undertaking to commence business when the appropriate public department is satisfied that the company has fulfilled all the preventive conditions. The granting of a licence or authorisation to commence business is usually prima facie proof that an insurance company has fulfilled these controls. Of course not only must a government prevent unsuitable associations obtaining an insurance licence: it must also continue to supervise the trading activities of authorised insurers once they have commenced business. The main reason for this is to ensure that the insurance company remains solvent and allocates enough reserves to meet all the financial liabilities which it is continually incurring. The laws enabling each control authority to check the current operations of its licensed insurance companies are classified as concurrent controls. In most Western European states this checking process involves an examination of returns, accounts and documents submitted by each insurer and sometimes an unannounced or “spot check” examination of the insurer’s affairs at its head office by a government official. Despite the existence of preventive and concurrent control laws, an insurer may sometimes find itself in financial difficulties. The control laws dealing with the withdrawal of an insurance authorisation, the amalgamation or transfer of an insurance company’s portfolio, and the rules protecting policyholders in the event of a winding-up, are classified as final controls. To set the scene for the process of integration, we have illustrated these classifications with examples from the nine different sets of Member State control laws prevailing on the date of enlargement of the Community, i.e. 1 January 1973. xvii INTRODUCTION Having verified that the freedoms of establishment and services detailed in the Rome Treaty are to be introduced for insurance undertakings and activities, and also having isolated and examined the main obstacles, preventing their introduction,3 we then concentrate on how these obstacles can be overcome. Once again the E.E.C. blueprint, the Treaty of Rome, prescribes the method. Articles 100-102 provide for the removal of these obstacles by approximating4 the appropriate Member State laws throughout the Community. The Rome Treaty contains specific provisions on the method of introducing a common market for insurance. Articles 52 to 58 provide for the gradual abolition of restrictions on the right of establishment, i.e. the right of insurance companies to cross into a foreign Member State and establish business there. Articles 59 to 66 of the Rome Treaty provide for the progressive abolition of restrictions on the free supply of services within the Community. This right to supply services means freedom for any company to sell its services in another Member State without firstly having to set up a subsidiary or open a branch office there. Equally it means the freedom of a national insurance “consumer” to buy an insurance policy from any company established within the Community. When introduced it could mean, for example, that an Irish insurance “consumer” would be able to purchase an insurance policy from, say, a German or United Kingdom insurance company, even though this company did not have an establishment in Ireland. The Rome Treaty envisages the completion in stages of the economic freedoms contained in it. Accordingly, in 1961 the timetabled stages towards the attainment of a common insurance market were set out in the “general programme”. The relevancy of the general programme and the organisations involved in preparing and processing the appropriate Community legislation are examined in Chapter 3. Such organisations include Community institutions (i.e. the Commission, the Council of Ministers, the European Parliament, and the Economic and Social Committee); the control authorities of each national government; a central body representing the European private enterprise insurance industry (i.e. the Comité Européene des Assurances (C.E.A.)); and finally, the consumers’ or insurance policyholders’ interests which are usually represented by national consumers associations. Only one of the target dates set out in the general programme was attained. This was the date planned for Reinsurance; the 1964 Reinsurance Directive5 introducing the freedoms of establishment and services for reinsurance operations. 3 in Chapters 1 and 2 respectively. 4 Or co-ordinating. 5 Which is examined in Chapter 4 post. xviii INTRODUCTION NON-LIFE INSURANCE Freedom of establishment in respect of Non-Life insurers was timetabled for 1966. It was not until 1973, however, that concrete progress was made in this area, when two directives were passed by the Council of Ministers. The first Council Directive of 24 July 1973 dealt with the approximation of Member State control laws. In effect it contained a model set of preventive and concurrent rules for controlling Non-Life insurance companies within the Community. When each Member State has adjusted its national control laws in accordance with this directive there will, for example, be similar minimum guarantee funds (Art. 17) and solvency margins (Art. 16) required for all Non- Life insurers operating throughout the Community. The second Council Directive of 24 July 1973 provided for the removal of restrictions on freedom of establishment for Non-Life insurers, when the first directive had been implemented in each Member State. Both these directives are analysed in Chapter 5, and, in fact, are now being implemented throughout the Community by national legislation within each Member State6. Introducing freedom of services for Non-Life insurance activities, and freedom of establishment for life assurers are the next stages in the attainment of a common insurance market7. Commission proposals8 to introduce freedom of services for Non-Life insurance (large risks only) are examined in Chapter 6. These proposals are intended to supplement the first Council directive9 of 24 July 1973, and the provisions seeking to harmonise insurance contract laws and the calculation of technical reserves throughout the Community should be noted particularly. However, the implementation of freedom of services for Non-Life risks, both large and small, is dependent upon, inter alia, a much greater degree of harmonisation of insurance contract law than has hitherto been attained. LIFE ASSURANCE Very little progress has been made towards introducing freedom of services for life assurance activities10. However, developments in the sphere of freedom of establishment for life assurers had reached the draft directive 6 They were implemented in Ireland by the European Communities (Non-Life Insurance) Regulations 1976 and in the United Kingdom by the Insurance (Classes of Business) Regulations 1977/1552 and the Insurance Companies (Solvency: General Business) Regulations 1977/1553. 7 Both should have been introduced by 1968, but these stages and indeed the remainder of the general programme of 1961 are now very much out of date. 8 i.e. the draft directive of December 1975. 9 Non-life approximation of laws — See Ch.5 post. 10 See Chapter 8 post. xix INTRODUCTION stage by December 1973. This draft directive on the approximation of control laws relating to life assurers, contained, inter alia, Commission proposals on the contentious issues of specialisation and separate management,11 as well as prescribing common minimum guarantee funds12 and solvency margins13 for life assurance companies operating throughout the Community. Amendments were also suggested by the European Parliament. These developments have culminated in the Council Life establishment directive of 1979, which we shall examine in Chapter 7. One would have expected a second draft directive relating to the removal of restrictions on freedom of establishment for life assurance companies after the appropriate state control laws had been approximated. This instrument was, in fact, prepared by the Commission but was later withdrawn. It became unnecessary as a consequence of a 1974 judgment emanating from the European Court of Justice. The approximation of laws directives for non-life and life assurance companies respectively dealt with the co-ordination of preventive and concurrent controls. A logical development would be the approximation of final control laws for both non-life and life assurance companies. The E.E.C. Commission has prepared a document on this topic and its provisions are outlined in Chapter 9. It deals with matters such as forms of winding up; effect of winding up on insurance contracts; collection of assets; preferential creditors and so on. It does not seem unduly extravagant to suggest that the agency system has been, and will remain, the cornerstone of insurance marketing. One would therefore expect this factor to receive special attention in the context of the creation of a common insurance market. It does. The Council directive of December 197614 has been designed to permit insurance intermediaries enjoy the freedoms of establishment and services. Therefore, what is meant in the Treaty of Rome by the term “common insurance market” is a single, Community-wide market where insurance enterprises, persons, activities and capital are free to cross national frontiers, and where there are appropriate Community and national laws ensuring that competition within the Community is not distorted. Thus the basic idea is to create conditions within the Community which would make it resemble one large national insurance market. An insurance market normally consists of insurance enterprises, intermediaries and their employees. So far we have looked at the implications of economic integration for insurers,15 intermediaries and the paid employees of insurance intermediaries. To complete the picture, therefore Chapter 11 11 Articles 12 and 13. 12 Article 17. 13 Article 18. 14 Detailed in Chapter 10 post. 15 Both Non-Life and Life. xx INTRODUCTION deals with integration and insurance company manpower; and we outline the possible implications of integration for insurance company workers, managers and supervisors. It is interesting to note that movement of insurance workers is dealt with under the economic freedom styled “free movement of workers” whilst free movement of insurance managers and supervisors falls to be considered under the heading of “freedom of establishment”. A condition precedent to introducing this freedom for insurance managers and supervisors would, of course, be some degree of harmonisation of insurance qualifications within the E.E.C. We therefore look at the implications of such a development. The scope of this subject is immense, particularly when one realises that creating a common insurance market should be viewed in the context of achieving a Common European market for all classes of international trade and business. Community legislative developments in areas such as consumer protection, worker representation and products liability will undoubtedly affect insurers. However, in order to keep this book within reasonable lengths, it has been restricted to the insurance proposals contained in the 1961 general programme, together with directly related Community matters such as coinsurance,16 compulsory motor insurance,16 the reciprocal enforcement of civil and commercial judgments,17 insurance manpower,18 the liquidation of insurance undertakings,19 insurance contract law20 and insurance company accounts21. We conclude in Chapter 13 by reviewing progress made in these areas and assessing the prospects of achieving a common insurance market in the forseeable future. 16 Mentioned incidentally in Chapter 13. 17 Noted in Chapter 3. See also the Somafer case in Chapter 13. 18 Examined in Chapter 11. 19 Detailed in Chapter 9. 20 A draft directive is examined in Chapter 12. 21 Probable future developments noted in Chapter 13. xxi