Insolvency and wounding up of insurance companies in the law of the EU with overview on our law


Directive 2001/17/EC of the European Parliament and of the Council of 19 March 2001 on the reorganisation and winding-up of insurance undertakings has been passed on the Community level to harmonize winding-up proceedings of insurance undertakings, protect creditors and for the sound functioning of the internal market. Winding-up procedures and reorganisation measures over insurance undertakings are subjects of regulation. Evaluation of the rules contained in the Directive and our legislation in this field, especially Law on Liquidation and Insolvency of Banks and Insurance Companies 2005 (basic law) and Law on Insolvency 2004 (with amendments 2005) are subjects of this article.

By introducing these new institutions in our insolvency law, (insolvency and reorganisation) shift has been made towards harmonisation of the insolvency law with the EU law. This is reflected in adoption of the principles on which this field has been established (Directive’s Preamble outlines following principles: unity, universality, coordination, publicity, equivalent treatment and protection of insurance creditors). Yet, there are certain differences reflected in the bodies carrying out insolvency proceeding, (winding-up and reorganisation), formation of the settlement order, regulation of the reorganisation procedure.

In some essential elements our insolvency proceeding law has been regulated by the common provisions for banks and insurance undertakings (insolvency proceeding initiation, insolvency proceeding bodies, legal consequences of the insolvency proceeding initiation, denying legal measures, prohibition of the sale of debtor’s legal entity, creditors settlement scheme). Accordingly, winding-up (compulsory and voluntary) has been regulated with same rules for banks and insurance undertakings. On the other hand, it is notorious banks and insurance undertakings have different products and protection of insured in all countries is stronger than for bank clients. Therefore, in the field of insurance undertakings’ insolvency subsidiary application of the general insolvency rules would better suit, than banks insolvency rules.

Regarding bodies carrying out insolvency proceeding (winding-up and reorganisation) Directive strictly points out difference between bodies acting in winding-up and reorganisation procedures and body competent for these procedures and supervisory body of insurance undertakings, for it is essential that the body supervising insurance undertakings, which may issue measure of license withdrawal, cannot take part in winding-up and reorganisation proceedings, which may be initiated as a consequence of those measures. In this regard, one should consider solution of our law where Agency for deposit insurance is acting as insolvency or winding-up administrator, i.e. independent body established by law as type of nongovernmental body.

Although Directive establishes several ways of settlement orders, comparing basic intention in allocation of the insolvency fund in our and EU laws some similarities may be seen: absolute priority of insurance claims over other claims (not secured) in insolvency proceeding over insurance undertaking; special protection enjoy rights of employees, claims against social insurance and state claims (taxes etc.).

There are also differences regarding reorganisation: our Law on Insolvency provides for reorganisation in insolvency proceeding only, i.e. as insolvency proceeding feature compared to the Directive by which reorganisation may be undertaken outside winding (insolvency) proceeding, conclusion coming from the position that reorganisation measure do not delay winding-up proceeding opening.