The Implications for British Insurance, Particularly Long Term Business, of Joining the European Common Market

Abstract

SynopsisThe European Economic Community (Common Market) was established by the Treaty of Rome signed by six countries, namely, Belgium, France, Germany, Italy, Luxembourg and the Netherlands, in 1957.Many of the eleven basic aims of the Treaty have some bearing on insurance business. The free movement of persons, services and capital is of the greatest technical interest to insurers but the measures designed to promote the economic growth of the Community which will include the expansion and improvement of capital markets could be of even greater interest—particularly to life assurers. Another aim of the Treaty, viz. to ensure fair competition within the Community, could act as a constraint on the introduction of liberalizing measures.The general programme for the progressive establishment of the Common Market over a transitional period of 12 years (extended if necessary) included a specific timetable for the introduction of freedom of establishment and freedom of services in respect of insurance transactions. The implementation of this programme as it concerns insurance has fallen into arrears and only one of the five directives which were scheduled has so far been promulgated. Nevertheless, the achievement of the aims of the Treaty of Rome must eventually result in the gradual harmonization of legislation affecting insurance business within the member states. Chiefly because of the need to avoid any distortion of competition, the measures introduced are likely to apply to all insurers within the E.E.C. irrespective of whether they transact business in one or more member states.It is premature to consider in detail the likely terms and conditions of the E.E.C. legislation as this is still a long way off. Insofar as the present pattern of insurance control legislation of most E.E.C. countries is more restrictive—particularly for long-term business—than in the United Kingdom, any short-term solution for harmonizing legislation would seem likely to involve British companies in more stringent rules. It is hoped that the E.E.C. will take into account the outcome of the discussions on similar issues which have taken place over the last decade within international organizations such as the Organization for Economic Co-operation and Development and the Comité Européen des Assurances on which the United Kingdom is represented. E.E.C. thinking may also be influenced in the direction of the progressive liberalization of insurance control legislation by the record of life assurance business in the United Kingdom and by the need to encourage the development of capital markets to which life assurance is an important contributor as a source of long-term and regular savings. Thus the ultimate pattern of E.E.C. legislation may well reflect the British system of freedom, provided such a system is well presented within the E.E.C. negotiations. Generally, problems for the British actuary will arise from the imposition of new rules within the E.E.C. not only for insurance transactions but for the many other commercial transactions with which the actuary is professionally interested as advisor or participant.Special areas of long-term business such as pension schemes; life reassurance; equity-linked contracts and private sickness insurance are described. Last but not least, in connexion with the introduction of freedom of mobility of labour, it may be necessary to consider to what extent actuarial qualifications earned in another member country can be recognized as enabling an actuary to practise in the United Kingdom.