Council Directive 91/674/EEC of 19 December 1991 on the annual accounts and consolidated accounts of insurance undertakings

• CELEX: Directive 91/674/EEC
• Articles: 73

Article 1

1. Articles 2, 3, 4 (1), (3) to (5), 6, 7, 13, 14, 15 (3) and (4), 16 to 21, 29 to 35, 37 to 42, 43 (1), points 1 to 7 and 9 to 13, 45 (1), 46, 48 to 50, 51 (1), 54, 56 to 59 and 61 of Directive 78/660/EEC shall apply to the undertakings referred to in Article 2 of this Directive, except where this Directive provides otherwise.

2. Where reference is made in Directives 78/660/EEC and 83/349/EEC to Articles 9 and 10 (balance sheet) or to Articles 23 to 26 (profit and loss account) of Directive 78/660/EEC, such references shall be deemed to be references to Article 5 (balance sheet) or to Article 29 (profit and loss account) of this Directive as appropriate.

3. References in Directives 78/660/EEC and 83/349/EEC to Articles 31 to 42 of Directive 78/660/EEC shall be deemed to be references to those Articles, taking account of Articles 45 to 62 of this Directive.

4. Where the aforementioned provisions of Directive 78/660/EEC relate to balance-sheet items for which this Directive lays down no equivalent, they shall be deemed to be references to the items in Article 6 of this Directive where the corresponding assets and liabilities items are listed.

Article 2

1. The coordination measures prescribed by this Directive shall apply to companies and firms within the meaning of the second paragraph of Article 58 of the Treaty which are:

(a) undertakings within the meaning of Article 1 of Directive 73/239/EEC, excluding those mutual associations which are excluded from the scope of that Directive by virtue of Article 3 thereof but including those bodies referred to in Article 4 (a), (b), (c) and (e) thereof except where their activity does not consist wholly or mainly in carrying on insurance business;

(b)

undertakings within the meaning of Article 1 of Directive 79/267/EEC, excluding those bodies and mutual associations referred to in Articles 2 (2) and (3) and 3 of that Directive; or

(c)

undertakings carrying on reinsurance business.

In this Directive, such undertakings shall be referred to as insurance undertakings.

2. Funds of a group pension fund within the meaning of Article 1 (2) (c) and (d) of Directive 79/267/EEC which an insurance undertaking administers in its own name but on behalf of third parties must be shown in the balance sheet if the undertaking acquires legal title to the assets concerned. The total amount of such assets and liabilities shall be shown separately or in the notes on the accounts, broken down according to the various assets and liabilities items. However, the Member States may permit the disclosure of such funds as off-balance-sheet items provided there are special rules whereby such funds can be excluded from the assets available for distribution in the event of the winding up of an insurance undertaking (or similar proceedings).

Assets acquired in the name of and on behalf of third parties must not be shown in the balance sheet.

Article 3

Those provisions of this Directive which relate to life assurance shall apply mutatis mutandis to insurance undertakings which underwrite only health insurance and which do so exclusively or principally according to the technical principles of life assurance.

Member States may apply the first paragraph to health insurance underwritten by joint undertakings according to the technical principles of life assurance where such activity is significant.

Article 4

This Directive shall apply to the association of underwriters known as Lloyd's subject to the adaptations set out in the Annex to take account of the particular nature and structure of Lloyd's.

SECTION 2 General provisions concerning the balance sheet and the profit and loss account

Article 5

The combination of items under the conditions laid down in Article 4 (3) (a) or (b) of Directive 78/660/EEC shall be restricted in the case of insurance undertakings,

- as regards the balance sheet, to items preceded by arabic numerals, except for items concerning technical provisions, and

- as regards the profit and loss account, to items preceded by one or more lower-case letters, except for items I (1) and (4) and II (1), (5) and (6).

Combination shall be authorized only under the rules laid down by the Member States.

SECTION 3 Layout of the balance sheet

Article 6

The Member States shall prescribe the following layout for balance sheets:

Assets

A. Subscribed capital unpaid

showing separately called-up capital (unless national law requires called-up capital to be included under liabilities, in which case capital called but not yet paid must be included as an asset either under A or under E (IV)).

B.

Intangible assets

as described unter items B and C (I) of Article 9 of Directive 78/660/EEC, showing separately:

- formation expenses, as defined by national law and in so far as national law permits their being shown as an asset (unless national law requires their disclosure in the notes on the accounts),

- goodwill, to the extent that it was acquired for valuable consideration (unless national law requires its disclosure in the notes on the accounts).

C.

Investments

III. Land and buildings:

showing separately land and buildings occupied by an insurance undertaking for its own activities (unless national law requires their disclosure in the notes on the accounts).

III.

Investments in affiliated undertakings and participating interests:

1. Shares in affiliated undertakings.

2.

Debt securities issued by, and loans to, affiliated undertakings.

3.

Participating interests.

4.

Debt securities issued by, and loans to, undertakings with which an insurance undertaking is linked by virtue of a participating interest.

III.

Other financial investments:

1. Shares and other variable-yield securities and units in unit trusts.

2.

Debt securities and other fixed-income securities.

3.

Participation in investment pools.

4.

Loans guaranteed by mortgages.

5.

Other loans.

6.

Deposits with credit institutions.

7.

Other.

IV.

Deposits with ceding undertakings.

D.

Investments for the benefit of life-assurance policyholders who bear the investment risk

E.

Debtors

(Amounts owed by:

- affiliated undertakings, and

- undertakings with which an insurance undertaking is linked by virtue of participating interests

shall be shown separately, as sub-items of items I, II and III).

III. Debtors arising out of direct insurance operations

1. policyholders;

2. intermediaries.

III.

Debtors arising out of reinsurance operations.

III.

Other debtors.

IV.

Subscribed capital called but not paid

(unless national law requires that capital called but not paid be shown as an asset under A).

F.

Other assets

III. Tangible assets and stocks as listed under C (II) and D (I) in Article 9 of Directive 78/660/EEC, other than land and buildings, buildings under construction and deposits paid on land and buildings.

III.

Cash at bank and in hand.

III.

Own shares (with an indication of their nominal value or, in the absence of a nominal value, their accounting par value) to the extent that national law permits their being shown in the balance sheet.

IV.

Other.

G.

Prepayments and accrued income

III.

Accrued interest and rent.

III.

Deferred acquisition costs (distinguishing those arising in non-life insurance and life-assurance business).

III.

Other prepayments and accrued income.

H.

Loss for the financial year

(unless national law requires it to be shown as a liability under A (VI)).

Liabilities

A. Capital and reserves

III. Subscribed capital or equivalent funds

(unless national law requires called-up capital to be shown under this item. In that case, the amounts of subscribed capital and paid-up capital must be shown separately).

III.

Share premium account.

III.

Revaluation reserve.

IV.

Reserve.

IV.

Profit or loss brought forward.

VI.

Profit or loss for the financial year

(unless national law requires it to be shown as an asset under H or as a liability under I).

B.

Subordinated liabilities

C.

Technical provisions

1. Provision for unearned premiums:

(a) gross amount

.

(b)

reinsurance amount ( )

.

.

2.

Life assurance provision:

(a) gross amount ( )

.

(b)

reinsurance amount ( )

.

.

3.

Claims outstanding:

(a) gross amount

.

(b)

reinsurance amount ( )

.

.

4.

Provision for bonuses and rebates

(unless shown under 2):

(a) gross amount

.

(b)

reinsurance amount ( )

.

.

5.

Equalization provision

6.

Other technical provisions:

(a) gross amount

.

(b)

reinsurance amount ( )

.

.

D.

Technical provisions for life-assurance policies where the investment risk is borne by the policyholders:

(a) gross amount

.

(b)

reinsurance amount ( )

.

.

E. Provisions for other risks and charges

1. Provisions for pensions and similar obligations.

2.

Provisions for taxation.

3.

Other provisions.

F.

Deposits received from reinsurers

G.

Creditors

(Amounts owed to:

- affiliated undertakings, and

- undertakings with which an insurance undertaking is linked by virtue of a participating interest

shall be shown separately, as sub-items.)

III. Creditors arising out of direct insurance operations.

III.

Creditors arising out of reinsurance operations.

III.

Debenture loans, showing convertible loans separately.

IV.

Amounts owed to credit institutions.

IV.

Other creditors, including tax and social security.

H.

Accruals and deferred income

I.

Profit for the financial year

(unless national law requires it to be shown as a liability under A (VI)).

Article 7

Article 14 of Directive 78/660/EEC shall not apply to commitments linked to insurance activities.

SECTION 4 Special provisions relating to certain balance-sheet items

Article 8

Article 15 (3) of Directive 78/660/EEC shall apply only to assets items B and C (I) and (II) as defined in Article 6 of this Directive. Any movements in these items shall be shown on the basis of the balance-sheet value at the beginning of the financial year.

Article 9

Assets: item C (III) (2)

Debt securities and other fixed-income securities

1. This item shall comprise negotiable debt securities and other fixed-income securities issued by credit institutions, by other undertakings or by public bodies, in so far as they are not covered by item C (II) (2) or (4).

2. Securities bearing interest the rate of which varies in line with specific factors, for example the interest rate on the inter-bank market or on the Euromarket, shall also be regarded as debt securities and other fixed-income securities.

Article 10

Assets: item C (III) (3)

Participation in investment pools

This item shall comprise shares held by an undertaking in joint investments constituted by several undertakings or pension funds, the management of which has been entrusted to one of those undertakings or to one of those pension funds.

Article 11

Assets: items C (III) (4) and (5)

Loans guaranteed by mortgages and other loans

Loans to policyholders for which the policy is the main security shall be included under 'Other loans` and their amount shall be disclosed in the notes on the accounts. Loans guaranteed by mortgage shall be shown as such even where they are also secured by insurance policies. Where the amount of 'Other loans` not secured by policies is material, an appropriate breakdown shall be given in the notes on the accounts.

Article 12

Assets: item C (III) (6)

Deposits with credit institutions

This item shall comprise sums the withdrawal of which is subject to a time restriction. Sums deposited with no such restriction shall be shown under F (II) even if they bear interest.

Article 13

Assets: item C (III) (7)

Other

This item shall comprise those investments which are not covered by items C (III) (1) to (6). Where the amount of such investments is significant, they must be disclosed in the notes on the accounts.

Article 14

Assets: item C (IV)

Deposits with ceding undertakings

In the balance sheet of an undertaking which accepts reinsurance this item shall comprise amounts, owed by the ceding undertakings and corresponding to guarantees, which are deposited with those ceding undertakings or with third parties or which are retained by those undertakings.

These amounts may not be combined with other amounts owed by the ceding insurer to the reinsurer or set off against amounts owed by the reinsurer to the ceding insurer.

Securities deposited with ceding undertakings or third parties which remain the property of the undertaking accepting reinsurance shall be entered in the latter's accounts as an investment, under the appropriate item.

Article 15

Assets: item D

Investments for the benefit of life assurance policyholders who bear the investment risk.

In respect of life assurance this item shall comprise, on the one hand, investments the value of which is used to determine the value of or the return on policies relating to an investment fund and, on the other hand, investments serving as cover for liabilities which are determined by reference to an index. This item shall also comprise investments which are held on behalf of the members of a tontine and are intended for distribution among them.

Article 16

Assets: item F (IV)

Other

This item shall comprise those assets which are not covered by items F (I), (II) and (III). Where such assets are material, they must be disclosed in the notes on the accounts.

Article 17

Assets: item G (I)

Accrued interest and rent

This item shall comprise those items that represent interest and rent that have been earned up to the balance-sheet date but have not yet become receivable.

Article 18

Assets: item G (II)

Deferred acquisition costs

1. The costs of acquiring insurance policies shall be deferred in accordance with Article 18 of Directive 78/660/EEC in so far as such deferral is not prohibited by Member States.

2. Member States may, however, permit the deduction of acquisition costs from unearned premiums in non-life-insurance business and their deduction by an actuarial method from mathematical reserves in life-assurance business. Where this method is used, the amounts deducted from the provisions must be indicated in the notes on the accounts.

Article 19

Liabilities: item A (I)

Subscribed capital or equivalent funds

This item shall comprise all amounts, irrespective of their actual designations, which, in accordance with the legal structure of an insurance undertaking, are regarded under the national law of the Member State concerned as equity capital subscribed by the shareholders or other persons.

Article 20

Liabilities: item A (IV)

Reserves

This item shall comprise all the types of reserves listed in Article 9 of Directive 78/660/EEC under liabilities item A (IV), as defined therein. The Member States may also require other types of reserves if necessary for insurance undertakings the legal structures of which are not covered by Directive 78/660/EEC.

Reserves shall be shown separately, as sub-items of liabilities item A (IV), in the balance sheets of the insurance undertakings concerned, except for the revaluation reserve, which shall be shown as a liability under A (III).

Article 21

Liabilities: item B

Subordinated liabilities

Where it has been contractually agreed that, in the event of winding up or of bankruptcy, liabilities, whether or not represented by certificates, are to be repaid only after the claims of all other creditors have been met, the liabilities in question shall be shown under this item.

Article 22

Where a Member States permits an undertaking's balance sheet to include funds the allocation of which either to policyholders or to shareholders has not been determined by the close of the financial year, those amounts shall be shown as liabilities under an item Ba (Fund for future appropriations).

Variations in this item shall derive from an item II (12a) (Transfers to or from the fund for future appropriations) in the profit and loss account.

Article 23

Liabilities: item C

Technical provisions

Article 20 of Directive 78/660/EEC shall apply to technical provisions, subject to Articles 24 to 30 of this Directive.

Article 24

Liabilities: items C (1) (b), (2) (b), (3) (b), (4) (b) and (6) (b) and D (b)

Reinsurance amounts

1. The reinsurance amounts shall comprise the actual or estimated amounts which, under contractual reinsurance arrangements, are deducted from the gross amounts of technical provisions.

2. As regards the provision for unearned premiums, the reinsurance amounts shall be calculated according to the methods referred to in Article 57 or in accordance with the terms of the reinsurance policy.

3. Member States may require or permit the reinsurance amounts to be shown as assets. Where this option is exercised, those amounts shall be shown as assets under an item Da (Reinsurers' share of technical provisions), subdivided as follows:

1. Provision for unearned premiums

2.

Life assurance provision

3.

Claims outstanding

4.

Provisions for bonuses and rebates (unless shown under 2)

5.

Other technical provisions

6.

Technical provisions for life-assurance policies where the investment risk is borne by the policyholders.

Notwithstanding Article 5, these items shall not be combined.

Article 25

Liabilities: item C (1)

Provision for unearned premiums

The provision for unearned premiums shall comprise the amount representing that part of gross premiums written which is to be allocated to the following financial year or to subsequent financial years. In the case of life assurance Member States may, pending further harmonization, require or permit the provision for unearned premiums to be included in item C (2).

If, pursuant to Article 26, item C (1) also includes the amount of the provision for unexpired risks, the description of the item shall be 'Provision for unearned premiums and unexpired risks`. Where the amount for unexpired risks is material, it shall be disclosed separately either in the balance sheet or in the notes on the accounts.

Article 26

Liabilities: item C (6)

Other technical provisions

This item shall comprise, inter alia, the provision for unexpired risks, i.e. the amount set aside in addition to unearned premiums in respect of risks to be borne by the insurance undertaking after the end of the financial year, in order to provide for all claims and expenses in connection with insurance contracts in force in excess of the related unearned premiums and any premiums receivable on those contracts. However, if national legislation so provides, the provision for unexpired risks may be added to the provision for unearned premiums, as defined in Article 25, and included in the amount shown under item C (1).

Where the amount of unexpired risks is significant, it shall be disclosed separately either in the balance sheet or in the notes on the accounts.

Where the option provided for in the second paragraph of Article 3 is not exercised, this item shall also include the ageing reserves.

Article 27

Liabilities: item C (2)

Life assurance provision

The life assurance provision shall comprise the actuarially estimated value of an insurance undertaking's liabilities including bonuses already declared and after deducting the actuarial value of future premiums.

Article 28

Liabilities: item C (3)

Claims outstanding

The provision for claims outstanding shall be the total estimated ultimate cost to an insurance undertaking of settling all claims arising from events which have occured up to the end of the financial year, whether reported or not, less amounts already paid in respect of such claims.

Article 29

Liabilities: item C (4)

Provision for bonuses and rebates

The provision for bonuses and rebates shall comprise amounts intended for policyholders or contract beneficiaries by way of bonuses and rebates as defined in Article 39 to the extent that such amounts have not been credited to policyholders or contract beneficiaries or included in an item Ba (Fund for future appropriations), as provided for in Article 22, first paragraph, or in item C (2).

Article 30

Liabilities: item C (5)

Equalization provision

1. The equalization provision shall comprise any amounts set aside in compliance with legal or administrative requirements to equalize fluctuations in loss ratios in future years or to provide for special risks.

2. Where, in the absence of any such legislative or administrative requirements, reserves within the meaning of Article 20 have been constituted for the same purpose, this shall be disclosed in the notes on the accounts.

Article 31

Liabilities: item D

Technical provisions for life-assurance policies where the investment risk is borne by the policyholders.

This item shall comprise technical provisions constituted to cover liabilities relating to investment in the context of life assurance policies the value of or the return on which is determined by reference to investments for which the policyholder bears the risk, or by reference to an index.

Any additional technical provisions constituted to cover death risks, operating expenses or other risks (such as benefits payable at the maturity date or guaranteed surrender values) shall be shown under item C (2).

Item D shall also comprise technical provisions representing the obligations of a tontine's organizer vis-à-vis its members.

Article 32

Liabilities: item F

Deposits received from reinsurers

In the balance sheet of an undertaking ceding reinsurance this item shall comprise amounts deposited by or withheld from other insurance undertakings under reinsurance contracts. These amounts may not be merged with other amounts owed to or by the other undertakings in question.

Where an undertaking ceding reinsurance has received as a deposit securities which have been transferred to its ownership, this item shall comprise the amount owed by the ceding undertaking by virtue of the deposit.

SECTION 5 Layout of the profit and loss account

Article 33

1. The Member States shall prescribe the layout shown in Article 34 for profit and loss accounts.

2. The technical account for non-life-insurance business shall be used for those classes of direct insurance which are within the scope of Directive 73/239/EEC and for the corresponding classes of reinsurance business.

3. The technical account for life-assurance business shall be used for those classes of direct insurance which are within the scope of Directive 79/267/EEC and for the corresponding classes of reinsurance business.

4. Member States may require or permit undertakings the activities of which consist wholly of reinsurance to use the technical account for non-life-insurance business for all their business. This shall also apply to undertakings underwriting direct non-life-insurance and also reinsurance.

Article 34

Profit and loss account

III. Technical account - Non-life-insurance business

1. Earned premiums, net of reinsurance:

(a) gross premiums written

.

(b)

outward reinsurance premiums ( )

.

.

(c)

change in the gross provision for unearned premiums and, in so far as national legislation authorizes the inclusion of this provision in liabilities item C (1), in the provision for unexpired risks (+/ )

.

(d)

change in the provision for unearned premiums, reinsurers' share (+/ )

.

.

.

2.

Allocated investment return transferred from the non-technical account (item III (6))

.

3.

Other technical income, net of reinsurance

.

4.

Claims incurred, net of reinsurance:

(a)

claims paid

(aa) gross amount

.

(bb)

reinsurers' share ( )

.

.

(b)

change in the provision for claims,

(aa)

gross amount

.

(bb)

reinsurers' share ( )

.

.

.

5.

Changes in other technical provisions, net of reinsurance, not shown under other headings (+/ )

.

6.

Bonuses and rebates, net of reinsurance

.

7.

Net operating expenses:

(a)

acquisition costs

.

(b)

change in deferred acquisition costs (+/ )

.

(c)

administrative expenses

.

(d)

reinsurance commissions

and profit participation ( )

.

.

8.

Other technical charges, net of reinsurance

.

9.

Change in the equalization provision (+/ )

.

10.

Sub-total (balance on the technical account for non-life-insurance business (item III 1)).

.

III.

Technical account - Life-assurance business

1. Earned premiums, net of reinsurance:

(a) gross premiums written

.

(b)

outward reinsurance premiums ( )

.

(c)

change in the provision for unearned premiums, net of reinsurance (+/ )

.

.

2.

Investment income:

(a)

income from participating interests,

with a separate indication of that derived from affiliated undertakings .................

.

(b)

income from other investments,

with a separate indication of that derived from affiliated undertakings .................

(aa) income from land and buildings

.

(bb)

income from other investments

.

.

(c)

value re-adjustments on investments

.

(d)

gains on the realization of investments

.

.

3.

Unrealized gains on investments

.

4.

Other technical income, net of reinsurance

.

5.

Claims incurred, net of reinsurance:

(a)

claims paid

(aa)

gross amount

.

(bb)

reinsurers' share ( )

.

.

(b)

change in the provision for claims

(aa)

gross amount

.

(bb)

reinsurers' share ( )

.

.

.

6.

Change in other technical provisions, net of reinsurance, not shown under other headings (+/ ):

(a)

life assurance provision, net of reinsurance

(aa)

gross amount

.

(bb)

reinsurers' share ( )

.

.

(b)

other technical provisions, net of reinsurance

.

.

7.

Bonuses and rebates, net of reinsurance

.

8.

Net operating expenses:

(a)

acquisition costs,

.

(b)

change in deferred acquisition costs (+/ )

.

(c)

administrative expenses

.

(d)

reinsurance commissions

and profit participation ( )

.

.

9.

Investment charges:

(a)

investment management charges, including interest

.

(b)

value adjustments on investments

.

(c)

losses on the realization of investments

.

.

10.

Unrealized losses on investments

.

11.

Other technical charges, net of reinsurance

.

12.

Allocated investment return transferred to the non-technical account ( ) (item III 4))

.

13.

Sub-total: (balance on the technical account - life assurance business) (item III 2))

.

III.

Non-technical account 1. Balance on the technical account - non-life-insurance business (item I (10))

.

2.

Balance on the technical account - life-assurance business (item II (13))

.

3.

Investment income

(a) income from participating interests,

with a separate indication of that derived from affiliated undertakings .................

.

(b)

income from other investments,

with a separate indication of that derived from affiliated undertakings .................

(aa) income from land and buildings

.

(bb)

income from other investments

.

.

(c)

value re-adjustments on investments

.

(d)

gains on the realization of investments

.

.

4.

Allocated investment return transferred from the life-assurance technical account (item II (12))

.

5.

Investment charges:

(a)

investment management charges, including interest

.

(b)

value adjustments on investments

.

(c)

losses on the realization of investments

.

.

6.

Allocated investment return transferred to the non-lifeinsurance technical account (item I 2))

.

7.

Other income

.

8.

Other charges, including value adjustments

.

9.

Tax on profit or loss on ordinary activities

.

10.

Profit or loss on ordinary activities after tax

.

11.

Extraordinary income

.

12.

Extraordinary charges

.

13.

Extraordinary profit or loss

.

14.

Tax on extraordinary profit or loss

.

15.

Other taxes not shown under the preceding items

.

16.

Profit or loss for the financial year

.

SECTION 6 Special provisions relating to certain profit-and-loss-account items

Article 35

Non-life-insurance technical account: item I (1) (a)

Life-assurance technical account: item II (1) (a)

Gross premiums written

Gross premiums written shall comprise all amounts due during the financial year in respect of insurance contracts regardless of the fact that such amounts may relate in whole or in part to a later financial year, and shall include inter alia:

ii(i) premiums yet to be written, where the premium calculation can be done only at the end of the year:

i(ii)

- single premiums, including annuity premiums,

- in life assurance, single premiums resulting from bonus and rebate provisions in so far as they must be considered as premiums on the basis of contracts and where national legislation requires or permits their being shown under premiums;

(iii)

additional premiums in the case of half-yearly, quarterly or monthly payments and additional payments from policyholders for expenses borne by the insurance undertaking;

(iv)

in the case of co-insurance, the undertaking's portion of total premiums;

i(v)

reinsurance premiums due from ceding and retroceding insurance undertakings, including portfolio entries,

after deduction of:

- portfolio withdrawals credited to ceding and retroceding insurance undertakings, and

- cancellations.

The above amounts shall not include the amounts of taxes or charges levied with premiums.

Article 36

Non-life-insurance technical account: item I (1) (b)

Life-assurance technical account: item II (1) (b)

Outward reinsurance premiums

Outward reinsurance premiums shall comprise all premiums paid or payable in respect of outward reinsurance contracts entered into by an insurance undertaking. Portfolio entries payable on the conclusion or amendment of outward reinsurance contracts shall be added; portfolio withdrawals receivable must be deducted.

Article 37

Non-life-insurance technical account: items I (1) (c) and (d)

Life-assurance technical account: item II (1) (c)

Change in the provision for unearned premiums, net of reinsurance

Pending further coordination, Member States may, in the case of life assurance, require or permit the change in unearned premiums to be included in the change in the life assurance provision.

Article 38

Non-life-insurance technical account: item I (4)

Life-assurance technical account: item II (5)

Claims incurred, net of reinsurance

1. Claims incurred shall comprise all payments made in respect of the financial year plus the provision for claims but minus the provision for claims for the preceding financial year.

These amounts shall include annuities, surrenders, entries and withdrawals of loss provisions to and from ceding insurance undertakings and reinsurers, external and internal claims management costs and charges for claims incurred but not reported such as referred to in Article 60 (1) (b) and (2) (a).

Sums recoverable on the basis of subrogation and salvage within the meaning of Article 60 (1) (d) shall be deducted.

2. Where the difference between:

- the loss provision made at the beginning of the year for outstanding claims incurred in previous years, and

- the payments made during the year on account of claims incurred in previous years and the loss provision shown at the end of the year for such outstanding claims is material,

it shall be disclosed in the notes on the accounts, broken down by category and amount.

Article 39

Non-life-insurance technical account: item I (6)

Life-assurance technical account: item II (7)

Bonuses and rebates, net of reinsurance

Bonuses shall comprise all amounts chargeable for the financial year which are paid or payable to policyholders and other insured parties or provided for their benefit, including amounts used to increase technical provisions or applied to the reduction of future premiums, to the extent that such amounts represent an allocation of surplus or profit arising on business as a whole or a section of business, after deduction of amounts provided in previous years which are no longer required.

Rebates shall comprise such amounts to the extent that they represent a partial refund of premiums resulting from the experience of individual contracts.

Where material, the amount charged for bonuses and that charged for rebates shall be disclosed separately in the notes on the accounts.

Article 40

Non-life-insurance technical account: item I (7) (a)

Life-assurance technical account: item II (8) (a)

Acquisition costs

Acquisition costs shall comprise the costs arising from the conclusion of insurance contracts. They shall cover both direct costs, such as acquisition commissions or the cost of drawing up the insurance document or including the insurance contract in the portfolio, and indirect costs, such as advertising costs or the administrative expenses connected with the processing of proposals and the issuing of policies.

Member States may require policy renewal commissions to be entered in item I (7) (c) or II (8) (c).

Article 41

Non-life-insurance technical account: item I (7) (c)

Life-assurance technical account: item II (8) (c)

Administrative expenses

Administrative expenses shall include the costs arising from premium collection, portfolio administration, handling of bonuses and rebates, and inward and outward reinsurance. They shall in particular include staff costs and depreciation provisions in respect of office furniture and equipment in so far as these need not be shown under acquisition costs, claims incurred or investment charges.

Article 42

Life-insurance technical account: items II (2) and (9)

Non-technical account: items III (3) and (5)

Investment income and charges

1. All investment income and charges relating to non-life insurance shall be disclosed in the non-technical account.

2. In the case of an undertaking carrying on life-assurance business only, investment income and charges shall be disclosed in the life-assurance technical account.

3. In the case of an undertaking carrying on both life-assurance and non-life-insurance business, investment income and charges shall, to the extent that they are directly connected with the carrying on of the life-assurance business, be disclosed in the life-assurance technical account.

4. Member States may require or permit the disclosure of investment income and charges according to the origin or attribution of the investments, if necessary by providing for further items in the non-life-insurance technical account, by analogy with the corresponding items in the life-assurance technical account.

Article 43

Non-life-insurance technical account: item I (2)

Life-assurance technical account: item II (2)

Non-technical account: items III (4) and (6)

Allocated investment return

1. Where part of the investment return is transferred to the non-life-insurance technical account, the transfer from the non-technical account shall be deducted from item III (6) and added to item I (2).

2. Where part of the investment return disclosed in the life-assurance technical account is transferred to the non-technical account, the amount transferred shall be deducted from item II (12) and added to item III (4).

3. Member States may lay down the procedures for and the amounts of transfers of allocated return from one part of the profit and loss account to another. The reasons for such transfers and the bases on which they are made shall be disclosed in the notes on the accounts in either event; where appropriate, a reference to the text of the relevant regulation shall suffice.

Article 44

Life-assurance technical account: items II (3) and (10)

Unrealized gains and losses on investments

1. In life-assurance business Member States may permit the disclosure in full or in part in items II (3) and (10) in the profit and loss account of variations in the difference between:

- the valuation of investments at their current value or by means of one of the methods referred to in Article 33 (1) of Directive 78/660/EEC, and

- their valuation at purchase price.

In any event, Member States shall require that the amounts referred to in the first paragraph be disclosed in the aforementioned items where they relate to investments shown as assets under D.

2. Member States which require or permit the valuation of the investments shown as assets under C at their current value may, in respect of non-life-insurance, permit the disclosure in full or in part in an item III (3a) and in an item III (5a) in the profit and loss account of the variation in the difference between the valuation of those investments at their current value and their valuation at purchase price.

SECTION 7 Valuation rules

Article 45

Article 32 of Directive 78/660/EEC, under which the valuation of items shown in the annual accounts must be based on the principle of purchase price or production cost, shall apply to investment subject to Articles 46 to 49 of this Directive.

Article 46

1. Member States may require or permit the valuation of investments shown as assets under C on the basis of their current value calculated in accordance with Articles 48 and 49.

2. The investments shown as assets under D shall be shown at their current value.

3. Where investments are shown at their purchase price, their current value shall be disclosed in the notes on the accounts.

However, Member States in which, on the date of the notification of this Directive, investments are shown at their purchase price may give undertakings the option of initially disclosing in the notes on the account the current value of investment shown as assets under C (I) no later than five years after the date referred to in Article 70 (1) and the current value of other investments no later than three years after the same date.

4. Where investments are shown at their current value, their purchase price shall be disclosed in the notes on the accounts.

5. The same valuation method shall be applied to all investments included in any item denoted by an arabic numeral or shown as assets under C (I).

6. The method applied to each investment item shall be stated in the notes on the accounts.

Article 47

Where current value is applied to investments, Article 33 (2) and (3) of Directive 78/660/EEC shall apply, except as provided in Articles 37 and 44 of this Directive.

Article 48

1. In the case of investments other than land and buildings, current value shall mean market value, save as provided in paragraph 5.

2. Where investments are officially listed on an official stock exchange, market value shall mean the value on the balance-sheet date or, when the balance-sheet date is not a stock-exchange trading day, on the last stock-exchange trading day before that date.

3. Where a market exists for investments other than those referred to in paragraph 2, market value shall mean the average price at which such investments were traded on the balance-sheet date or, when the balance-sheet date is not a trading day, on the last trading day before that date.

4. Where on the date on which the accounts are drawn up investments such as referred to in paragraphs 2 or 3 have been sold or are to be sold within the short term, the market value shall be reduced by the actual or estimated realization costs.

5. Except where the equity method is applied in accordance with Article 59 of Directive 78/660/EEC, all other investments shall be valued on a basis which has prudent regard to the likely realizable value.

6. In all cases the method of valuation shall be precisely described and the reason for adopting it stated in the notes on the accounts.

Article 49

1. In the case of land and buildings current value shall mean the market value on the date of valuation, where relevant reduced as provided in paragraphs 4 and 5.

2. Market value shall mean the price at which land and buildings could be sold under private contract between a willing seller and an arm's length buyer on the date of valuation, it being assumed that the property is publicly exposed to the market, that market conditions permit orderly disposal and that a normal period, having regard to the nature of the property, is available for the negotiation of the sale.

3. The market value shall be determined through the separate valuation of each land and buildings item, carried out at least every five years according to methods generally recognized or recognized by the insurance supervisory authorities. Article 35 (1) (b) of Directive 78/660/EEC shall not apply.

4. Where the value of any land and buildings item has diminished since the preceding valuation under paragraph 3, an appropriate value adjustment shall be made. The lower value thus arrived at shall not be increased in subsequent balance sheets unless such increase results from a new determination of market value arrived at in accordance with paragraphs 2 and 3.

5. Where on the date on which the accounts are drawn up land and buildings have been sold or are to be sold within the short term, the value arrived at in accordance with paragraphs 2 and 4 shall be reduced by the actual or estimated realization costs.

6. Where it is impossible to determine the market value of a land and buildings item, the value arrived at on the basis of the principle of purchase price or production cost shall be deemed to be the current value.

7. The method by which the current value of land and buildings has been arrived at and their breakdown by financial year of valuation shall be disclosed in the notes on the accounts.

Article 50

Where Article 33 of Directive 78/660/EEC is applied to insurance undertakings, it shall be so in the following manner:

(a) paragraph 1 (a) shall apply to assets shown under F (I) as defined in Article 6 of this Directive;

(b)

paragraph 1 (c) shall apply to assets shown under C (I), (II), (III) and (IV) and F (I) (except for stocks) and (III) as defined in Article 6 of this Directive.