Act No. 363/1999 Coll. - Insurance Act on insurance and on amendment to some related acts (the Insurance Act) dated 21 December 1999

Transcription

1 Act No. 363/1999 Coll. - Insurance Act on insurance and on amendment to some related acts (the Insurance Act) dated 21 December 1999 as amended by Act No. 159/2000 Coll., Act No. 316/2001 Coll., Act No. 12/2002 Coll., Act No. 126/2002 Coll. and by Act No.39/2004 Coll. dated 17 th December 2003 The Parliament has adopted this Act of the Czech Republic: PART ONE INSURANCE ACTIVITIES, CONDITIONS FOR THEIR PURSUIT AND EXERCISE OF STATE SUPERVISION TITLE I BASIC PROVISIONS 1 (1) This Act regulates in compliance with the legislation of European Communities 1, the conditions for the pursuit of insurance and reinsurance activities, and the state supervision of the pursuit of insurance and reinsurance activities as well as of pension supplementary insurance, exercised by the Ministry of Finance (hereinafter referred to as "the Ministry"). (2) This Act regulates a. pursuit of insurance and reinsurance activity by insurance or reinsurance undertaking having its seat in the territory of the Czech Republic, b. pursuit of insurance activity by insurance undertaking having its seat in the territory of other Member State of the European Union or in the territory of countries forming the European Economic Area c. pursuit of insurance activity by insurance undertaking having its seat in the territory of other country than that referred to in letter a) and b) above d. exercise of state insurance supervision e. pursuit of insurance intermediary activity. (3) This Act shall not apply to the pursuit of sickness insurance, pension system, social security schemes, pension supplementary insurance with state contribution and public health insurance according to special legal provisions 1a) unless otherwise stipulated by special legal provisions. (4) Furthermore this Act shall not apply to a. the activity of mutuals and co-operatives, where the indemnity differs according to the resources available and which require that each and every of their members pays the same contribution; b. the activity consisting in accepting contractual obligation to provide indemnity only in case of the death, while the indemnity shall not exceed average funeral costs or while the indemnity is not of pecuniary nature;

2 c. the activity consisting in providing assistance in case of a breakdown or accident of the road vehicle by provision of service rendered in the territory of a Member State [ 2, paragraph 2, letter a)], in which Member State the provider of this service has his workshop and if the provider is not an insurance undertaking and in case of the 1. on the spot repair, if the service provider uses for this activity mainly his own employees and his own equipment, 2. transport of the vehicle to the nearest and most suitable place of repair and transport of the driver and passengers to the nearest place, from which they can continue their voyage by other means, 3. transport of the vehicle, possibly also of the driver and passengers to their residence, to their place of departure, if different from their residence, or to their place of destination in the same state. 2 (1) For the purpose of this Act: Definitions a. insurance undertaking means home insurance undertaking, insurance undertaking from other Member State or nonmember-country insurance undertaking, b. home insurance undertaking means a legal person having its seat in the territory of the Czech Republic, which has been granted an authorisation by the Ministry to carry on insurance activity according to this Act, c. insurance undertaking from other Member State means a legal person having its seat in the territory of a Member State of European Union or in the territory of other country forming the European Economic Area, which has been granted official licence to carry on insurance activity, d. non-member-country insurance undertaking means a legal person with the seat in the territory of a country other than that referred to in letters b) or c), which has been granted official licence to carry on insurance activity, e. insurance activity means the conclusion of insurance contracts according to a special legal provision 2) by an insurance undertaking, the administration of insurance and the settlement of claims under insurance contracts, rendering assistance services and processing personal data in connection with these activities. Insurance activity shall include the management of assets the source of which are the technical provisions of the insurance undertaking (hereinafter referred to as "financial placements"), the conclusion of contracts by the insurance undertaking with reinsurance undertakings to reinsure the liabilities of an insurance undertaking ensuing from insurance contracts concluded by the insurance undertaking (ceded reinsurance), and the activity aimed at prevention of losses and at the mitigation of their consequences (loss prevention), f. reinsurance undertaking means a legal person carrying on activity of accepting insurance risks ceded by insurance undertaking or by other reinsurance undertaking, having its seat in the territory of the Czech Republic carrying on reinsurance activity according to this Act or a legal person having its seat abroad which carries on reinsurance activity in accordance with the laws of the country in which it has its seat, g. reinsurance activity means the conclusion of contracts under which a reinsurance undertaking commits itself to provide to an insurance undertaking an indemnity in an agreed extent in case of the occurrence of a fortuitous event specified in the

3 contract and an insurance undertaking commits itself to pay to the reinsurance undertaking a contractually stipulated part of premium from insurance contracts concluded by the insurance undertaking which are subject of such contract (hereinafter referred to as "reinsurance contract"), conclusion of reinsurance contracts between reinsurance undertakings, administration of reinsurance and settlement of claims under reinsurance contracts. Reinsurance activity shall include the management of assets, the source of which are the technical provisions of the reinsurance undertaking, h. activities related to insurance or reinsurance activity mean intermediary activity pursued in connection with insurance or reinsurance activity, advisory services related to insurance of natural and legal persons, and investigation of insured events performed by independent loss adjusters according to a contract with an insurance undertaking and further activities with the consent of the Ministry, i. solvency means the ability of an insurance or reinsurance undertaking to meet liabilities from insurance or reinsurance activity by means of its own resources, j. administration of insurance means the set of activities aimed at maintaining and updating the state of insurance contracts, k. insurance risk means the rate of probability of the occurrence of an insured event caused by an insured peril, l. policyholder means a person that has concluded an insurance contract with an insurance undertaking, m. insurance portfolio means a set of concluded insurance contracts, n. accessories to a portfolio mean the rights and commitments ensuing from such insurance contracts, and financial placements adequate to this portfolio, o. earned premium means the part of the premium written according to a concluded insurance contract that relates to the current accounting period regardless of whether the premium has been paid or not, p. unearned premium means the part of the premium written according to a concluded insurance contract which relates to the following accounting period regardless of whether the premium has been paid or not, r. ability to meet commitments means the proven ability of insurance or reinsurance undertaking to meet all commitments arising from insurance or reinsurance activities pursued, including commitments falling due in future accounting periods, s. settlement of a claim means the set of activities related to such settlement of a claim starting with the commencement of an investigation necessary to ascertain the obligation of an insurance undertaking to provide indemnity and the extent of such an obligation and ending with the determination of the amount to be paid out in settlement of the claim,

4 t. assistance services mean assistance provided to persons who get into difficulties while travelling or while away from their permanent residence, which consists of a commitment of an insurance undertaking carrying out insurance activity according to the insurance class No. 18 part B of the Annex No. 1 to this Act, to provide on the basis of a premium paid in advance the immediately available assistance to the beneficiary according to the insurance contract, if this beneficiary gets into difficulty in consequence of an insured event, u. insurance conditions mean the conditions prepared by the insurer for the conclusion of insurance contracts for individual classes of insurance, for groups of such classes or for individual types of insurance concluded under such classes, in particular general insurance conditions, special or supplementary insurance conditions, v. life assurance means the set of classes of insurance referred to in Part A of the Annex No. 1 to this Act, w. non-life insurance means the set of classes of insurance referred to in Part B of the Annex No. 1 to this Act, x. technical rate of interest means the guaranteed participation in the yield from the financial placements in life assurance, y. internal control system means the system of mechanisms and instruments aimed particularly at the assessment of verity, integrity and ability to testify of the information on the activity of an insurance or reinsurance undertaking, at the investigation and documentation of the risks connected with the activities of an insurance or reinsurance undertaking and at the determination of probability of the negative impacts of these risks; at the stipulation of the working procedures, safeguarding the material correctness of the data disclosed in the accounting books of an insurance or reinsurance undertaking and testing their correctness; on verification whether the activity of an insurance or reinsurance undertaking complies with the legal provisions; at the evaluation of the business, efficiency and effectiveness of the management of an insurance or reinsurance undertaking, using particularly their financial, property and personal resources; z. address of the residence of the natural person means the address of her residence or of the place, where she stays; if the natural person has residences in more places, then the address of the residence, where the natural person stays with the intention to stay there permanently, aa. state insurance supervision means the decision making and control activity of the Ministry in the extent specified by this Act or by special legal provision in the private insurance industry, activities connected therewith and the set of instruments stipulated to pursue the supervision, bb. control activity of the Ministry means the control of compliance with the rules set by this Act or by special legal provision, regulating the pursuit of the activities in private insurance industry, including financial supervision and supervision of the activity of insurance undertaking in a group, cc. financial supervision means the control of the business activity of an insurance undertaking, particularly of its ability to meet its commitments, of the establishment of the technical provisions, including mathematical provisions, of the financial placements according to this Act, of respecting of the administrative and accounting procedures, set by special legal provisions and of the reliability of the internal control systems, dd. supervision of the activity of insurance undertaking in a group means control of the facts, concerning associated undertaking of an insurance undertaking, its partner and associated undertakings of a partner of the insurance undertaking, which facts influence or may influence financial position of the insurance undertaking, ee. person participating in the management of insurance or reinsurance undertaking means the person, who is not member of statutory or supervisory body of the insurance or reinsurance undertaking, its proxy holder or representative of its branch and which person on the basis of an agreement, participation in the insurance or reinsurance undertaking or on the basis of other fact effects substantial influence on its activity, ff. insurance intermediary activity means professional activity aimed at the conclusion of insurance or reinsurance contracts and activities connected with it, gg. insurance agent means a legal or natural person pursuing insurance intermediary activity according to a contract with an insurance undertaking.

5 hh. insurance or reinsurance broker means a legal or natural person pursuing insurance intermediary activity according to a contract with any person that is interested in concluding an insurance or reinsurance contract, ii. independent loss adjuster means a natural or legal person carrying out according to a contract with an insurance undertaking, on behalf and on account of that insurance undertaking, investigation necessary to ascertain the extent of its liability to provide indemnity out of the concluded insurance. (2) Furthermore, for the purpose of this Act a. Member State means Member State of the European Union or other country forming the European Economic Area, b. home Member State means Member State in which the seat of an insurance undertaking is located, c. Member State of the branch means Member State in which an insurance undertaking operates on the basis of the right to establish branches, d. pursuit of insurance activity on the basis of the right to establish branches means any permanent presence (establishment) of an insurance undertaking from a Member State in the territory of other Member State other than that in which this insurance undertaking has its seat; this presence may take form of an organizational unit of the undertaking, like branch, or of an office led by own staff of the insurance undertaking or by an independent person, having permanent authorisation to act on behalf of the insurance undertaking in the same way as a branch, e. freedom to provide temporary services means the freedom of an insurance undertaking having its seat in a Member State to pursue temporarily insurance activities in the territory of Member State other than that in which the insurance undertaking has its seat, namely in the extent of a licence, which has been granted by competent authority of the state of its seat, in case that this activity does not have the character of permanent presence in the territory of the given other Member State, f. Member State of the commitment means Member State, in which the policyholder as a natural person has his/her residence or policyholder as a legal person has his seat or branch in case of a commitment from the life assurance, or Member State, in which the insured risk is situated, in case of a commitment from the non-life insurance, g. Member State, in which the insured risk is situated means the Member State 1. in which the property is situated, where the insurance relates either to building or to buildings and their contents, in so far as the contents are covered by the same insurance policy, 2. of registration, where the insurance relates to vehicles of any type, 3. where the policyholder took out the policy in the case of policies of a duration of four months or less covering travel or holiday risks, whatever the non-life insurance class concerned, 4. where the policyholder as natural person has his habitual residence or, if the policyholder is a legal person, the Member State where his establishment, to which the insurance policy relates, is situated,

6 h. Member State of the provision of services means Member State of the commitment, if the commitment is covered by an insurance undertaking or a branch situated in other Member State i. qualifying holding means direct or indirect holding or their total in the capital or voting rights of a legal person who represents at least 10% or which makes it possible to exercise significant influence over the management of this legal person, j. competent authority means the authority exercising supervision of the activity of an insurance undertaking, k. close link means relationship among two or more persons, in which one of the persons is linked to the other person by direct or indirect participation in capital or voting rights of 20% or more, or by control relationship, or as parent undertaking. l. regulated market means market with financial instruments situated in a Member State and regulated in compliance with the legal provisions of the Member State, or a financial market in a non-member-country, recognised by the home Member State of the insurance undertaking, which meets comparable requirements as the regulated market of a Member State, in particular all financial instruments dealt in on that market must be of a quality comparable to that of the instruments dealt in on the regulated market or markets of the Member State in question; m. matching assets mean the representation of underwriting liabilities which can be required to be met in a particular currency by assets expressed or realisable in the same currency (congruence rule); n. capital at risk means the amount payable on death, from which mathematical provision is deducted; o. mathematical provision means provision for life insurance premium. (3) For the purpose of state supervision of insurance groups a. participation means any participation in other undertaking or direct or indirect holding of 20 or more per cent of voting rights or registered capital of an undertaking, b. partner means person, who has a participation, c. related undertaking means an undertaking in which a participation is held by given person, d. insurance holding company means a parent undertaking the main business of which is to acquire and hold participations in subsidiary undertakings, where those subsidiary undertakings are exclusively or mainly insurance undertakings, nonmember-country insurance undertakings or reinsurance undertakings, one at least of such subsidiary undertakings being an insurance undertaking,

7 e. mixed-activity insurance holding company means a parent undertaking, other than an insurance undertaking, a nonmember-country insurance undertaking, a reinsurance undertaking or an insurance holding company, which includes at least one insurance undertaking among its subsidiary undertakings, f. group means 2 or more persons, among which exists close link. Pursuit of Insurance Activity 3 (1) Unless stipulated otherwise by this Act, insurance or reinsurance activity in the territory of the Czech Republic may only be carried on by an insurance or reinsurance undertaking which has been granted an authorisation by the Ministry according to this Act. (2) Insurance undertaking with its seat in the territory of the Czech Republic may carry on insurance activity under the conditions of this Act, if established as a joint stock company or as a co-operative. (3) Reinsurance activity may be carried on under the conditions hereof only by an insurance or reinsurance undertaking with its seat in the territory of the Czech Republic, established as a joint stock company. The provisions hereof shall not apply to the pursuit of reinsurance activity in the territory of the Czech Republic by an insurance or reinsurance undertaking with its seat abroad with the exception of the provision of 35a, paragraph 2, letter d). (4) Home insurance undertaking may carry on such insurance or reinsurance activity and activities related thereto only within the scope of the authorisation granted to such undertaking by the Ministry. An insurance undertaking that has been granted an authorisation to carry on reinsurance activity may not reinsure insurance risks insured by insurance contract that it had concluded itself. A reinsurance undertaking may carry on only reinsurance activity and activities related thereto to the extent of the authorisation granted to such undertaking by the Ministry. (5) Insurance intermediary activity in the territory of the Czech Republic may be carried on only for insurance carried on by an insurance company according to this Act or for an reinsurance undertaking. 4 (1) Unless stipulated otherwise by this Act, legal status of insurance and reinsurance undertakings shall be governed by the Commercial Code. (2) Home insurance undertaking established as a joint stock company or a reinsurance undertaking shall be entitled to issue shares to which voting rights are attached only in book-entry form. (3) Home insurance or reinsurance undertaking, when carrying on their activities, are obliged to proceed prudently, in particular not to carry on their activities in a way that would damage the property entrusted to them by third persons or endanger their security and stability or security and stability of persons linked to the insurance undertaking. For this purpose the insurance and reinsurance undertaking are obliged to establish and during its whole existence to keep internal control systems, to evaluate regularly information provided by them and to take in time adequate measures. Pursuit of insurance activity by an insurance undertaking having its seat outside the territory of the Czech Republic 5 Insurance Undertakings with Seat Abroad (1) An insurance undertaking having its seat abroad (hereinafter referred to as "foreign insurance undertaking") may carry on insurance activity in the territory of the Czech Republic through its organizational unit (branch) under the conditions laid down by this Act. (2) Upon issuing an authorisation to carry on insurance activity to a foreign insurance undertaking, the Ministry shall be entitled to request the necessary information directly from the state supervisory authority of the country in which such undertaking has its seat and, upon the request of such supervisory authority, to provide information on the activities of the foreign insurance undertaking in the territory of the Czech Republic through its organizational unit (branch). If the exchange of information between state supervisory authorities is not based on international agreements, the foreign insurance undertaking shall be obliged, upon the Ministry's request, to ensure that the necessary information is obtained from the state supervisory authority of the country in which such undertaking has its seat.

8 (3) For the purposes of this Act, the association of underwriters known as Lloyd s (hereinafter referred to as " the association of underwriters ") shall be deemed to be a foreign insurance undertaking. The head of an organizational unit (branch) of this foreign insurance undertaking must also be authorised to bind individual insurers of the association. 5a Pursuit of insurance activity by an insurance undertaking from other Member State (1) Insurance undertaking from other Member State is authorised to carry on insurance activity in the territory of the Czech Republic on the basis of the right to establish its branches (establishment) or on the basis of the freedom to provide temporary services in the extent for which it has been granted licence to carry on insurance activity in the country where it has its seat. (2) Before a branch of an insurance undertaking from other Member State in the territory of the Czech Republic shall be established, the Ministry must be informed in compliance with the legislation of the European Communities by the competent authority of the home Member State at least a. about the scheme of operations, list of classes of the insurance activity carried on in the territory of the Czech Republic and internal organizational structure of the branch, b. about the address of the location of the branch in the territory of the Czech Republic, to which all communications to the representative of the insurance undertaking from other Member State are delivered, c. of the name of the branch chief officer, who must be authorised to bind and represent the insurance undertaking vis-a-vis third persons and courts in Czech Republic, and d. that this insurance undertaking has the required solvency margin available. (3) Before the commencement of the activity of the branch of an insurance undertaking, the Ministry is obliged to inform the insurance undertaking and the competent authority of the home Member State within two months since it received the information stated in paragraph (2) about the conditions, under which the activity of the branch may be carried on in the territory of the Czech Republic. (4) Branch of an insurance undertaking from other Member State may be established and take up its activity as soon as the insurance undertaking from other Member State received information of the Ministry of the conditions for the activity of the branch in the territory of the Czech Republic, or by void expiry of a period of 2 months since the delivery of the information according to paragraph 2 to the Ministry. Duty to record in the Commercial Register in compliance with 28 paragraph 4 of the Commercial Code is not infringed thereby. (5) Insurance undertaking from other Member State is authorised to carry on its activity in the territory of the Czech Republic on the basis of the freedom to provide temporary services on condition that a. it informs competent authority of the home Member State before commencement of the activity and informs it of the extent of insurance, which it intends to carry on in the territory of the Czech Republic, b. the Ministry obtains in compliance with the legislation of European Communities information as per paragraph 6. (6) Before the commencement of the activity in the territory of the Czech Republic by an insurance undertaking from other Member State on the basis of the freedom to provide temporary services, following information must be supplied in compliance with the legislation of the European Communities by competent authority of the home Member State to the Ministry: a. certificate that the insurance undertaking from other Member State owns assets at least equal to the required solvency margin according to 22, b. extent of insurance according to classes of insurance, which the insurance undertaking from other Member State is authorised to offer in compliance with the licence granted to it by the competent authority of home Member State,

9 c. extent of insurance according to classes of insurance, which the insurance undertaking from other Member State intends to offer in the territory of the Czech Republic, d. the name, surname, date of birth and address of residence of the claims representative in the Czech Republic, appointed for settlement of claims from the insurance, in case that insurance according to the insurance class No. 10 letter a) listed in the Part B of the Annex No.1 to this Act is to be carried on. 5b Further obligations of an insurance undertaking from other Member State carrying on insurance activity in the territory of Czech Republic on the basis of the right to establish branches or the freedom to provide temporary services and the exercise of state supervision of this activity (1) An insurance undertaking from other Member State, which is carrying on in the territory of the Czech Republic its insurance activity on the basis of the right to establish branches or on the basis of the freedom to provide temporary services is obliged to present to the Ministry documents on its activity required by the Ministry. (2) If the Ministry finds out, that the insurance undertaking from other Member State does not fulfil the obligations which refer to this activity in the Czech Republic, it is obliged to require from the given insurance undertaking to remove the ascertained irregularities. (3) If the insurance undertaking from other Member State does not bring its activity into compliance with the legal provisions, the Ministry is obliged to inform of this fact competent authority of the home Member State. (4) If measures taken by competent authority of the home Member State do not lead to the removal of ascertained irregularities in the activity of insurance undertaking from other Member State, the Ministry is obliged to take necessary measures to prevent that insurance undertaking from further infringement of the duties. The Ministry is obliged to inform of these measures competent authorities of the home Member State. If it appears necessary in the interest of the protection of the consumer, the Ministry shall ban such insurance undertaking from concluding new insurance contracts or enlarging commitments from insurance contracts already concluded. (5) For the purpose of control, insurance undertaking from other Member State carrying on insurance activity in the territory of Czech Republic on the basis of the right to establish branches or on the basis of the freedom to provide temporary services is obliged to inform the Ministry of the insurance conditions used at the conclusion of the insurance contracts as well as of their amendments. 5c Pursuit of insurance activity by an insurance undertaking from non-member-country (1) Insurance undertaking from non-member-country may carry on insurance activity in the territory of Czech Republic only through a branch under the conditions stipulated by this Act and special legal provision, namely on the basis of an authorisation granted by the Ministry ( 8 paragraph 4). (2) When granting authorisation to carry on insurance activity to insurance undertaking from non-member-country, the Ministry is entitled to require necessary information directly from competent authority of the country of the seat of the insurance undertaking and, at the request of this authority, to provide information on the activity of insurance undertaking in the territory of Czech Republic through its branch. In case that such an exchange of information between competent authorities does not follow from international treaties, the insurance undertaking from non-member-country is obliged to arrange at the request of the Ministry the supply of necessary information from competent authority of the country of the seat of the insurance undertaking. (3) Authorisation to carry on insurance activity in the territory of Czech Republic through the branch may be granted, if the following conditions are fulfilled: a. insurance undertaking from non-member-country is authorised according to the legal provisions valid in the country of the seat to carry on insurance activity according to the classes of insurance of life assurance or non-life insurance, b. insurance undertaking from non-member-country establishes its branch in the territory of Czech Republic, c. insurance undertaking from non-member-country commits itself to arrange and keep in the seat of the branch accounting especially for the activity carried on in the territory of Czech Republic and to keep all documents relating to this activity,

10 d. non-member-country insurance undertaking appoints the authorised representative in Czech Republic, who has to be approved by the Ministry before he begins to carry on his activity, e. insurance undertaking from non-member-country has in the territory of Czech Republic its property, the value of which is equal to at least one half of the minimum guarantee fund according to 22, paragraph 2 and shall deposit at least one quarter of this minimum as principal to an account opened especially for that purpose with a bank having its seat in the territory of Czech Republic or with a branch of a foreign bank, with which account it cannot dispose without consent of the Ministry, f. insurance undertaking from non-member-country commits itself to keep the required solvency margin according to 22, g. insurance undertaking from non-member-country presents the scheme of operations according to 8, paragraph 2, h. insurance undertaking from non-member-country appoints claims representative in Czech Republic for settlement of claims from the insurance, in case that insurance according to the insurance class No. 10 letter a) listed in the Part B of the Annex No.1 to this Act is to be carried on. (4) In case that insurance undertaking from non-member-country has been granted in the country of its seat licence to carry on simultaneously insurance activity according to the classes of insurance of life assurance and non-life insurance, insurance undertaking cannot offer through its one branch in the territory of Czech Republic simultaneously life assurance and non-life insurance. Simultaneously with the life assurance accident insurance and sickness insurance according to the classes of insurance No. 1 and 2 listed in the Part B of the Annex No.1 to this Act may be offered, if licence to such an concurrence has been granted by competent authority of the home Member State. (5) Unless otherwise provided by this Act, the provisions of this Act concerning pursuit of the insurance activity by home insurance undertaking and the exercise of state supervision of this activity relate similarly to the pursuit of the insurance activity by nonmember-country insurance undertaking through its branch established in the territory of Czech Republic. (6) Every insurance undertaking from non-member-country, which applied in more than one Member State for licence to carry on insurance activity through its branches or already obtained this licence from more than one Member State may ask for the following advantages: a. required solvency quoted in 22 shall be calculated in relation to the overall extent of undertaking, which takes place within the Member States; in this case for the purpose of this calculation only activities carried on by all branches established within the Member States are taken into consideration, b. required deposit according to paragraph 3 letter e) shall be deposited in only one of the Member States, c. property, designated to cover the guarantee fond requirements, may be located in any Member State, in which insurance undertaking from non-member-country pursues its insurance activity. (7) Advantages referred to in paragraph 6 may be granted only all simultaneously. Insurance undertaking from non-member-country is obliged to make the application for granting the advantages to the competent authorities in Member States, in which insurance activity is to be carried on. Competent authority of the Member State, which shall in the future supervise that solvency conditions of the insurance undertaking's activities carried on through its branches established within the Member States shall be named in the application. Insurance undertaking is obliged to substantiate the choice of the given authority. Deposit according to paragraph 3 letter e) shall be deposited in the given Member State. (8) Advantages may be granted only in the case that competent authorities of all Member States, in which the application has been made, agree to do so. Advantages come in force as from the date of the dispatch of the information to other competent authorities that the competent authority chosen in accordance with paragraph 7 shall supervise the solvency for entire insurance activity carried on through the branches of insurance undertaking from the non-member-country, established in the Member States.

11 (9) Competent authority chosen according to paragraph 7 shall obtain from other Member States information necessary for the exercise of the control activity over the overall solvency of the branches of insurance undertaking from non-member-country established in their territory. Advantages granted by all Member States involved shall be removed at the request of one or more Member States involved. 6 State Insurance Supervision (1) State insurance supervision shall be exercised by the Ministry mainly in the interest of consumer protection. The Ministry shall prepare an annual report on such activities, containing an evaluation of the situation on the insurance market and shall publish it in Finančni zpravodaj (Financial Journal) not later than by September 30 of each calendar year. (2) State insurance supervision shall apply to insurance undertakings that carry on insurance activity in the territory of the Czech Republic, home insurance undertakings and reinsurance undertakings carrying on reinsurance activity and legal and natural persons which carry on insurance intermediary activity in this territory, activity of independent loss adjusters and further activities in connection with insurance and reinsurance activity as well as other natural and legal persons to the extent stipulated by this Act or by special legal provision. (3) In the exercise of state insurance supervision, the Ministry shall cooperate with international organizations, state supervisory authorities of other countries, central administrative authorities and organizations active in the field of insurance. (4) Every person engaged in the exercise of state insurance supervision must fulfil the condition of credibility according to 10a, must have appropriate professional qualifications and meet the conditions to execute the activity. Details of the performance of this activity are stipulated in the code of operations of the Ministry. 6a The Ministry Field of Activity of the Ministry a. exercises state supervision in insurance and pension supplementary insurance in the extent stipulated by this Act and by special legal provisions. 2a) b. makes decisions on the rights and duties of legal and natural persons if this Act or special legal provisions so stipulate, 2a) c. keeps the lists of responsible actuaries, administrators, liquidators authorised to administer winding-up proceedings and register of insurance intermediaries and independent loss adjusters, d. co-operates with other administration authorities and institutions at least in the extent stipulated by this Act and by special legal provisions, e. co-operates within its field of activity with international organizations and foreign authorities, f. informs the public of the services from the sphere of insurance in the extent and manner stipulated by this Act and by special legal provisions, g. once a year compiles the report on its activity, which is presented to the government by the minister of finance. 6b

12 Employees of the Ministry (1) Employees of the Ministry which are to exercise the activities connected with the exercise of the state supervision in insurance and pension supplementary insurance or to ensure similar activities within the framework of the fulfillment of other tasks must fulfil the conditions of credibility ( 10a) and must be fully fit to legal actions. (2) Qualification prerequisite of the employee referred to in paragraph 1 is always at least full secondary (general or special) education. 6c Information provided to the Commission of European Communities (1) The Ministry conveys to the Commission of the European Communities and to the pertinent authorities of the Member States which home authorities or bodies are in compliance with the provisions of 39a authorised to obtain information to which extends the duty of confidentiality according to this Act. (2) The Ministry conveys to the Commission of the European Communities information concerning private insurance in compliance with the provisions of the legal provisions of the European Communities or at their request. TITLE II CONDITIONS FOR PURSUIT OF INSURANCE AND REINSURANCE ACTIVITY 7 Authorisation to Carry on Insurance or Reinsurance Activity (1) Home insurance undertaking is authorised to carry on insurance or reinsurance activity solely on the basis of a license issued by the Ministry and on condition that its statutory and effective seat be placed in the territory of the Czech Republic. License issued by the Ministry on conditions stipulated by this Act is valid for all Member States and authorises the home insurance undertaking to carry on insurance or reinsurance activity in the territory of other Member State, either through the branch established in the Member State or on the basis of the freedom to provide temporary services. (2) Home insurance undertaking or insurance undertaking from non-member-country is obliged to apply for approval of the Ministry before extending or changing insurance or reinsurance activity, unless these changes are subject only to the duty to notify. (3) The authorisation to a home insurance undertaking or to a non-member-country insurance undertaking to carry on insurance or reinsurance activity in the territory of Czech Republic or to extend or change this activity shall be granted by the Ministry on the basis of an application in writing, containing requisites stipulated by this Act. The Ministry shall decide on this application within 6 months since it has been delivered to the Ministry. (4) No authorisation according to paragraph 2 may be granted if: a. the conditions laid down by this Act have not been met, b. members of the statutory and supervisory bodies of an insurance undertaking or reinsurance undertaking or representative of the branch of an insurance undertaking do not meet the credibility conditions or these persons or persons participating in the management of an insurance undertaking or a reinsurance undertaking do not offer with regard to their qualification and existing practice security of prudent management of the insurance undertaking, its branch, or reinsurance undertaking. c. close link between an insurance undertaking and further natural and legal persons hampers effective exercise of the state insurance supervision according to this Act, d. effective exercise of the state insurance supervision according to this Act is hampered by legal provisions of the nonmember-country, to which one or more natural of legal persons are subject and with which persons an insurance undertaking from non-member-country has a close link, or difficult enforcement of the duties stipulated by these legal provisions,

13 e. well founded suspicion exists that the capital and further financial resources of the insurance undertaking or reinsurance undertaking originate from criminal activity or from unidentifiable sources; applicant is obliged to prove the origin of the capital and further financial sources to the Ministry, or f. granting of authorisation would be inconsistent with the international agreements by which the Czech Republic is bound and which have been published in the International Agreements Digest. (5) The authorisation to carry on insurance activity shall be granted according to classes of life assurance or non-life insurance or according to the groups of non-life insurance listed in Part C of the Annex No.1 to this Act, if an extension of the activity according to 10 art.1 is concerned, authorisation may be granted also for the class of insurance not listed in the Annex No.1 to this Act, but which may be carried on in compliance with the legal provision of the state in the territory of which this activity is to be extended. The Ministry is entitled to limit the required extent of activity, if the ability of the applicant to carry on safely insurance activity in the extent provided in the application is not sufficiently proven. (6) An insurance undertaking shall not be granted an authorisation to carry on simultaneously insurance activity according to classes of life assurance and non-life insurance, with the exception of an insurance, undertaking, requesting an authorisation to carry on insurance activity according to the classes of life assurance, which may be granted an authorisation to carry on simultaneously insurance activity according to classes of insurance No. 1 and 2 of non-life insurance. (7) The Ministry shall not grant authorisation to take up insurance activity before it shall be informed of the owners of the insurance or reinsurance undertaking and of the volume of their shares. The Ministry shall not grant authorisation if proper and prudent management of the insurance undertaking or reinsurance undertaking is not safeguarded or if, taking into consideration the required extent and character of the activity of the insurance undertaking or reinsurance undertaking, security of its financial stability is not given. (8) An insurance undertaking that has been granted an authorisation to carry on insurance activity according to one or more classes of non-life insurance may conclude an insurance contract also for insurance risks included in a class for which it has not been granted an authorisation, provided that this risk a. is connected to an insurance risk included in a class for which an authorisation has been granted, and b. concerns an object that was insured against insurance risk according to a) above, and c. is insured by an insurance contract under which insurance risk according to a) above is insured ( hereinafter referred to as "supplementary insurance"). (9) Insurance risk included in classes of insurance No. 14, 15 or 17 may not be covered by supplementary insurance. 8 Application for Authorisation (1)The application for an authorisation to carry on insurance activity shall contain a. business name, b. seat, c. articles of association, for a joint stock company also founding agreement or founder's deed, d. scheme of operations,

14 e. amount of registered capital of a joint stock company and registered basic capital of a co-operative (hereinafter referred to as "registered capital") and its source, f. name, respectively names, and surname, date of birth, address of the residence and document certifying fulfilment of the credibility conditions according to 10a of each natural person acting as the founder of an insurance undertaking, or document of the credibility according to 10b of a legal person as the founder of an insurance undertaking, g. name, respectively names and surname, date of birth, address of the residence and document certifying fulfilment of the credibility conditions according to 10a of each natural person who is a member of board of directors, supervisory board or control board or who is to act as a proxy holder of an insurance undertaking, or person who on the basis of an agreement, participation in the insurance undertaking or reinsurance undertaking or on the basis of other fact effects substantial influence on its activity, for all natural persons including particulars on kind of the education accomplished and professional experience, h. name and surname, birth number or date of birth, place of permanent residence of natural person that is to carry on the activity of a responsible actuary according to 23, i. name respectively names, surname, date of birth and address of the residence of natural persons proposed for the position of claims representatives appointed in the Member States, if insurance according to the class of insurance No. 10 letter a) listed in Part B of the Annex No.1 to this Act is to be carried on. (2) The scheme of operations shall contain a. class of insurance or groups of classes for which the authorisation is to be granted, b. methods of calculation of insurance premium; in case of life assurance, including statistical data upon which such calculation is based, c. methods of calculation of technical provisions, d. basic principles of ceded reinsurance, e. items the minimum guarantee fund is composed of according to 22 (2), f. estimate of expenses of building up administrative services and sales network and the way of covering such expenses; in case insurance is carried on according to class No. 18 of non-life insurance, then also the financial and technical resources allocated for providing assistance services, g. for the first three financial years:

15 1. expected incomes and expenses divided into expenses connected with the take up of the activity and usual expenses, in particular running costs and remuneration of the insurance intermediaries, 2. expected amount of premium written, expected claims incurred and the amount of technical provisions established according to 13, 3. expected balance sheet, 4. expected financial resources to cover commitments from the insurance activity carried on. (3) The application of a foreign insurance undertaking for an authorisation to carry on insurance activities in the territory of the Czech Republic through its organizational unit must contain the particulars according to paragraph 1 (a) through (d) and (h), the scheme of operations according to paragraph 2, as well as a. a certificate confirming fulfilment of the credibility conditions according to 10a with respect to the natural person nominated as the head of the organizational unit of the foreign insurance undertaking, including the place of his permanent residence in the Czech Republic and particulars on his education accomplished and professional experience, b. approval by the state insurance supervisory authority of the country in which the insurance undertaking has its seat in respect of the extension of the foreign insurance undertaking's activity to the territory of the Czech Republic, c. confirmation by the authority specified in b) above, on financial stability of the foreign insurance undertaking, including the development of solvency according to 22 for the past 3 years, and d. annual accounts for the past 3 years verified by an auditor. In case that the foreign insurance undertaking exists for a shorter period of time, it shall submit the documents according to c) and d) above for the whole duration of its existence. In case of an association of underwriters, the documents according to d) shall be replaced by the annual trading accounts and an auditor's report confirming that the commitments of each insurer arising from insurance activity carried on are fully covered by matching assets. (4) The application of a non-member-country insurance undertaking for an authorisation to carry on insurance activity in the territory of Czech Republic through its branch shall contain data according to paragraph 1 letter a), c) and h). As enclosure to this application the insurance undertaking shall present the scheme of operations according to paragraph 2 and a. document certifying fulfilment of credibility conditions according to 10b of the non-member-country insurance undertaking, quoting address of the residence of the natural person, who is proposed as authorised representative of the branch in Czech Republic, including particulars on kind of his education accomplished and on his professional experience, b. approval of the competent authority of the country in which the insurance undertaking has its seat to the extension of the activity of the insurance undertaking from non-member-country to the territory of Czech Republic, c. certificate of the competent authority of the country in which the insurance undertaking has its seat of the financial stability and credibility according to 10b of the insurance undertaking from non-member-country including evolution of the solvency according to 22 for the last 3 years,