Swiss Re to Alter Structure as EU Re Directive Deadline Approaches

Swiss Re announced plans to alter its current corporate structure within the European Union by forming three legal entities, based in Luxembourg.

They “will serve as risk carriers for most of its European reinsurance and insurance business, operating via branches in the rest of the EU,” said the bulletin. “The new legal structure will result in more efficient capital management, administration and reporting.”

The structural changes are designed to accord with the “upcoming implementation of the European Reinsurance Directive,” Swiss Re said. “The new legal structure will improve the alignment of regulatory and economic capital requirements.”

Swiss Re indicated that it is targeting mid-2009 to have the new structure in place, starting with the conversion of the first locations by January 1, 2008. “For Swiss Re clients, the envisaged change will have no significant impact, as Swiss Re’s business structure and market approach will remain unchanged,” said the announcement. “The existing local operations will continue to have the responsibility for their business activities.”

The EU’s financial market Reinsurance Directive, originally introduced in 2003, was approved by the EU’s Council of Ministers at its meeting on October 17, 2005. The EU’s European Parliament approved the proposed Directive in June 2005. The Directive was officially adopted on Dec. 10, 2005. Companies have two years from that date to comply with it, which puts the deadline in December this year.

However, the Directive is being increasingly viewed as an interim measure, effective while the EU formulates the Solvency II rules for the insurance industry that are now scheduled to go into force in 2010. The Directive’s provisions would then beome part of Solvency II.

In a bulletin on the EU web site (http://europa.eu) it describes the Directive as requiring that “all reinsurance undertakings be authorized in their home Member State. To obtain that authorization, they will need to meet strict requirements.”

The directive lays down the minimum necessary conditions to obtain official authorization for reinsurance activities. These conditions stipulate that undertakings must have a specific legal form, submit a scheme of operations and hold a minimum guarantee fund.

Once companies have complied with these requirements 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 specialized reinsurers whilst activities of reinsurance carried out by direct insurers are subjected to regulation. It also contributes to reinforce international financial stability.”

The EU also notes that the Directive 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.

Topics Legislation Europe Reinsurance