Order on Branches of Third-Country Insurance Undertakings

Order on Branches of Third-Country Insurance Undertakings 1)

Pursuant to Section 3, Paragraph 3, and Section 316, Paragraph 1, of Act No. 718 of 13 June 2023 on Insurance Undertakings, the following is prescribed:

Chapter 1
General Provisions
Scope of Application

Section 1. This Order applies to insurance undertakings that have been granted authorization in a country outside the European Union, with which the Union has not concluded an agreement in the financial area, and which wish to conduct insurance business in this country through a branch.

Chapter 2
Authorization and Notification

Section 2. An insurance undertaking wishing to conduct insurance business covered by Annexes 1 and 2 to the Act on Insurance Undertakings through a branch in Denmark must obtain authorization from the Danish Financial Supervisory Authority (Finanstilsynet).

Paragraph 2. Authorization shall be granted provided the following conditions are met:

1. The insurance undertaking is established as a joint-stock company, a mutual company, or a company with a corresponding legal form in its home country.
2. The possibility of conducting insurance business through a branch in this country is established by international agreement, or the Danish Financial Supervisory Authority considers that Danish companies are granted corresponding rights in the insurance undertaking's home country.
3. The insurance undertaking has submitted the documentation referred to in Section 3 to the Danish Financial Supervisory Authority.

Section 3. In connection with the application for authorization to conduct insurance business through a branch, the insurance undertaking shall submit the following to the Danish Financial Supervisory Authority:

1. A declaration that the insurance undertaking is lawfully established in its home country, including information on how long the company has conducted the notified business in the home country, and whether the supervisory authority in the home country has made comments within the last 3 years regarding the manner in which the business is conducted.
2. A declaration that the planned activities are covered by the company's authorization in the home country.
3. A description of the branch's business, including information on organization and planned activities.
4. The branch's address.
5. The names of the branch's management and the general agent, cf. Section 57 in the Act on Insurance Undertakings, documentation that the general agent meets the conditions in Section 10, and the general agent's original power of attorney.
6. Documentation that the conditions in Section 19 of the Act on Insurance Undertakings are met.
7. A business plan for the branch prepared in accordance with Sections 5-9.
8. A solvency certificate for the insurance undertaking.
9. The insurance undertaking's annual report for the last 3 financial years.
10. The insurance undertaking's articles of association.
11. A list of the insurance undertaking's board members.

Paragraph 2. For branches that are to cover risks under insurance class 10 in Annex 1 to the Act on Insurance Undertakings, excluding the carrier's liability, the insurance undertaking shall, in addition to the documentation mentioned in Paragraph 1, submit a declaration that the branch is a member of the Danish Association for International Motor Vehicle Insurance.

Paragraph 3. For branches that are to conduct business covered by Annex 2 to the Act on Insurance Undertakings, the insurance undertaking shall, in addition to the documentation mentioned in Paragraph 1, submit documentation that the branch has employed a responsible actuary in accordance with Section 139, Paragraphs 2-5, of the Act on Insurance Undertakings.

Paragraph 4. The Danish Financial Supervisory Authority may demand that a translation of the attachments mentioned in Paragraphs 1-3 be submitted.

Section 4. The insurance undertaking must, simultaneously with the submission of the application in accordance with Section 2, report or notify the branch for registration with the Danish Business Authority (Erhvervsstyrelsen) in accordance with Section 349, Paragraph 1, of the Act on Limited Liability Companies.

Paragraph 2. The insurance undertaking may not commence insurance business in this country through a branch until the Danish Financial Supervisory Authority's authorization for this has been granted, and the registration of the branch has been completed with the Danish Business Authority.

Chapter 3
Business Plan

Section 5. As part of the application for authorization to conduct insurance business through a branch, the insurance undertaking must prepare a business plan for the branch. The business plan must cover the branch's first 5 financial years and be divided into quarters.

Paragraph 2. If the branch's first financial statement is after a period of less than one year, the business plan must cover this period and the 5 subsequent financial years.

Section 6. The business plan must include the following:

1. The branch's business model.
2. Information on the nature of the risks or obligations that the insurance undertaking intends for the branch to assume.
3. Information on the branch's business management.
4. An opening balance sheet as it is expected to be after the costs of establishing the branch have been incurred.
5. The expected financial results in the form of income statements and balance sheets for the financial years covered by the business plan.
6. A statement on the branch's investment policy.
7. A statement on the intended reinsurance programs and creditworthiness.
8. The estimated costs for the establishment of the branch's administration during the period covered by the business plan.
9. The estimated administrative costs excluding costs related to the establishment of the administration, notably the ongoing general costs and commissions.
10. An estimate of the future solvency capital requirement, cf. Section 16, No. 3, based on the expected balance sheet, information on the method used to calculate these estimates, and an overview of the branch's capital base, cf. Section 16, No. 1, to cover the solvency capital requirement.
11. An estimate of the future minimum capital requirement, cf. Section 16, No. 3, based on the expected balance sheet, information on the method used to calculate these estimates, and an overview of the branch's basic capital base to cover the absolute minimum for the minimum capital requirement, cf. Section 16, No. 2.
12. An estimate of the financial resources necessary to cover the branch's insurance technical provisions, solvency capital requirement, and minimum capital requirement, cf. Section 13 and Section 16, No. 3.
13. An assessment of the risk that the branch cannot meet the solvency capital requirement or the minimum capital requirement within the first year.
14. An assessment of the risk that the branch loses its entire capital base within the first year.

Section 7. For branches that are to conduct insurance business covered by Annex 1 to the Act on Insurance Undertakings, the business plan must, in addition to the information in Section 6, include the following:

1. The estimated premiums or contributions and loss expenses.
2. Information on the equipment that the branch has available for use in business covered by insurance class 18.

Section 8. For branches that are to conduct insurance business covered by Annex 2 to the Act on Insurance Undertakings, the business plan must, in addition to the information in Section 6, include the following:

1. A detailed overview of the expected income and expenses in connection with direct life insurance business, as well as the assumption and granting of reinsurance.
2. The technical basis on which the business plan is based.

Section 9. The Danish Financial Supervisory Authority may require the insurance undertaking, in addition to the information mentioned in Sections 5-8, to provide other information deemed necessary to assess whether the results in the business plan can be considered realistic.

Chapter 4
General Agent

Section 10. A person may be appointed as general agent or representative if, in addition to meeting the requirements in Section 57, Paragraph 5, of the Act on Insurance Undertakings, the person meets the following requirements:

1. The person has residence in this country.
2. The person has been resident in this country for the last two years.

Paragraph 2. The Danish Financial Supervisory Authority may grant a dispensation from the requirement in Paragraph 1, No. 2.

Section 11. The general agent must immediately notify the Danish Financial Supervisory Authority if the supervisory authorities in the insurance undertaking's home country, after the branch has commenced its business, have made comments regarding the manner in which the company's business is conducted, or if the insurance undertaking has entered bankruptcy, composition, or a corresponding arrangement, or if the company has entered liquidation.

Section 12. The Danish Financial Supervisory Authority appoints a general agent on behalf of the insurance undertaking when the acting general agent no longer meets the conditions in Section 10, cannot perform their duties, resigns, or has their power of attorney revoked, and the insurance undertaking fails to appoint a new general agent.

Paragraph 2. The general agent appointed by the Danish Financial Supervisory Authority acts as the branch's general agent until another is appointed by the company or until the former general agent can again perform their duties.

Chapter 5
Insurance Technical Provisions

Section 13. The branch must have sufficient insurance technical provisions to cover the obligations entered into and must have sufficient expertise to calculate them.

Chapter 6
Assets

Section 14. The branch must have assets of a size at least equal to half of the lower limit of the minimum capital requirement for the insurance portfolio belonging to the branch, cf. Section 155, Paragraph 5, of the Act on Insurance Undertakings.

Paragraph 2. An amount corresponding to a quarter of the value of the assets must be deposited as security.

Section 15. The registered assets shall serve exclusively as security for the fulfillment of obligations under the direct insurance contracts belonging to the branch and for covering amounts that the branch is obligated to pay under the Act on Insurance Undertakings, including fines.

Paragraph 2. For branches that have been taken under administration, the individual insured can only claim satisfaction for a due insurance claim to the extent that the Danish Financial Supervisory Authority considers it defensible, taking into account that the assets also serve as security for the branch's obligations to the other insured parties.

Chapter 7
Capital

Section 16. The branch must calculate the capital for the insurance portfolio belonging to the branch in accordance with the following provisions:

1. The capital base must cover the solvency capital requirement for the insurance portfolio belonging to the branch, and shall be calculated in accordance with Sections 153 and 154 of the Act on Insurance Undertakings and regulations issued pursuant thereto.
2. The basic capital base must cover the minimum capital requirement for the insurance portfolio belonging to the branch, and shall be calculated in accordance with Section 153, Paragraph 2, and Section 155 of the Act on Insurance Undertakings and regulations issued pursuant thereto. The amount deposited pursuant to Section 14, Paragraph 2, is included in the basic capital base, which must be at least equal to half of the lower limit of the minimum capital requirement, cf. Section 155, Paragraph 5, of the Act on Insurance Undertakings.
3. The solvency capital requirement and the minimum capital requirement are calculated for the insurance portfolio belonging to the branch in accordance with Sections 154 and 155 of the Act on Insurance Undertakings. The assets covering the solvency capital requirement must be located in this country with an amount at least corresponding to the minimum capital requirement. The remainder of the amount must be located within the European Union.

Chapter 8
Accounts and Reporting

Section 17. The insurance undertaking must keep a separate account for the business conducted through the branch.

Paragraph 2. No later than one month after the insurance undertaking's annual report is finally approved, but no later than 4 months after the end of the financial year, the insurance undertaking must submit two copies of the annual report with audit opinion to the Danish Financial Supervisory Authority.

Paragraph 3. The Danish Financial Supervisory Authority forwards one of the copies mentioned in Paragraph 2 to the Danish Business Authority, where the annual report will be made publicly available in accordance with the rules set by the Danish Business Authority.

Section 18. Within six months after the end of each financial year, the general agent must, using the forms prepared by the Danish Financial Supervisory Authority for this purpose, submit a report on the branch's business in this country to the Danish Financial Supervisory Authority.

Paragraph 2. In addition to information on the branch's business, the report must contain information on the branch's economic situation and the size of the minimum and solvency capital requirements, and must be certified by a state-authorized auditor.

Paragraph 3. The provisions on audit in Section 193 of the Act on Insurance Undertakings and regulations issued pursuant thereto may, upon decision by the Danish Financial Supervisory Authority, apply partially to the branch.

Section 19. For branches conducting insurance business in accordance with Annex 1 to the Act on Insurance Undertakings, the report must, in addition to the information in Section 18, contain a calculation of the insurance technical provisions for the insurance portfolio belonging to the branch, including an overview of the assets designated to cover the insurance technical provisions, and the assets corresponding to premiums entered into where the insurance period begins after the end of the financial year.

Section 20. For branches conducting insurance business in accordance with Annex 2 to the Act on Insurance Undertakings, the report must, in addition to the information in Section 18, contain the following:

1. A summary indication of the insurance sums for the direct life insurance policies belonging to the branch that were in force at the end of the most recent financial year.
2. An indication of the number of insured persons and annual premiums.
3. A calculation of the life insurance provisions and information that enables the Danish Financial Supervisory Authority to verify the correctness of these calculations.
4. An indication of the sum of premiums entered into during the last financial year.
5. The amount lent by the company against pledge in the insurance policies belonging to the branch within their surrender value.

Section 21. The Danish Financial Supervisory Authority may require the branch to provide further information that is necessary in each individual case to assess the information received in accordance with Sections 17-20.

Chapter 9
Transfer of Insurance Portfolios

Section 22. An insurance undertaking wishing to transfer the whole or a specific part of the insurance portfolio belonging to a branch to another company established in this country must obtain authorization from the Danish Financial Supervisory Authority.

Paragraph 2. The transfer must be carried out in accordance with Section 195 of the Act on Insurance Undertakings and is conditional on the acquiring company, after the transfer has taken place, having a capital base that covers the solvency capital requirement calculated by the branch.

Paragraph 3. If the acquiring company is established in another country within the European Union or in a country with which the Union has concluded an agreement in the financial area, the supervisory authority in this country must confirm that the company, after the transfer has taken place, has a capital base that covers the solvency capital requirement calculated by the branch.

Chapter 10
Orders to Take Necessary Measures

Section 23. The Danish Financial Supervisory Authority orders the branch to take the measures deemed necessary within a deadline set by the authority if:

1. The branch does not comply with the Act on Insurance Undertakings and regulations issued pursuant thereto,
2. The manner in which the branch's assets are placed is not satisfactory,
3. The branch's economic position exposes the interests of the insured to danger,
4. The branch does not have sufficient insurance technical provisions to cover the obligations entered into,
5. A branch conducting life insurance business deviates from the notified technical basis applicable to the business,
6. The Danish Financial Supervisory Authority does not find the notified technical basis satisfactory, or
7. It turns out that the assets covering the insurance technical provisions are not satisfactory.

Paragraph 2. If the report in accordance with Sections 18-20 shows a deterioration in the branch's economic position compared to the prepared business plan, the Danish Financial Supervisory Authority may order the branch within a deadline set by the authority to take the necessary measures to improve the branch's economic position, including preparing a new business plan.

Paragraph 3. As part of the measures mentioned in Paragraphs 1 and 2, the Danish Financial Supervisory Authority may prohibit the branch from disposing of its assets or restrict its disposal thereof in accordance with Section 222, Paragraph 1, of the Act on Insurance Undertakings.

Paragraph 4. If the branch does not take the measures prescribed in Paragraphs 1 and 2 within the given deadline, and the omission is deemed to pose a danger to the interests of the insured, the Danish Financial Supervisory Authority may appoint another general agent and authorize this person to wind up the branch's business in accordance with Sections 227-235 of the Act on Insurance Undertakings. The general agent may seize all assets belonging to the branch during the winding up of the business.

Chapter 11
Withdrawal of Authorization

Section 24. The Danish Financial Supervisory Authority may wholly or partially withdraw the insurance undertaking's authorization to conduct insurance business through a branch if:

1. The conditions for obtaining authorization, cf. Section 2, are no longer met, or
2. The branch grossly neglects its obligations under the Act on Insurance Undertakings and regulations issued pursuant thereto.

Paragraph 2. In the event of withdrawal of an insurance undertaking's authorization to conduct insurance business through a branch, the Danish Financial Supervisory Authority decides whether the insurance undertaking should seek to transfer the insurance portfolio to one or more insurance undertakings conducting insurance business in this country, or whether the company should otherwise seek to wind up the insurance portfolio. For insurance undertakings conducting insurance business covered by Annex 2 to the Act on Insurance Undertakings through a branch, the Danish Financial Supervisory Authority may decide that the insurance portfolio is taken under administration in accordance with Chapter 20 of the Act on Insurance Undertakings.

Paragraph 3. The Danish Financial Supervisory Authority may, in connection with the withdrawal of an insurance undertaking's authorization to conduct insurance business through a branch, prohibit the insurance undertaking from disposing of the branch's assets or restrict its disposal thereof in accordance with Section 222, Paragraph 1, of the Act on Insurance Undertakings.

Chapter 12
Winding Up of the Branch

Section 25. The Danish Financial Supervisory Authority requests the Danish Business Authority to delete a branch when:

1. The insurance undertaking notifies that it wishes the branch to be deleted, unless the Danish Financial Supervisory Authority finds that the branch should be maintained taking into account direct insurance policies that are still in force,
2. The branch is without a general agent and this deficiency is not remedied within a deadline set by the Danish Financial Supervisory Authority, unless the Danish Financial Supervisory Authority finds it necessary to appoint a general agent, or
3. The branch's business has been wound up in accordance with Sections 22-24.

Chapter 13
Insurance Undertakings with Domicile in Switzerland etc.

Section 26. For insurance undertakings with domicile in Switzerland, which lawfully conduct insurance business covered by Annex 1 to the Act on Insurance Undertakings, the provisions in Sections 2-25 apply with the following modifications:

1. The company may, regardless of the provision in Section 2, Paragraph 2, No. 1, conduct insurance business in this country through a branch, provided the company is established in accordance with the legislation of Switzerland.
2. A general agent or a representative appointed by the general agent with Swiss citizenship does not need to meet the requirement in Section 10, Paragraph 1, No. 2, to have been resident in this country for the last two years.
3. The provisions in Section 14, Paragraph 2, and Section 16 do not apply.
4. The provision on registration of assets in Section 219 of the Act on Insurance Undertakings applies only if the company has authorization to conduct compulsory accident insurance or if registration is prescribed pursuant to Section 23, Paragraph 3, or Section 24, Paragraph 3, as a measure.

Paragraph 2. A company covered by Paragraph 1 can only obtain authorization to conduct insurance business within the insurance class in which the company conducts insurance business in Switzerland.

Section 27. For insurance undertakings with domicile in Switzerland, which lawfully conduct insurance business covered by Annex 2 to the Act on Insurance Undertakings, and for insurance undertakings with domicile in a country that was entitled to conduct business in this country on 30 September 1975, the provisions in Sections 2-25 apply, subject to Paragraph 2.

Paragraph 2. Companies etc. (legal persons) may be subject to criminal liability under the rules in Chapter 5 of the Criminal Code.

Chapter 14
Benefits for Companies with Authorization in Several Countries within the European Union

Section 28. Insurance undertakings that have requested or obtained authorization to establish a branch in several countries within the European Union, or in countries with which the Union has concluded an agreement in the financial area, may request the following benefits:

1. The solvency capital requirement is calculated for the total branch business within the Union and countries with which the Union has concluded an agreement in the financial area.
2. Security in accordance with Section 14 is provided only in the country that supervises the solvency of the total branch business, cf. Paragraph 2.
3. The assets that must cover the minimum capital requirement may be located in any of the countries within the Union where the insurance undertaking conducts business through a branch.

Paragraph 2. The request for obtaining the benefits mentioned in Paragraph 1 must be submitted to the supervisory authorities in all the affected countries within the European Union or countries with which the Union has concluded an agreement in the financial area. The request must contain a reasoned statement of which of the affected supervisory authorities shall subsequently supervise the solvency of the total branch business, cf. Paragraph 1, No. 1.

Paragraph 3. The benefits mentioned in Paragraph 1 can only be granted if the supervisory authorities in all the affected countries within the European Union or countries with which the Union has concluded an agreement in the financial area have given their consent. The benefits only take effect from the point in time when the chosen supervisory authority, vis-à-vis the supervisory authorities in the other affected countries, has declared that it will supervise the solvency of the total branch business, cf. Paragraph 1, No. 1.

Paragraph 4. The authorization to use the benefits mentioned in Paragraph 1 is revoked by all the affected countries if one or more of these do not wish to maintain the authorization.

Chapter 15
Equivalence in Relation to Reinsurance Undertakings

Section 29. In cases covered by Article 172, Paragraph 2, of Directive 2009/138/EC of the European Parliament and of the Council of 25 November 2009 on the taking-up and pursuit of the business of Insurance and Reinsurance (Solvency II), as amended by Directive 2014/51/EU of the European Parliament and of the Council of 16 April 2014, where it is established that a third country's solvency rules are equivalent to the rules in the directive, reinsurance agreements entered into with companies with headquarters in this third country are treated in the same way as reinsurance agreements entered into with companies that have obtained authorization under the directive.

Paragraph 2. In cases covered by Article 172, Paragraph 4, of Directive 2009/138/EC of the European Parliament and of the Council of 25 November 2009 on the taking-up and pursuit of the business of Insurance and Reinsurance (Solvency II), as amended by Directive 2014/51/EU of the European Parliament and of the Council of 16 April 2014, where it is established that a third country's solvency rules are assessed to be temporarily equivalent to the rules in the directive,

1. The Order contains provisions that implement parts of Directive 2009/138/EC of the European Parliament and of the Council of 25 November 2009 on the taking-up and pursuit of the business of Insurance and Reinsurance (Solvency II), Official Journal of the European Union 2009, No. L 335, page 1, and Council Directive 91/371/EEC of 20 June 1991 on the implementation of the Agreement between the European Economic Community and Switzerland on direct insurance other than life insurance, Official Journal of the European Communities 1991, No. L 205, page 48.

Act Series A
2024 Published on 12 December 2024
5 December 2024. No. 1491.
Ministry of Industry, Business and Financial Affairs, Danish Financial Supervisory Authority, file no. 24-019099 CQ003059