Draft

Draft Official translation REPUBLIC OF LITHUANIA LAW ON INSURANCE 18 September 2003 No.IX-1737 Vilnius CHAPTER I GENERAL PROVISIONS Article

1. Objective of the Law
2. The objective of this Law is to regulate the insurance and insurance mediation activity with a view to making the insurance system credible, efficient, safe and stable.
3. The Law shall specify persons who have the right to engage in the business of insurance and reinsurance as well as insurance and reinsurance mediation in the Republic of Lithuania, determine the main principles of state regulation of these activity, regulate these activity and its characteristic features which a public company, a private company or a European company (Societas Europaea) engaged in insurance or independent insurance mediation activity must conform to. This Law shall also regulate characteristic features of pre-contractual relations between parties to the contract, the terms and conditions of the insurance contract, the relations arising from insurance contracts and relating to them as well as other relations set out in this Law.
4. The provisions of this Law shall not apply to: 1) state social insurance relations; 2) relations regulated by the Law on Insurance of Deposits and Liabilities to Investors.
5. Specific features of the establishment, licensing, activity, winding-up, bankruptcy and state supervision of entities having the right to engage in the business of accumulation of a portion of the state social insurance contribution, shall be established by other laws.
6. Specific features of insurance activity of certain insurance companies may be established by other laws.
7. The activity related to pension accumulation which is set out in subparagraph 5, paragraph 2, Article 7 of this Law shall be regulated by other laws of the Republic of Lithuania.
8. The provisions of the Law on Companies shall apply to the relations regulated by this Law to the extent this Law does not provide otherwise. Article
9. Definitions
10. Insured person - in life and health insurance - the natural person specified in the insurance contract to whom, upon occurrence of an insured event in his life, the insurer must pay a benefit; in insurance against civil liability - the person specified in the insurance contract whose property interests related to civil liability are covered by insurance; in property insurance - the person specified in the insurance contract whose property interests are covered by insurance.
11. Required solvency margin - the amount of solvency margin calculated according to the procedures prescribed by legal acts which must be commensurate with the scope and character of the insurer’s activity.
12. Civil liability insurance - the insurance of property interests related to civil liability for the damage caused to the injured party or its property where the amount of the benefit paid by the insurer depends on the amount of the indemnity which the insured person must pay to the third party for the damage, which, however, must be within the limits of the insurance sum if it specified in the contract.
13. Participating undertaking: 1) a parent undertaking; 2) an undertaking holding participation in any other undertaking in any of the forms set out in paragraph 5 of this Article; 3) an undertaking which, though not related to any another undertaking or undertakings referred to in paragraphs 28 and 48 of this Article, is managed in conjunction with these companies under the contracts or provisions of the memorandums or articles of association; 4) an undertaking which, though not related to any other undertaking or undertakings referred to in paragraphs 28 and 48 of this Article, but in which the majority of members of its administration, management or supervisory bodies have been the same as in another company or other undertakings throughout the financial year until the drafting of consolidated financial accounts.
14. Participation - a direct or indirect holding of 20% or more voting rights at the meeting of the highest managing body or 20% or more of the share/member share capital of the undertaking, as well as any other real and long-term possibility to exercise influence over the decisions related to the activity of the undertaking both as a shareholder/participant and a holder of any other rights related to the share/member share capital.
15. Large insurance risk – insurance risk under the criteria set out in Article 10 of this Law.
16. Policyholder - a person who has applied to the insurer in order to conclude an insurance contract, or who has received an offer from the insurer to conclude an insurance contract, or who has concluded an insurance contract with the insurer.
17. Insurer - a person authorised under law to engage in insurance activity.
18. Insurer’s surplus share/bonus - the amount of the insurer’s earnings due to a policyholder/beneficiary in the cases provided in a capital accumulation life assurance contract, calculated and paid according to the procedure provided in the contract.
19. Insurers’ Bureau - an association of insurers who are engaged in the activity of the insurance class specified in subparagraph 10, paragraph 3, Article 7 of this Law in the Republic of Lithuania other than carriers liability insurance, established according to the procedure provided by laws, or an analogous association of any another European Union Member State.
20. Insured event - an event specified in the insurance contract upon occurrence of which the insurer is obliged to pay the benefit.
21. Cover - the commitment of the insurer to pay a benefit upon occurrence of an insured event.
22. Premium - the amount of money specified in the insurance contract which the policyholder pays to the insurer for the coverage.
23. Insurance undertaking – an undertaking which, according to the procedure prescribed by this Law, has been granted a licence to engage in insurance activity.
24. Insurable interest – a loss that the policyholder, the insured person, or the beneficiary may incur upon occurrence of an insured event.
25. Benefit - an amount of money which the insurer must pay, according to the procedure specified in the insurance contract, to the policyholder or another person who is entitled to the insurance benefit upon occurrence of an insured event, or any other form of payment of benefit provided in the insurance contract.8
26. Insurance holding company - a parent undertaking which is not a mixed-activity holding company yet the main business of which is to acquire and hold participations in subsidiary undertakings, where those subsidiary undertakings are exclusively or mainly insurance undertakings, insurance, reinsurance undertakings of any other European Union Member State or non-member-country insurance undertakings, one at least of such subsidiary undertakings being an insurance undertaking of another EU Member State or a non-member country.
27. Insurance period - the time interval from the beginning until the end of insurance coverage, which does not necessarily coincide with the term of the insurance contract.
28. Insurance policy - the document issued by the insurer certifying conclusion of the insurance contract.
29. Insurance object - property interests related to a person’s life, health, property, or liability.
30. Insurance risk - a peril threatening to the insurance object.
31. Sum insured - the sum of money specified in the insurance contract or the sum of money which is calculated by the method specified in the insurance contract, which, except for the cases provided in the contract, shall be equal to the maximum benefit which may be paid under the insurance contract.
32. Insurance policy conditions - standard insurance contract conditions drafted by the insurer.
33. Insurance intermediary - a person performing insurance mediation activity for a certain payment
34. Insurance mediation - the commercial economic activity of introducing, proposing or carrying out other work preparatory to the conclusion of contracts of insurance, or of concluding such contracts, or of assisting in the administration and performance of such contracts, in particular in the event of a claim. This activity when undertaken by an insurance undertaking or an employee of an insurance undertaking shall not be considered as insurance mediation. The provision of information on an incidental basis in another professional activity, provided that the purpose of the activity is not to assist the customer in concluding or performing an insurance contract, the management of claims of an insurance undertaking on the basis of a contract with the insurer, loss adjusting and expert appraisal of claims shall not be considered as insurance mediation. .
35. Technical provisions – insurer’s obligations arising from insurance and/or reinsurance contracts or relating to them which are calculated following the procedure set out by legal acts.
36. Insurance activity - economic-commercial activity whereby the risk of the losses of other persons is assumed in the form of the insurance contract or it is sought to protect property interests of these persons in any other way upon occurrence of insured events, by using for the security of those interests, the insurer’s assets covering technical provisions and other assets. For the purposes of this Law, insurance activity shall also be the activity set out in subparagraph 5, paragraph 2, Article 7 of this Law. The concept “insurance activity” in this Law shall not include reinsurance.
37. Subsidiary - an undertaking which meets at least one of the criteria listed bellow: 1) an undertaking in which another undertaking has a majority of voting rights of its shareholders or other participants; 2) an undertaking in which another undertaking, a shareholder/participant of the first, has the right to appoint and recall the majority of members of the administration, management or supervisory body of the first undertaking; 3) an undertaking over which, under the provisions of its memorandum, articles of association or contracts concluded with another company, an undertaking may exercise a dominant influence; 4) an undertaking in which another undertaking, under contracts concluded with its shareholders/participants, controls the majority of its shareholders’/participants’ voting rights; 5) an undertaking over which, in the opinion of the competent authority, another undertaking is exercising a dominant influence; 6) an undertaking which, under the criteria of paragraphs 1 - 5, is a subsidiary of a subsidiary. In this case, it shall be considered a subsidiary of the parent undertaking whose subsidiary has a subsidiary.
38. European Union Member State - the Republic of Lithuania or any other state that is a member of the European Union. For the purposes of this Law, the concept of the Member State of the European Union shall also include states of the European Economic Area.
39. European Union Member State where the risk is situated – a Member State of the European Union, where: 1) property is situated when an insurance contract relates to buildings or buildings together with property in them, if this property is insured under the same insurance contract; 2) a vehicle of any type related to an insurance contract is registered; 3) the policyholder has concluded an insurance contract for not longer than four months for travel or holiday risks, irrespective of the insurance class these risks might belong; 4) the policyholder’s permanent place of residence, his head office, a branch or agency that are related to the insurance contract is located only in all other cases except which have not been specified in subparagraphs 1-3 of this paragraph.
40. European Union Member State of provision of services - a Member State of the European Union where the risk is situated or a European Union Member State of commitment under a life insurance contract, if the insurance contract regarding that risk or commitment is concluded not by an insurance undertaking of this European Union Member State, or a branch of an insurance undertaking established in this European Union Member State, or a branch of an insurance undertaking of another European Union Member State.
41. Guarantee fund - the reserve of an association of insurers engaged in the insurance class specified in subparagraph 10, paragraph 3, Article 7 of this Law, except carriers’ liability insurance, in the Republic of Lithuania, or any other analogous formation provided by legislation of any other European Union Member State.
42. Life assurance - the insurance of property interests related to life and/or capital accumulation of a natural person where due to insured events, such as death of the insured, maturity of the insurance term established in the insurance contract or other insured event, insurance benefits are paid in lump sum or in instalments.
43. Close link - a situation in which persons are linked by control or participation. If one person controls two or more persons it is considered that there is a close link between these persons.
44. Group of companies - a group of undertakings which consists a parent undertaking, its subsidiaries and undertakings in which the parent undertaking or its subsidiaries hold a participation in the manner specified in the manner specified in paragraph 4 of this Article.
45. Measures involving intervention - measures applied by the court or the Insurance Supervisory Commission of the Republic of Lithuania (hereinafter – “the Supervisory Commission” in order to preserve or restore the financial position of an insurance undertaking or a subsidiary of a non-member-country insurance undertaking and the interests of policyholders, the insured persons, beneficiaries, the injured party or other creditors or to implement the objectives established in Article 2.124 of the Civil Code, and which due to their nature have an effect on the rights and obligations of the persons of undertakings other than the insurance undertaking itself or a branch of a non-member-country insurance undertaking.
46. European Union Member State of the commitment under a life insurance contract - a Member State of the European Union, where a permanent place of residence or the head office of the policyholder related to the life assurance contract is situated.
47. Surrender value - the sum calculated by actuarial/mathematical methods with regard to part of paid insurance premiums intended for capital accumulation, the interest accrued during the contract term, the part of the insurer’s profit due to the policyholder under the contract and other elements specified in the insurance contract.
48. Another European Union Member State - a European Union Member State other than the Republic of Lithuania.
49. Insurance undertaking of another European Union Member State – an undertaking that has a right to carry out insurance activity under legal acts of the said Member State.
50. Competent authority – the authority which supervises insurance, insurance or reinsurance mediation activity. The Insurance Supervisory Commission of the Republic of Lithuania shall be the competent authority of the Republic of Lithuania.
51. Control – the relationship between a parent undertaking and a subsidiary, as defined in paragraphs 28 – 48 of this Article, or a similar relationship between any natural or legal person and an undertaking. Control may be direct and indirect.
52. Mixed-activity insurance holding company – a parent undertaking other than an insurance undertaking, an insurance undertaking of another European Union Member State, an insurance undertaking of a non-member country, a reinsurance undertaking, an insurance holding company or a mixed-activity financial holding company, under condition that at least one of its subsidiaries is an insurance undertaking of another European Union Member State or an insurance undertaking of a non-member country.
53. Solvency margin– the insurer’s assets which exceed obligations arising from insurance and/or reinsurance contracts.
54. Beneficiary - the person specified in the insurance contract or the person appointed by the policyholder and, in the cases specified in the contract, also the person appointed by the insured who is entitled to the benefit upon occurrence of the insured event.
55. Irrevocable beneficiary - the beneficiary who may not be revoked or replaced unilaterally, at the discretion of the policyholder or, in the cases specified in the insurance contract - of the insured person, without prior consent of the beneficiary.
56. Injured party - in civil liability insurance - the person who has been caused damage or injury by the policyholder or the insured person.
57. Parent undertaking – an undertaking which meets at least one of the criteria listed below: 1) it has the majority of shareholders’ or other participating votes in another undertaking; 2) as a shareholder/participant of another undertaking, it has the right to appoint and recall the majority of members of administration, managing and supervisory bodies of that undertaking; 3) it may exercise a significant influence over another undertaking because of the contracts concluded with that undertaking, the provisions of the incorporation instrument or of the articles of association of that undertaking; 4) under the contracts concluded with the shareholders/participants of another undertaking, it has control over the majority of votes of that undertaking’s shareholders/participants; 5) in the opinion of a competent authority the undertaking exercises an effective influence over another undertaking.
58. Reinsurance – a type of insurance, where, for an insurance premium, insurer’s anticipated risk of claims payment or other loss conditioned by its activity is accepted.
59. Reinsurance undertaking - an undertaking, other than that indicated in paragraphs 14, 40 or 61 of this Article, whose principal activity is claims payment or acceptance of other loss of insurance activity risk, or acceptance of other reinsurance loss risk when engaged in reinsurance of these risks in respect of insurance undertakings, insurance undertakings of other European Union Member States, and non-member country insurance undertakings.
60. Reinsurance intermediary - a person engaged in reinsurance mediation activity for payment.
61. Reinsurance mediation - the economic commercial activity of introducing, proposing or carrying out other work preparatory to the conclusion of contracts of reinsurance, or of concluding such contracts, or of assisting in the administration and performance of such contracts, in particular in the event of a claim. These activity when undertaken by an insurance undertaking or an employee of a reinsurance undertaking who is acting under the responsibility of the reinsurance undertaking are not considered as reinsurance mediation. The provision of information on an incidental basis in the context of another professional activity provided that the purpose of the activity is not to assist the customer in concluding or performing as reinsurance contract, the management of claims of a reinsurance undertaking on the basis of a contract with the insurer, and loss adjusting and expert appraisal of claims shall also not be considered as reinsurance mediation.
62. Dependent insurance intermediary – any person who carries on the activity of insurance mediation for and on behalf of one or more insurance undertakings and their interests. Any person who carries on the activity of insurance mediation for and on behalf of one or more insurance undertakings and in their interests, in addition to his principal professional activity, is also considered a dependent insurance intermediary if the insurance is complementary to the goods and services supplied within the framework of this professional activity
63. Right of establishment - the right to establish in another European Union Member State a subsidiary or a branch of an insurance undertaking, a subsidiary or a branch of an undertaking of insurance intermediaries, or the right to establish in the Republic of Lithuania a subsidiary or a branch of an insurance undertaking of another European Union Member State, a subsidiary or a branch of an undertaking of insurance intermediaries of another European Union Member State.
64. Related undertaking – a subsidiary or other undertaking in which a participation is held by another undertaking in the manner specified in paragraph 4 of this Article.
65. Health insurance - insurance of property interests related to health of a natural person where due to insured events related to health of the person a benefit is paid in the amount of the sum insured or its part, or in the amount of the loss resulting from an insured event. Health insurance shall include accident insurance and sickness insurance.
66. Right to provide services – the right of an insurance undertaking to engage in insurance activity in another European Union Member State without establishing a subsidiary or a branch, the right of insurance intermediaries to engage in insurance mediation activity in another European Union Member State without establishing a subsidiary or a branch of insurance intermediaries, or the right of an insurance undertaking of another European Union Member State to engage in insurance activity in the Republic of Lithuania without establishing a subsidiary or a branch of an insurance undertaking, and the right of insurance intermediaries of another European Union Member State to engage in insurance mediation activity in the Republic of Lithuania without establishing a subsidiary or a branch of insurance intermediaries.
67. Available solvency margin – the amount of the insurer’s assets in excess of his obligations, arising from insurance and/or reinsurance contracts and calculated in accordance with the procedure set out in legal acts.
68. Property insurance - insurance of a person’s property interests where the amount of the benefit depends, within the limits of the sum insured, on the amount of the loss and other expenses incurred by the person. 60.non-member country - a country which is not a Member State of the European Union or of the European Economic Area.
69. Insurance undertaking of a non-member country – an undertaking engaged in insurance activity, registered in a non-member country, which, according to the nature of its activity should have to obtain a licence to engage in insurance activity as set out in this Law or an equivalent authorisation if it were registered in the Republic of Lithuania or any other European Union Member State. Article
70. Insurance Activity
71. The following shall have the right to engage in insurance activity in the Republic of Lithuania: 1) insurance undertakings - public companies, private companies, and European companies (Societas Europaea) established in the manner prescribed by laws of the Republic of Lithuania and which have obtained a licence to engage in insurance activity according to the procedures set out in this Law; 2) insurance undertakings of other European Union Member States, exercising the right of establishment and/or the right to provide services. 3) branches of insurance undertakings of foreign countries established in the Republic of Lithuania having a licence to carry on insurance activity as branches according to the procedure prescribed by this Law.
72. The entities referred to in paragraph 1 of this Article may not engage in the Republic of Lithuania in any other commercial economic activity other than insurance, reinsurance and related activity - management of insured and reinsured events, insurance and reinsurance mediation, consulting on questions relating to insurance and reinsurance, mediation in concluding pension accumulation contracts save supplementary voluntary accumulation, training insurance and reinsurance specialists, in-service training, as well as leasing of immovable property and valuation of property to be insured.
73. Persons referred to in paragraph 1 of this Article may engage in insurance-related insurance mediation activity only as dependent insurance intermediaries.
74. All other persons not named in this Law shall be prohibited from carrying on insurance activity in the Republic of Lithuania, except in the cases established by the Supervisory Commission, where the insurance coverage by a branch of a non-member- country insurance undertaking established in the Republic of Lithuania or a branch of an insurance undertaking of another Member State of the European Union is not recognised due to compulsory insurance in a non-member country. Article
75. Reinsurance Activity In the Republic of Lithuania, only entities referred to in paragraph 1 of Article 3 of this Law as well as those listed below shall have the right to engage in reinsurance activity: 1) reinsurance companies of the Republic of Lithuania; 2) reinsurance companies of other European Union Member States both those which have established a branch in the Republic of Lithuania and those which have not; 3) non-member country reinsurance companies both those which have established a branch in the Republic of Lithuania and those which have not. Article
76. Insurance and Reinsurance Mediation Activity
77. In the Republic of Lithuania, only the following shall have the right to engage in mediation activity: 1) undertakings (insurance agents undertakings) of any legal form established according to the laws of the Republic of Lithuania and natural persons, who are engaged in insurance mediation activity (insurance agents) according to the procedures established by laws of the Republic of Lithuania. Insurance agents companies and insurance agents shall be dependent insurance intermediaries; 2) insurance brokers undertakings established according to the procedures prescribed by laws of the Republic of Lithuania, such as public companies, private companies and European companies which have obtained a licence to engage in insurance brokers activity according to the procedure set out in this Law. Insurance brokers undertakings shall be independent insurance intermediaries; 3) insurance intermediaries of other European Union Member States which carry on insurance mediation activity in the Republic of Lithuania, exercising the right of establishment and/or the right to provide services; 4) branches of insurance intermediaries of foreign countries established in the Republic of Lithuania.
78. In the Republic of Lithuania, only persons referred to paragraph 1 of Article 3 and paragraph 1 of Article 5 of this Law as well as the persons listed below shall have the right to engage in reinsurance mediation: 1) insurance brokers undertakings; 2) reinsurance intermediaries of other European Union Member States which are engaged in reinsurance mediation activity in the Republic of Lithuania both those which have established a branch and those which have not; 3) reinsurance intermediaries of foreign states, which have not established a branch in the Republic of Lithuania, or branches of insurance intermediaries and/or reinsurance intermediaries of foreign countries established in the Republic of Lithuania.
79. Insurance undertakings or branches of insurance undertakings of foreign countries, insurance companies of other European Union Member States exercising the of establishment and/or the right to provide services shall be prohibited from using the services of persons who do not have the right to be engaged in insurance or reinsurance mediation activity. Article
80. Agencies The procedures set out in this Law regarding establishment of branches, their activity and supervision of the activity shall be applicable to the agencies or any other offices managed by the employees and persons of the founding undertaking, who have a permanent or a long-term authorisation to operate on behalf of the undertaking they represent, where: 1) the agency or office is being founded in another Member State of the European Union by an insurance undertaking or an undertaking of insurance intermediaries of the Republic of Lithuania; 2) the agency or office in the Republic of Lithuania is being founded by an insurance undertaking or an undertaking of insurance intermediaries of another Member State of the European Union. Article
81. Branches and Classes of Insurance
82. Insurance branches shall be life assurance and non-life insurance.
83. Life assurance shall comprise the following assurance classes: 1) life assurance other than provided in classes 2 - 5; 2) marriage and birth insurance; 3) life assurance related to investment funds (when the investment risk is borne by the policyholder); 4) tontines; 5) accumulation of pensions activity.
84. Non-life insurance shall comprise the following insurance classes: 1) accident insurance; 2) sickness insurance; 3) land vehicles (other than railway rolling stock)insurance; 4) railway rolling stock insurance; 5) aircraft insurance; 6) ships (sea and internal waters) insurance; 7) goods in transit insurance; 8) property (other than in subparagraphs 3, 4, 5, 6 and 7) insurance against fire and natural forces; 9) property insurance against other risks (other than in subparagraph 8); 10) liability arising out of the use of motor vehicles operating on the land;; 11) liability arising out of the use of aircraft; 12) liability arising out of the use of ships (sea and internal waters); 13) general liability insurance; 14) credit insurance; 15) suretyship insurance; 16) financial loss insurance; 17) legal expenses insurance; 18) assistance insurance.
85. Where the licence for insurance activity or the authorisation for the activity of a branch of a non-member-country insurance undertaking simultaneously covers: 1) insurance classes in subparagraphs 1 and 2, paragraph 3 of this Article, it shall be named accident and sickness insurance (health insurance); 2) insurance class in subparagraph 1, paragraph 3 of this Article covering passenger injury insurance and insurance classes in subparagraphs 3, 7 and 10, paragraph 3 of this Article shall be named motor insurance; 3) insurance class in subparagraph 1, paragraph 3 of this Article covering passenger injury insurance and classes in subparagraphs 4, 6, 7 and 12, paragraph 3 of this Article shall be named marine and transport insurance; 4) insurance class in subparagraph 1, paragraph 3 of this Article covering passenger injury insurance and classes in subparagraphs 5, 7, and 11, paragraph 3 of this Article shall be named aviation insurance; 5) insurance classes in subparagraphs 8 and 9, paragraph 3 of this Article shall be named fire and other damage to (destruction of) property; 6) insurance classes in subparagraphs 10, 11, 12 and 13, paragraph 3 of this Article shall be named liability insurance; 7) insurance classes in subparagraphs 14 and 15, paragraph 3 of this Article shall be named credit and suretyship insurance; 8) all insurance classes in paragraph 3 of this Article shall be named non-life insurance risks insurance.
86. The Supervisory Commission shall approve the description of life assurance and non-life insurance classes which shall be observed by insurance undertakings and branches of foreign insurance undertakings. Article
87. Difference Between Life and Non-Life Insurance Activity in the Republic of Lithuania
88. None of the entities specified in paragraph 1 Article 3 of this Law, shall have the right to engage in both life and non-life insurance, save for the cases and exceptions referred to in paragraph 2 of this Article, and paragraph 3, Article 224 of this Law, where the legislation of a Member State of the European Union authorises an insurance undertaking of another European Union Member State to carry on both life and non-life insurance activity.
89. The entities referred to in paragraph 1, Article 3 of this Law, which are engaged in life insurance shall also have the right to engage only in the activity of non life insurance classes indicated in subparagraphs 1 and 2, paragraph 3, Article 7 of this Law following the procedure established by laws.
90. Insurance undertakings and branches of insurance undertakings of foreign countries must follow the rules of life-assurance activity and the rules of separate administration of non-life insurance classes listed in subparagraphs 1 and 2, paragraph 3, Article 7 of this Law, approved by the Supervisory Commission Article
91. Ancillary Insurance Risks of Non-Life Insurance
92. An insurance undertaking which has a licence to engage in insurance activity, or a branch of a non-member-country insurance undertaking having an authorisation for insurance activity of a branch granted for carrying on the insurance activity of the principal risk belonging to the non-life insurance class or a group of classes, shall have the right, without changing the licence for insurance activity or the authorisation for the insurance activity of the branch, to conclude insurance contracts for ancillary insurance risks belonging to other insurance classes of non-life insurance provided that the following conditions are met: 1) ancillary insurance risk is connected with the principal insurance risk; 2) ancillary insurance risk concerns the object which is covered against the principal risk; 3) ancillary risk is covered by the insurance contract insuring the principal risk.
93. The risks of insurance classes listed in subparagraphs 14, 15, and 17, paragraph 3, Article 7 of this Law may not be regarded as risks ancillary to other classes, with the exception of cases indicated in paragraphs 3 and 4 of this Article.
94. Insurance risk belonging to the insurance class in subparagraph 17, paragraph 3 of Article 7 of this Law may be considered as ancillary to the risks of insurance class referred to in subparagraph 18, paragraph 3, Article 7 of this Law only when the conditions specified in paragraph 1 of this Article are fulfilled, and when the principal risk is exclusively related to providing assistance to persons who encounter difficulties while travelling, while away from home or from their permanent place of residence.
95. Insurance risk belonging to the insurance class referred to in subparagraph 17, paragraph 3, Article 7 of this Law, may also be considered ancillary insurance risk only when the conditions specified in paragraph 1 of this Article are fulfilled and when it is related to arguments or risks which arise out of or are related to the use of sea vessels. Article
96. Large Insurance Risk
97. Insurance risk shall be considered large if it belongs to the following: 1) insurance classes specified in subparagraphs 4, 5, 6, 7, 11, and 12, paragraph 3, Article 7 of this Law; 2) insurance classes referred to in subparagraphs 14 and 15, paragraph 3, Article 7 of this Law, where the policyholder is involved in commercial activity or is a self-employed professional, and the insurance risks are related to this activity.
98. An insurance risk shall also be considered large if it belongs to the insurance class referred to in subparagraphs 3, 8, 9, 10, 13, and 16, paragraph 3, Article 7 of this Law, and the insurer of the risk of this group exceeds at least two of the following values: 1) the amount of assets indicated in the balance sheet of the policyholder is at least EUR 6 200 000; 2) the net assets of the policyholder totals or exceeds EUR 12 800 000; 3) the average number of personnel employed by the policyholder is at least 250 during the accounting year.
99. If the policyholder belongs to a group of persons the consolidated accounts of which are made in compliance with the requirements set forth in the Law on Consolidated Accounts of Enterprises or in an equivalent legal act of another Member State of the European Union, the values referred to in paragraph 2 of this Article shall be established on the basis of the values set out in the consolidated accounts. Article
100. Evaluation of Good Repute, Professional Qualifications and Experience
101. A natural person shall not be considered of good repute if: 1) he has been convicted for any premeditated criminal acts, has previous convictions for administrative offences relating to property, commerce, finance, accounting and statistics; 2) a disciplinary sanction to dismiss this person from his position or an official sanction to dismiss him from office is still effective; 3) the person abuses narcotic, toxic, psychotropic substances or alcohol; 4) there are other important reasons why the person may not be considered of good repute.
102. A legal person shall not be considered of good repute where: 1) he has incurred criminal or administrative liability; 2) members of the managing bodies of this person and natural persons supervising this legal person are not of good repute, and the legal person supervising this legal person has incurred criminal or administrative liability; 3) there are other important reasons why this person may not be considered of good repute.
103. When evaluating professional qualifications and experience of a natural person, the entities provided for in this Law shall take into consideration the person’s educational background, the positions held, length of service and other factors which may have influence on the professional qualifications and experience of the person.
104. When good repute, professional qualifications and experience is evaluated by the Supervisory Commission, the information about the person’s good repute, professional qualifications and experience shall be submitted in special forms set by the Supervisory Commission. When verification of the data provided in the forms is needed, the Supervisory Commission must have the right to request the person to provide additional documentation and information essential for the assessment of good repute, professional qualifications and experience as well as the right to seek that information from the persons specified in Article 196 of this Law. CHAPTER II INSURANCE UNDERTAKINGS OF THE REPUBLIC OF LITHUANIA SECTION ONE LICENCE TO ENGAGE IN INSURANCE ACTIVITY Article
105. Licence to Engage in Insurance Activity
106. An insurance undertaking shall have the right to engage in insurance activity in the Republic of Lithuania subject to a licence to engage in insurance activity granted by the Supervisory Commission. The Supervisory Commission shall establish the rules of licensing of insurance activity.
107. A licence for insurance activity shall be granted: 1) to a public company, private company or a European company which is being incorporated; 2) to a new public company, private company, or a European company to be operated upon the reorganisation of legal persons; 3) to a public company, private company or European company which is changing its type of business into insurance activity.
108. A licence for insurance activity shall also be effective in all the other European Union Member States, providing the right to engage in insurance activity through exercising the right of establishment and/or the right to provide services under the conditions specified in this Section V of this Chapter.
109. A licence for insurance activity shall be issued to engage in insurance activity of the entire insurance class or several groups, belonging to branches of life assurance or non-life insurance, except for the cases when the applicant is willing to engage in insurance of only some risks belonging to the insurance class/classes.
110. A licence to engage in insurance activity shall be issued for an indefinite period of time.
111. A licence to engage in insurance activity shall be issued only for a particular insurance undertaking and may not be transferred to another person.
112. The form of a licence to engage in insurance activity shall be established by the Supervisory Commission.
113. An insurance undertaking which is to be incorporated may be registered in the Register of Legal Persons, and, where the licence for insurance activity is issued not to the undertaking about to be incorporated, appropriate changes in the Register of Legal Persons may be made only upon granting the licence for insurance activity.
114. The Supervisory Commission must inform the Register of Legal Persons about the granting, suspension or withdrawal of a licence according to the procedure set out in the regulations of the Register of Legal Persons.
115. The insurance undertaking must, within 5 working days, inform the Supervisory Commission about the registration in the Register of Legal Persons.
116. The instruments of incorporation of the insurance undertaking shall become invalid if they are not submitted to the Register of Legal Persons within nine months from the date of their execution. Article
117. Name of the Insurance Undertaking The name of an insurance undertaking must contain the word “insurance”. No other legal person shall have the right to use in its name this word or the combination “insurance undertaking” or a similar phrase, save for the exceptions provided by law. Article
118. Application for Licence to Engage in Insurance Activity
119. Applicants must submit an application to the Supervisory Commission for a licence to engage in insurance activity.
120. The application for a licence shall be accompanied by the following documents and information in writing: 1) articles of association and the memorandum of association of the insurance undertaking; 2) a scheme of operations of the contents and form prescribed by the Supervisory Commission; 3) information in the form prescribed by the Supervisory Commission about the controlling persons of the insurance undertaking, the participating undertakings and all the other shareholders. Information shall also be submitted about the members of the controlling legal persons as well as of the supervisory and management bodies of the participating undertakings; 4) information in the form prescribed by the Supervisory Commission about the chairman and other members of the supervisory board, the chairman and other members of the board, and the head of administration of the insurance undertaking; 5) information in the form prescribed by the Supervisory Commission about the chief financier and chief actuary; 6) documents certifying the accumulation in currency of the organisational fund of the insurance undertaking, its use and balance; 7) documents certifying the payment in currency for shares of the insurance undertaking to be incorporated; 8) information about the origin of the organisational fund and the currency used to pay for the shares of the insurance undertaking to be incorporated or to form its authorised capital; 9) contracts concluded on behalf of the insurance undertaking as specified in paragraph 1, Article 27 of this Law; 10) documents attesting payment of the state charge for the licence to engage in insurance activity; 11) where the insurance undertaking intends to engage in the insurance class listed in subparagraph 10, paragraph 3 of Article 7, except carriers’ liability insurance, the documents attesting that the insurance undertaking has its representatives with adequate authorisations appointed in every European Union member state for settlement of claims.
121. Where the founder is a legal person, the following shall be submitted in addition: 1) a transcript of the registration certificate or any other equivalent document of the founder; 2) financial statements of the founder for the last year along with an auditor’s opinion. This provision shall not apply where the founder is neither a controlling nor a participating undertaking of the insurance undertaking to be incorporated.
122. Where the insurance undertaking or legal persons are reorganised into a new legal person – an insurance undertaking or where a public company, a private company or a European company change the type of their activity into insurance business, the documents listed in subparagraph 7, paragraph 2 of this Article need not be submitted, yet, the following must be submitted in addition: 1) terms and conditions of reorganisation, the decision on reorganisation or changing of the type of the activity of the legal person; 2) a transcript of the registration certificate or any other equivalent document of each legal person, description of their previous activity, financial statements for the last year along with an auditor’s opinion if the Supervisory Commission has no right to obtain financial statements from the Register of Legal Persons in accordance with the procedure prescribed by legal acts; 3) information about the controlling persons of each legal person, their participating undertakings and all other shareholders; 4) documents certifying that the funds of the insurance undertaking are not less than the organisational fund and the authorised capital as provided in this Law as well as the information about the origin of the funds; 5) proof of tax payment and debts to creditors of each legal person.
123. Where an insurance undertaking of a foreign state is the founder of a subsidiary, it must, in addition, submit: 1) a licence for insurance activity or any other equivalent document issued by competent authorities of the foreign state; 2) an authorisation for the establishment of the insurance undertaking in the Republic of Lithuania issued by competent authorities of the foreign state or the information that the institution does not object to the establishment of a subsidiary of an insurance undertaking in the Republic of Lithuania.
124. The minimum guarantee fund of an insurance undertaking seeking a licence to engage in insurance activity is to include, when calculating it, the funds received after the payment of shares, or the funds provided for the authorised capital of the insurance undertaking as specified in paragraph 4, subparagraph 4 of this Article, must be in the amounts specified in subparagraph 3 of Article 39, having regard to the insurance classes which are contemplated. The assets of the organisational fund shall not be included when determining the minimum guarantee fund. The applicants must submit the documents testifying that the guarantee fund has been formed in currency as well as the origin of the assets. Article
125. Issuance of a Licence to Engage in Insurance Activity
126. Within six months from the submission of the application and all relevant documents for the issue of a licence to engage in insurance activity the Supervisory Commission shall adopt a decision concerning the issue of a licence to engage in insurance activity and inform the applicant thereof in writing.
127. The Supervisory Commission shall refuse to issue a licence to engage in insurance activity where: 1) the documents prescribed by this Law or the documents required according to the procedure established by this Law have not been presented; or where the submitted documents do not meet the requirements set out in the legal acts of the Republic of Lithuania; 2) the founders of the insurance undertaking and/or the controlling persons and the participating undertakings are not in compliance with the criteria established in paragraph 3 of Article 20 of this Law, and/or, in view of their business results, legislative provisions and other significant circumstances their financial position is not stable and sound; 3) the chairman and other members of the Supervisory Board, the chairman and other members of the Management Board, the head of the administration, the chief financier and the chief actuary of the insurance undertaking do not meet the requirements set out in paragraph 4 of Article 20 of this Law; 4) it may be assumed from the presented scheme of operations that the interests of the policyholders, the insured, the beneficiaries, and the injured party will not be sufficiently protected, or there is a reasonable ground to assume that obligations of the insurance undertaking arising from insurance contracts will not be performed continuously; 5) the authorised capital has not been fully paid-up; 6) the organisational fund and/or the authorised capital of the undertaking have been paid up from financial resources of illegal origin; 7) the structure of the insurance undertaking or a group of undertakings to which the insurance undertaking belongs or other close links with natural or legal persons make effective supervision impossible; 8) legal acts of anon-member country which are applicable to members of a group of undertakings to which the insurance undertaking belongs, to natural or legal persons having close links with the insurance undertaking, or difficulties in the implementation of these legal acts make effective supervision impossible; 9) the insurance undertaking is a successor to the rights and obligations of a legal person or persons the performance of which would violate the provisions of paragraph 2 of Article 3 of this Law and/or would endanger the interests of the policyholder, the insured, the beneficiaries, and the injured party; 10) the chairman and other members of the supervisory board, the chairman and other members of the board, the head of the administration, the chief financier or the chief actuary of the insurance undertaking hold positions which they are prohibited to hold according to this and other laws; 11) the requirement specified in paragraph 6, Article 14 of this Law has not been complied with or the origin of the financial resources of the guarantee fund is illegal.
128. When there is a suspicion that the authorised capital and the organisational fund and/or the minimum guarantee fund may be formed from the financial resources of an illegal origin, the Supervisory Commission must apply to the State Security Department seeking a conclusion about the origin of the funds. In this case, the time periods specified in this paragraph 1 of this Article and paragraph 11 of Article 12 shall be suspended and shall be resumed upon receipt of the conclusion from the State Security Department. Article
129. Consultation with Other Institutions
130. Prior to issuance of the licence for insurance activity, the Supervisory Commission must consult competent authorities of another Member State of the European Union about the circumstances significant for issuing the licence for insurance activity, where the insurance undertaking is: 1) a subsidiary of an insurance undertaking of any other European Union Member State; 2) a subsidiary of the parent undertaking of an insurance undertaking of any other European Union Member State; 3) under the control of the same person who controls the insurance undertaking of any other European Union Member State.
131. Prior to issuance of the licence for insurance activity, the Supervisory Commission must consult the Bank of Lithuania and the Securities Commission about the circumstances significant for issuing the licence for insurance activity, where the undertaking is: 1) a subsidiary of a credit institution or a financial broker of a Member State of the European Union; 2) a subsidiary of the parent undertaking of a credit institution or a financial broker of a Member State of the European Union; 3) under the control of the same person who controls the credit institution or the financial broker of any other Member State of the European Union.
132. In evaluating the good repute of the persons controlling the insurance undertaking as well as the good repute, professional qualifications and experience of the members of its supervisory and management bodies, the Supervisory Commission shall consult the institutions referred to in paragraphs 1 and 2 of this Article about the circumstances significant for evaluation of good repute, professional qualifications and experience and must provide to other authority institutions the information about these persons necessary for the purposes of the functions performed of the above-mentioned authorities. Article
133. Information about Changes The insurance undertaking must, according to the licensing procedure established by the Supervisory Commission, inform the Supervisory Commission about changes in the information provided in the documentation submitted for issuance of the licence for insurance activity. Article
134. Change of a Licence to Engage in Insurance Activity The insurance undertaking intending to engage in insurance activity of yet another insurance class or sub-classes belonging to the same insurance class or to expand the current activity to insurance of all the risks of the same insurance class, or a life assurance undertaking intending to engage in activity of non-life insurance classes referred to in subparagraphs 1 and 2, paragraph 3, Article 7 of this Law, must, according to the licensing procedure established by the Supervisory Commission, apply the Supervisory Commission seeking change of the licence. The Supervisory Commission shall make a decision concerning the change of the licence within one month of the submission of the required documentation as set out in the licensing procedure. Article
135. Suspension and Withdrawal of the Licence to Engage in Insurance Activity
136. On the grounds specified in paragraph 1, Article 198 of this Law, the Supervisory Commission shall have the right to suspend validity of the license to engage in insurance activity.
137. The Supervisory Commission shall have the right to withdraw the licence to engage in insurance activity where: 1) the insurance undertaking no longer meets the requirements under which the licence for insurance activity has been issued; 2) the insurance undertaking has committed a gross violation of legal acts; 3) the insurance undertaking has applied for revocation of the licence for insurance activity; 4) the insurance undertaking does not commence its engagement in insurance or related activity within 12 months following issuance of the licence for insurance activity; 5) the insurance undertaking has not been engaged in insurance or related activity for more than 6 months; 6) the insurance undertaking has failed to carry out the plans for the restoration of its financial position set out in Article 40 of this Law; 7) in the case specified in paragraph 12 Article 12 of this Law.
138. The Supervisory Commission shall notify other competent authorities of the other European Union Member States about its decision to withdraw the licence for insurance activity.
139. Having withdrawn the licence for engagement in insurance activity, the Supervisory Commission must take all possible measures to protect the interests of the policyholders, the insured, beneficiaries, and the injured party and shall have the right, after duly notifying the competent authorities of the European Union Member State where the insurance undertaking is carrying out insurance business, seize the assets from which technical provisions of the insurance undertaking are covered. The Supervisory Commission shall have the right to ask that the competent authorities of the European Union Member State where the insurance undertaking is carrying out its insurance business, impose analogous restrictions on the insurance undertaking in that European Union Member State.
140. The decision to withdraw the licence to engage in insurance activity must be fully substantiated. The Supervisory Commission shall, without delay, inform the insurance undertaking about the decision and its motivation in writing. SECTION TWO MANAGEMENT OF INSURANCE UNDERTAKING Article
141. General Provisions
142. Shareholders as well as the supervisory and managing bodies of an insurance undertaking must ensure a transparent, sound and prudent management of the insurance undertaking as well as the internal control of the activities of the insurance undertaking, while the head of the administration must ensure transparent, sound and prudent accounting procedures of the insurance undertaking.
143. An insurance undertaking must have a general shareholders’ meeting, the board, and the head of the administration.
144. Founders and persons controlling the insurance undertaking, the participating companies must be of good repute, while the members of the supervisory and management bodies as well as the head of administration of the insurance controlling/holding company must be of good repute, professionally qualified and experienced. Where one or several founders of the insurance undertaking decide to transfer shares to other persons prior to receipt of the licence for insurance activity, the transfer shall be subject to the provisions of Article 22 of this Law, and the term set out in paragraph 1, Article 15 of this Law shall be extended as specified in paragraph 4, Article 22 of this Law.
145. Members and the chairman of the supervisory board, members and the chairman of the board, the head of the administration, the chief financier, the chief actuary and other senior officers of the administration of the insurance undertaking as set out in the articles of association or internal regulations of the insurance undertaking must be of good repute, qualifications and experience.
146. Members and the chairman of the supervisory board if such has been formed, members and the chairman of the board, the head of the administration must be elected, while the persons who will hold the posts of the chief financier and the chief actuary of the insurance undertaking must be selected before the insurance undertaking is to be granted the licence for insurance activity. Article
147. Transparent, Sound and Prudent Management of the Insurance Undertaking
148. The organisational structure and the management system of an insurance undertaking must ensure a transparent, sound and prudent management of activity of the insurance undertaking.
149. In order to ensure a transparent, sound and prudent management, the articles of association or other internal regulations, the insurance undertaking must: 1) establish in a clear and transparent manner the internal structure of the insurance undertaking, procedures for selection of its employees, their functions, rights, obligations and responsibilities; 2) define and establish in a clear and transparent manner the functions, rights, obligations, responsibility, accountability, of the members of the supervisory board and the management board, the chairman of the board, the head of the administration, the chief actuary, the internal audit service/internal auditor, and senior officers of the administration, their decision making powers, relations, principles and rules of communication and co-operation. 3) clearly define the competence of the supervisory and managing bodies and senior administrative staff so as to ensure balance of functions, rights, and obligations in order to prevent unrestricted powers achieved by any single person in the decision making process; 4) must ensure that the board of the insurance undertaking is prevented from undue influence of the administration. Where the chairman of the board is also the head of administration, the insurance undertaking shall ensure that the administration is accountable to the board; 5) must ensure that the annual report of the insurance undertaking provides a transparent, sound and prudent compliance with the principles of management and is in line with the overall objectives of the undertaking; 6) must design, maintain, and use an efficient and comprehensive management information system so that relevant information is provided in due time to the board and the head of the administration and that prudent and sound management and control of the undertaking is ensured; 7) establish money laundering prevention measures as well as measures for recognition and prevention of other violations of laws.
150. The Supervisory Commission shall have the right to establish mandatory instructions and guidelines concerning the issues of a transparent, sound and prudent management. Article
151. Transfer of the Shares of the Insurance Undertaking
152. Any person or closely related persons who intend to transfer shares of the insurance undertaking must duly notify the Supervisory Commission and specify the number of shares to be transferred as well as the future owner of the shares, where: 1) it is intended to transfer the shares in the amount equal to or exceeding 10 per cent of the authorised capital of the insurance undertaking; 2) the shares to be transferred shall reduce the amount of own shares in such a way that after the transfer it will be less than 10 per cent, 20 per cent, 33 per cent or 50 per cent of the authorised capital or will reduce the number voting rights held by the general shareholders' meeting in such a way that after the transfer of the shares the number will be less than 10 per cent, 20 per cent, 33 per cent or 50 per cent of all the voting rights, or where following the transfer of shares the insurance undertaking will terminate to be a subsidiary of the transferor.
153. Any person or persons in close links who intend to acquire shares of an insurance undertaking must obtain an authorisation from the Supervisory Commission where: 1) it is intended to acquire shares of an insurance undertaking in the amount that is equal to or in excess of 10 per cent of the authorised capital of the insurance undertaking, or shares granting 10 per cent or more of all the voting rights held by the general shareholders’ meeting of the insurance undertaking; 2) the shares that are intended to be acquired will increase the number of shares owned up to 10 per cent, 20 per cent, 33 per cent or 50 per cent or more of the authorised capital of the insurance undertaking, or will increase the number of all the voting shares held by the general shareholders’ meeting of the insurance undertaking, or if the insurance undertaking which acquires the shares becomes a subsidiary of the acquirer.
154. An authorisation for the acquisition of shares of the insurance undertaking shall be issued according to the procedures established by the Supervisory Commission to a person or a closely related group of persons. Where at least one person of a group of persons intends to acquire shares of an insurance undertaking, it shall be considered that whole group of closely related persons intends to acquire shares.
155. Within three months after the date of submission of request for the acquisition of shares of an insurance undertaking and of all the accompanying documents, the Supervisory Commission shall make a decision on issue of an authorisation for the acquisition of shares of an insurance undertaking and shall duly notify the applicant in writing.
156. The Supervisory Commission shall have the right to refuse to grant an authorisation for the acquisition of shares of an insurance undertaking only where: 1) the documents listed in the Supervisory Commission’s resolution or required in the prescribed manner by this Law and legal acts have not been submitted, or where the documents submitted are not in compliance with the requirements provided in the legal acts of the Republic of Lithuania; 2) upon the acquisition of shares, the persons who are to control the insurance undertaking, and the companies which are to participate in do not meet the criteria provided in paragraph 3, Article 20 of this Law and/or, according to the results of their activities, the provisions of legal acts and other important circumstances, their financial position is not stable and sound; 3) it is intended to acquire shares for financial resources of illegal origin; 4) upon the acquisition of shares of an insurance undertaking, an effective supervision will be impossible owing to the structure of the group to which the insurance undertaking belongs; 5) acquisition of shares is in conflict with the provisions of other laws.
157. Where the person who intends to acquire shares of an insurance undertaking is an insurance undertaking, a credit institution or a company of a financial broker of another Member State of the European Union, a parent undertaking of an insurance undertaking, a credit institution or a company of a financial broker of another Member State of the European Union, or a controlling person of an insurance undertaking, a credit institution or a company of a financial broker of another Member State of the European Union, and if upon the acquisition of shares, the insurance undertaking becomes a subsidiary or an undertaking controlled by this person, the Supervisory Commission must, before granting an authorisation for the acquisition of shares, consult the institutions specified in Article 16 of this Law.
158. When granting an authorisation for the acquisition of shares of an insurance undertaking the Supervisory Commission shall have the right to set a term for the acquisition of shares of an insurance undertaking.
159. The transaction under which persons acquire shares of an insurance undertaking without holding an authorisation granted by the Supervisory Commission provided for in paragraph 2 of this Article shall be invalid. All claims relating to the consequences of this transaction shall be heard by a court of the Republic of Lithuania of the area of the headquarters of the insurance undertaking.
160. Insurance undertakings must notify the Supervisory Commission following the procedure prescribed by it about any changes of the shareholders of insurance undertakings.
161. When it is suspected that the shares of an insurance undertaking may be paid-up from financial resources of an illegal origin, the Supervisory Commission must apply to the State Security Department seeking its conclusion about the origin of said financial resources. In this case, the term specified in paragraph 4 of this Article shall be suspended and shall be renewed after receipt of the conclusion from the State Security Department. Article 23.Supervisory Board
162. If a supervisory board is formed at an insurance undertaking, the insurance undertaking must, after election of the members and the chairman of the supervisory board, furnish information within 10 days about these persons to the Supervisory Commission in the form established by it.
163. The supervisory board of an insurance undertaking, apart from the functions prescribed in other laws or articles of association, shall appoint and dismiss the head of the internal audit service or the internal auditor and shall formulate methodological instructions for their activity. Where the supervisory board is not formed, its functions shall be performed by the board of the insurance undertaking. Article
164. Board of the Insurance Undertaking
165. Before members and the chairman of the Management Board of the insurance undertaking are elected, the insurance undertaking must submit information to the Supervisory Commission in the form established by it and receive approval of the Supervisory Commission for the of persons seeking to take said positions. The Supervisory Commission shall adopt the decision on the approval of the candidates within 30 working days.
166. In addition to other functions specified in the laws or the articles of associations, the board of the insurance undertaking shall perform the following functions: 1) determine the strategic objectives of the insurance undertaking, measures aimed at achieving these objectives, and the procedure for monitoring of the measures and the evaluation of the results; 2) determine and inspect an independent risk management strategy of the insurance undertaking related to the activity carried out by the insurance undertaking, in particular, to the identification, evaluation, monitoring and control of the transactions referred to in Article 50 of this Law; 3) establish the procedure for conclusion of insurance contracts which shall also be applicable to dependent insurance intermediaries, by paying particular attention to the disclosure of information, which is material when concluding an insurance contract, to the policyholders, respect for and protection of interests each policyholders, and ensure that standard insurance policy conditions are in line with the legislative provisions; 4) establish the procedure for the reporting of insured events and events which could be recognised as insured events as well as the procedure for accounting of the results of investigation of the reports as well as the rules for the investigation of insured events and events which could be recognised as insured events; 5) establish the procedure for the examination of complaints submitted by the policyholders, insured persons, beneficiaries, and injured party as well as the procedure for giving a response to applicants; this procedure must be publicly announced on the Internet website of the undertaking and be provided upon request of any interested person after paying a fee for the service; 6) having ascertained that the candidates are of good repute, adequate professional qualifications and experience, shall appoint and recall the head of the administration, the chief financier, and the chief actuary; 7) determine the procedure for remuneration of the head of the administration, the chief financier, and the chief actuary; 8) determine the procedure for ascertaining that the persons seeking senior positions in the insurance undertaking are of good repute, adequate professional qualifications and experience, and ensure that the staff who make decisions on investment and/or assets management are of good repute, adequate professional qualifications and experience; 9) carry out the instructions and guidelines of the Supervisory Commission aimed at effective, transparent, sound and prudent management of the insurance undertaking.
167. Before election of the head of the administration of the insurance undertaking is elected, the board of the insurance undertaking must submit to the Supervisory Commission information in the form established by the Commission and obtain the approval of the Supervisory Commission for the nominee to the position of the head of administration. The Supervisory Commission shall make the decision concerning the approval of the candidate within 30 working days.
168. Having appointed the chief financier and/or the chief actuary, the board of the insurance undertaking must, within 10 days, submit the information about these persons to the Supervisory Commission in the form established by it. Article
169. Chief Actuary
170. An insurance undertaking must have its chief actuary – a mathematician in the insurance field. The chief actuary of an insurance undertaking must: 1) ensure that insurance premiums of the insurance undertaking are calculated and the technical provisions are made according to the principles and requirements established or recognised by legal acts; 2) inspect whether the insurance undertaking is able, at any moment, to carry out its obligations arising from insurance contracts, and if the insurance undertaking complies with the solvency margin requirements set forth in the legal acts, appraise the effect of the transactions specified in Article 50 of this Law on the solvency of the insurance undertaking; 3) seek that the coverage of the technical provisions by assets is in compliance with the nature of activity of the insurance undertaking and the requirements set forth in legal acts; make proposals on this issue to the board of the insurance undertaking; 4) seek that the reinsurance strategy of the insurance undertaking is adequate for the management of the assumed insurance and reinsurance risks at any moment and is in compliance with the requirements established by legal acts; make proposals on this issue to the board of the insurance undertaking; 5) make proposals to the board on the profit distribution of the insurance undertaking to the policyholders who have concluded life assurance contracts under which they are entitled to a share of profit of the insurer; 6) submit, at least once every quarter, reports to the board of the insurance undertaking in the form prescribed by it on the cover of technical provisions of the insurance undertaking and the state of solvency margin; 7) submit reports to the Supervisory Commission in the form prescribed by it; 8) observe the code of professional ethics approved by the actuaries’ professional organisation.
171. Having identified a threat that the insurance undertaking may, at any moment, become unable to carry out its obligations arising from insurance or reinsurance contracts, the chief actuary must immediately inform the board of the undertaking; if the latter does not take measures forthwith to improve the situation, to inform the Supervisory Commission.
172. The chief actuary of the insurance undertaking shall have the right to get all the information necessary for him to perform his functions from the supervisory board, the board, the head of the administration, the chief financier, the internal audit service or the internal auditor.
173. When carrying out his obligations, the chief actuary of the insurance undertaking shall be accountable only to the board of the insurance undertaking. Other bodies of the insurance undertaking shall be prohibited from interfering in the activities of the chief actuary.
174. Other rights, obligations, and responsibility of the chief actuary of the insurance undertaking shall be established by the actuary’s work regulations subject to the approval of the board of the insurance undertaking. Article
175. Internal Control of the Insurance Undertaking
176. Internal control of the activity of an insurance undertaking must be ensured by a reliable and effective system of internal control.
177. An insurance undertaking must have a service of internal audit or an internal auditor. These functions may be performed not only by a separate unit of the insurance undertaking or an employee, but also by the person with whom the insurance undertaking has concluded a contract of internal audit.
178. The system of internal control of the activity of an insurance undertaking shall be based on: 1) the organisational structure enabling to ensure vertical and horizontal relations; 2) the internal information system; 3) responsibility and competence of the personnel provided for in the internal regulations of the insurance undertaking; 4) sound internal control of operating procedures aimed at ensuring separation of obligations and the duty to sign financial documentation by two persons established in the internal regulations; 5) the information system for shareholders, supervisory and managing bodies; 6) risk management; 7) professional qualifications, experience, good repute of the internal audit service/internal auditor, and adequate funding allocated for carrying out direct functions of the internal audit service/internal auditor.
179. The internal audit service/internal auditor shall perform exercise the following functions: 1) ascertain whether financial statements of the insurance undertaking show reflect the actual state results of the activities of the insurance undertaking; 2) verify compliance with legal acts, articles of association of the insurance undertaking, resolutions of the supervisory board and the board of the insurance undertaking, orders of the head of the administration, and other internal regulations and their implementation; 3) inspect how contracts specified in Article 50 of this Law are identified, evaluated, monitored and controlled; 4) verify and appraise appropriateness and efficiency of the internal control system of the insurance undertaking; 5) appraise effectiveness of the activity, strategic goals and the means aimed at achieving these goals of the insurance undertaking; 6) put forward proposals to the supervisory board and the board concerning resolutions of the board, make recommendations to the board and the head of the administration on the issues of management and activity of the insurance undertaking, organisation of activity of its structural divisions and its efficiency; report to the supervisory board on the implementation of said recommendations.
180. The internal audit service/internal auditor must inform forthwith the supervisory board of the insurance undertaking and the latter failing to take measures to improve the situation, also the Supervisory Commission about the discovered breaches of the legislation of the Republic of Lithuania and other legal acts which jeopardise the interests of the policyholders, insured, beneficiaries, and injured party as well as the safe and credible functioning of the insurance undertaking.
181. The internal audit service or the internal auditor shall have the right to get all the information necessary for the exercise of their functions from the supervisory and managing bodies of the insurance undertaking, the head of the administration, the chief financier, the chief actuary, and other members of the administrative personnel of the insurance undertaking.
182. When carrying out their obligations, the internal audit service or the internal auditor shall be accountable only to the supervisory board of the insurance undertaking. The internal audit service or the internal auditor must be independent of the audited entity and they may not be subjected to any interference when determining the scope of the internal audit, when carrying out the audit and when submitting its findings.
183. Other rights, obligations, and responsibility of the internal audit service or the internal auditor of the insurance undertaking shall be established by the regulation of the internal audit service/the internal auditor which shall be subject to the approval of the supervisory board. The Supervisory Commission shall have the right to give mandatory instructions and recommendations concerning establishment of the rights and obligations of the internal audit service or the internal auditor of the insurance undertaking.
184. Where an insurance undertaking has no supervisory board, the functions, rights and obligations of such a board as specified in this Article shall be performed by the board of the insurance undertaking. Article
185. Outsourcing Contracts of the Insurance Undertaking
186. When concluding outsourcing contracts on the valuation of property to be insured by the insurance undertaking, conclusion of insurance contracts, administration of insured events, management of investments and/or assets, accounting, administration of databases, internal audit, and other contracts determined by the Supervisory Commission, the insurance undertaking must: 1) make sure that the other party to the contract is of good repute, adequate professional qualifications and experience; 2) have a clause in the contract providing for the right to obtain from the other party to the contract all the information relating to the activity carried out under the contract by that party; 3) have a clause in the contract providing for the right to give mandatory instructions to the other party to the contract relating to the activity carried out under the contract by that party.
187. The insurance undertaking must inform the Supervisory Commission about the contracts referred to in paragraph 1 of this Article in the manner established by the Supervisory Commission.
188. The insurance undertaking shall be responsible for violations of the legal acts regulating insurance activity, irrespective of the contracts specified in paragraph 1 of this Article.
189. The Supervisory Commission, upon discovering that an obstacle for an effective supervision of the insurance undertaking arises or that legislative provisions or the interests of policyholders, insured persons, or beneficiaries have been violated as a result of the contracts specified in paragraph 1 of this Article, shall have the right to obligate the insurance undertaking to rectify the situation or to require that the insurance undertaking itself performs the activities which under the contracts specified in paragraph 1 of this Article had to be performed by other persons. Article
190. Branches of Insurance Companies Branches of the insurance undertaking shall be established in the Republic of Lithuania and in foreign countries following the procedure prescribed by the Supervisory Commission subject to an authorisation to establish a branch. Article
191. Limitations on the Conflict of Interests
192. The head of the administration of an insurance undertaking may not perform the functions of a member of the supervisory board, the chief financier, the chief actuary, or be a member of the supervisory board or the board of another insurance undertaking, or work in the administration of another insurance undertaking; however, the head of the administration of the parent insurance undertaking shall have the right to be a member of the supervisory board and a member of the board of a subsidiary; and the head of the administration of a subsidiary shall have the right to be a member of the supervisory board and a member of the board of the parent insurance undertaking.
193. The internal auditor or an auditor of another insurance undertaking may not be a member of the supervisory board or a member of the board of the insurance undertaking.
194. An audit firm with which the insurance undertaking has concluded an audit contract may not be the internal auditor of the insurance undertaking.
195. The members of the bodies of an insurance undertaking shall also be subject to limitations of the conflict of interests set out in other laws of the Republic of Lithuania. CHAPTER THREE FINANCES OF INSURANCE COMPANIES Article
196. Organisational Fund
197. The founders, a legal person/persons which is being reorganised into an insurance undertaking or which is changing its activities into the activities of an insurance undertaking must form an organisational fund of financial resources intended for the expenses of founding, reorganisation into an insurance undertaking, or changing of type of activities.
198. The organisational fund must amount to the minimum of EUR 300
200. The organisational fund must be formed of financial resources only.
201. The organisational fund may not be formed of borrowed financial resources or resources of an illegal origin. Article
202. Authorised Capital
203. The authorised capital of an insurance undertaking may not be less than EUR 1 000
205. The articles of association which are amended due to the increase or decrease of the authorised capita must be approved, following the procedure prescribed by the Supervisory Commission, by the Supervisory Commission before the insurance undertaking communicates information about the amendments to the Register of Legal Persons. The Supervisory Commission shall adopt a decision on the approval of the amendments to the articles of association within 20 days of submission of all the relevant documents. Increase of the authorised capital may be registered, according to the procedure prescribed by law, only when the shares have been fully paid-up.
206. An insurance undertaking may have only registered shares. The shares of an insurance undertaking must be paid-up only in cash.
207. The share of an insurance undertaking may not be paid-up by borrowed financial resources nor by financial resources of an illegal origin. Article
208. Own and Borrowed Capital
209. The composition of own capital of an insurance undertaking shall be regulated by the Law on Companies; upon registration of the insurance undertaking as well as the amendments related to the changing of the undertaking’s activity at the Register of Legal Persons, the balance of the organisational fund shall be attributed to the mandatory reserve.
210. The borrowed capital of an insurance undertaking shall be composed of: 1) insurance technical provisions; 2) reinsurers’ deposits; 3) other commitments; 4) accumulated expenses and receivables. Article
211. Scheme of Operations
212. An insurance undertaking must conduct its business on the scheme of operations. The insurance undertaking must notify the Supervisory Commission about the intended changes in the scheme of operations and get approval for them according to the procedure prescribed by the Supervisory Commission.
213. The contents and form of the scheme of operations as well as the procedure for submitting it shall be established by the Supervisory Commission. Article
214. Technical Provisions
215. Following the procedure prescribed by the Supervisory Commission an insurance undertaking must form sufficient technical provisions and guarantee that they are represented by matching assets.
216. Following the procedure set by the Supervisory Commission insurance undertakings shall form the following technical provisions: 1) unearned premiums technical provision; 2) life insurance mathematical technical provision; 3) outstanding claims technical provision; 4) technical provision for bonuses and rebates; 5) equalisation technical provision; 6) other insurance technical provisions. Article
217. Assets Covering Technical Provisions
218. By accumulation of assets covering insurance technical provisions undertakings have to take into consideration the type of business carried on by a undertaking and aim to guarantee safety, liquidity, diversification, time matching and profitability of investment.
219. Insurance technical provisions must be covered by the assets that are expressed in the currency which determines the undertaking’s obligations that are set in the insurance and reinsurance contracts, following currency matching rules set by the Supervisory Commission.
220. Only the assets of the groups listed below may cover insurance technical provisions: 1) securities of the Government, the central bank and municipality; 2) real estate; 3) term deposits at banks; 4) loans guaranteed by immovable property; 5) mortgage bonds; 6) shares admitted to the official listing on the stock exchange or on a trading list of a regulated market; 7) shares not admitted to the official listing on the stock exchange or on a trading list of a regulated market, provided that there is an authorisation from the Supervisory Commission; 8) debentures of undertakings admitted to the official listing on the stock exchange or on a trading list of a regulated market; 9) debentures of undertakings not admitted to the official listing on the stock exchange or on a trading list of a regulated market, provided that there is an authorisation from the Supervisory Commission; 10) shares of variable capital investment companies and investment units of investment funds; 11) derivative financial instruments, provided that there is a authorisation from the Supervisory Commission; 12) other investments set by the Supervisory Commission, provided that an authorisation from the Supervisory Commission has been obtained in the cases set by the Supervisory Commission; 13) cash in the settlement account and on hand.
221. The portion of a premium that has not been required to be paid as well as the reinsurers’ share of technical provisions may be covered by: 1) insurance and reinsurance premiums that have not been required to be paid; 2) reinsurers’ debts; 3) other assets specified in paragraph 3 of this Article.
222. The Supervisory Commission shall have the right to limit, for a motivated cause, the investments covering technical provisions: 1) into shares and debentures of closely linked undertakings; 2) into shares and debentures of undertakings, whose shares have been acquired by members of the supervisory board, the board or the head of administration of an insurance undertaking or in whose supervisory or management bodies members of the supervisory board and the board of the insurance undertaking hold positions; 3) which may undermine the financial stability of an insurance undertaking or have any other negative impact on the activity of an insurance undertaking, the interests of the policyholders, insured, beneficiaries and/or injured party.
223. The Supervisory Commission shall determine the procedure for covering technical provisions with assets, its conditions, limitations and currency matching rules.
224. An insurance undertaking must administer the list of assets covering insurance technical provisions following the procedure set out by the Supervisory Commission. The court when applying temporary security measures, or any other state institutions applying sanctions related to the assets registered in this list, must obtain an opinion of the Supervisory Commission on the potential consequences of temporary security measures or sanctions for the financial position of the insurance undertaking as well for the interests of the policyholders, insured, beneficiaries and injured party. The Supervisory Commission must furnish its opinion conclusion to the court within 24 hours. Article
225. Failure to Meet Requirements for Formation of Technical Provisions and Their Cover by Assets
226. If an undertaking fails to meet the requirements for formation of technical provisions and their cover by assets, the Supervisory Commission, after a prior notification of the competent authority of the European Union Member State within which the insurance risk is situated, or other competent authority of the European Union Member State of the commitment, shall have the right to seize the assets of the insurance undertaking which cover technical provisions.
227. Exercise of the right referred to in paragraph 1 of this Article by the Supervisory Commission right does not prevent the Supervisory Commission from application of other sanctions provided by this Law. Article
228. Reinsurance
229. A licence of insurance activity shall grant the right to an insurance undertaking to engage in reinsurance.
230. Insurance undertakings may engage in reinsurance in those insurance classes in which they are carrying out insurance activity following the procedure set out in this Law.
231. Reinsurance activity carried out by an insurance undertaking shall be subject to the requirements analogous to those of formation of technical provisions, property cover and accounting as well as other requirements set for carrying out insurance activity in an insurance class. Article
232. Ceded Reinsurance
233. Insurance undertakings shall have the right to cede (transfer a part of assumed risk) by concluding insurance contracts only with persons listed in Article 4 of this Law.
234. The aim of ceded reinsurance may be reduction of losses owing to an assumed risk, reduction of the required solvency margin, a more effective use of capital held or extension of possibilities to assume other insurance risks.
235. With regard to the assumed risks, an insurance undertaking must, at any moment, have sufficient ceded reinsurance.
236. An insurance undertaking shall choose a reinsurer according to its own reinsurance strategy, which is subject to approval by the board of an insurance undertaking at least once a year, while life assurance undertakings – at least once every three years – covering all assumed insurance risks. Ceded reinsurance strategy must embrace: 1) types and scope of reinsurance contracts of the ceded reinsurance programme as well as the amounts of the risk assumed by the insurance undertaking; 2) criteria for the choice of the reinsurer and/or a certified list of reinsurers; 3) the principles of internal control of the reinsurance programme.
237. When choosing a reinsurer an insurance undertaking must follow a principle of safety and must possess sufficient information about the reinsurer.
238. The Supervisory Commission shall have the right to set requirements for reinsurance and the criteria for the choice of a reinsurer which must be followed by an insurance undertaking.
239. At the request of the Supervisory Commission an insurance undertaking must submit its reinsurance strategy, draft reinsurance contracts or the contracts proper. The Supervisory Commission shall have the right to task an insurance undertaking to revise or cancel the concluded insurance contracts where the requirements for reinsurance and the criteria for the choice of a reinsurer as set out by the Supervisory Commission have been breached. Article
240. Solvency Margin
241. Throughout the whole period of its economic commercial activity each insurance undertaking must maintain an adequate solvency margin: the available solvency margin must not be less than the required solvency margin, and the guarantee fund must not be less than the minimum guarantee fund. Solvency margin shall be calculated according to the procedure established by the Supervisory Commission.
242. A portion of the available solvency margin equal to the larger of the following amounts - the minimum guarantee fund or 1/3 of required solvency margin - shall comprise the guarantee fund.
243. The minimum guarantee fund shall be equal to: 1) EUR 2 000 000 for an insurance undertaking engaged in non - life insurance activity; 2) EUR 3 000 000 for an insurance undertaking engaged in life assurance activity; 3) EUR 3 000 000 for an insurance undertaking engaged in at least one of the activity of insurance risks in the insurance classes specified in subparagraphs 10, 11, 12, 13, 14 and 15, paragraph 3, Article 7 of this Law.
244. Amount of the minimum guarantee fund shall be indexed according to the procedure established by the Supervisory Commission. Article
245. Plans for Restoration of Financial Situation
246. An insurance undertaking which breaks the requirements for solvency margin must forthwith inform the Supervisory Commission.
247. At the request of the Supervisory Commission an insurance undertaking must increase, without delay, the available solvency margin or, following the procedure prescribed by the Supervisory Commission, submit to the Supervisory Commission a plan of a prescribed form for the recovery of the financial health of the insurance undertaking.
248. In certain cases, where there is a threat that the financial situation of an insurance undertaking may deteriorate even more considerably, the Supervisory Commission, upon a prior notification to the competent authority of another European Union Member State where the insurance undertaking is carrying out its activity, shall have the right to seize the assets of the insurance undertaking covering its technical provisions. The Supervisory Commission shall have the to ask the competent authority of another European Union Member State where the insurance undertaking is carrying out its activity to set analogous restrictions in another European Union Member State.
249. The Supervisory Commission shall have the right to set requirements for a short-term plan of restoration of financial soundness as well as its method of presentation.
250. At the request of the Supervisory Commission, insurance undertakings must revise their plans of restoration of financial soundness. Plans of restoration of financial soundness approved by the Supervisory Commission shall be obligatory to insurance undertakings.
251. Where a plan of restoration of financial soundness is not submitted in good time or is not being implemented, the Supervisory Commission must take all necessary sanctions including seizure of assets covering technical provisions and shall have the right to revoke the licence for insurance activity.
252. If due to specifics of an insurance undertaking activity and insufficiency of application of standard solvency requirements as provided by legal acts, there is a threat that interests of the policyholders, insured, beneficiaries or injured party will not be satisfied, the Supervisory Commission has a right to require the insurance undertaking to have higher than minimal solvency margin, which is set by acts of law, by increasing requirements for the required solvency margin in order the insurance undertaking could satisfy solvency margin requirements in the nearest future.
253. Where, due to the deterioration of the financial situation of the insurance undertaking, the interests of policyholders, insured persons, beneficiaries or any injured party are under a threat, the Supervisory Commission shall have the right to request the insurance undertaking to improve its financial situation take measures in advance to ensure the minimum solvency margin.
254. Provisions of this Article shall not preclude the Supervisory Commission from resorting to any other sanctions provided for in this Law. Article
255. Transfer of Rights and Obligations Under Insurance Contracts
256. On the basis of a written agreement and upon obtaining an authorisation from the Supervisory Commission an insurance undertaking shall have the right to transfer its rights and obligations under insurance contracts to other insurance undertaking, an insurance undertaking of another European Union Member State or a foreign insurance undertaking branch established in the Republic of Lithuania or another European Union Member State.
257. An insurance undertaking shall have the right to transfer its rights and obligations under all insurance contracts or part of them which were concluded when exercising the right of establishment or the right to provide services to an insurance undertaking of another European Union Member State only where a competent authority of this State confirms that after the transfer of rights and obligations, the required solvency margin under the legal acts of this State will be preserved by of the transferee assuming the rights and obligations.
258. If it is intended to transfer rights and obligations under insurance contracts of a branch of an undertaking in an European Union Member State concluded when exercising the right of establishment or the right to provide services, the Supervisory Commission must obtain an opinion from a competent authority of the host country about the transfer of rights and obligations.
259. An authorisation to transfer rights and obligations under insurance contracts may be granted provided that the competent authority of another European Union Member State within which the insurance risk is situated or the competent authority of another European Union Member State of the commitment under a life assurance contract does not object.
260. If information specified in parts 2 , 3 and 4 of this Article is not received within three months, it shall be considered that the competent authority of another European Union Member State does not object to the transfer of rights and obligations under insurance contracts.
261. A written contract on the transfer of rights and obligations must have a clause that the transfer of rights and obligations shall be considered to have taken place from the moment of publication of the authorisation for the transfer rights and obligations by the Supervisory Commission in the supplement “Informaciniai pranešimai” to the state gazette “Valstybės žinios”. Article
262. Granting of Authorisation to Transfer Rights and Obligations under Insurance Contracts
263. An insurance undertaking must announce about its intention to pass rights and obligations under insurance contracts in at least in two daily newspapers circulated in Lithuania and in another European Union Member State where the insurance undertaking performs its activities. The announcement about the intention to transfer the rights and obligations under insurance contracts specify the time period, not shorter than two months, within which the policyholder shall have the right to express his objection in writing against the intention of the insurance undertaking to transfer rights and obligations under insurance contracts.
264. Where the insurance undertaking failed to fulfil the requirement specified in paragraph 1 of this Article, the Supervisory Commission shall have the right to request that the insurance undertaking announces about its intention once again or informs in writing each policyholder thereupon individually.
265. At the end of the time period set in paragraph 1 of this Article the insurance undertaking which plans to transfer its rights and obligations, must apply to the Supervisory Commission seeking an authorisation for the transfer of the rights and obligations under insurance contracts. The authorisation to transfer the rights and obligations under insurance contracts shall be granted following the procedure set by the Supervisory Commission within three months from the application if: 1) all the necessary documents and information under the procedure determined by the Supervisory Commission for an authorisation for the transfer of the rights and obligations under insurance contracts; 2) the transferee assumes all the rights and obligations arising from insurance contracts; 3) after the transfer of the rights and obligations under insurance contracts the required solvency margin of the transferees assuming these rights and obligations will be retained at the level required by legal acts; 4) the transfer of the rights and obligations under insurance contracts shall not have a negative effect upon the property interests of the policyholders, insured persons, beneficiaries or any injured party of the insurance undertaking which transfers its rights and obligations under insurance contracts; 5) there is no objection from the competent authorities of other European Union Member State indicated in Article 40 of this Law to the transfer of the rights and obligations under insurance contracts;
266. The Supervisory Commission when granting an authorisation must set the time period within which the rights and obligations have to be transferred. The authorisation for the transfer of the rights and obligations under insurance contracts must be announced in the supplement “Informaciniai pranešimai” of the official gazette “Valstybės žinios”.
267. The Supervisory Commission must also announce the transfer of the rights and obligations under insurance contracts in another European Union Member State where the insurance risk is situated or another European Union State of the commitment under a life assurance contract following the requirements stipulated in the legal acts of that State.
268. If the policyholder objects to the transfer of the rights and obligations under insurance contracts he shall have the right to terminate the insurance contract following the procedure set out in the insurance contract within one month from the moment of the transfer of the rights and obligations.
269. The rights and obligations under insurance contracts shall be transferred together with the assets covering technical provisions. If tit is intended to transfer the rights and obligations under insurance contracts without all the assets or part of the assets covering technical provisions, the authorisation for the transfer of the rights and obligations under insurance contracts may be granted only if the Supervisory Commission approves a renewal plan of the assets covering provisions submitted following the procedure determined by the Supervisory Commission. Article
270. Accounts, Financial Statements and Audit
271. Insurance companies must keep financial accounting and draw up financial statements pursuant to the laws, resolutions of the Supervisory Commission and other legal acts and in accordance with the accounting policy chosen by the insurance undertaking.
272. The accounting system of an insurance undertaking must be organised in such way that: 1) financial statements would show the real financial situation of the insurance undertaking; 2) it would provide conditions for safe and credible management and disposal of the assets of the insurance undertaking; 3) it would provide conditions for the auditor company of the insurance undertaking, the internal audit service/internal auditor of the insurance undertaking or institutions authorised by law to inspect and evaluate the activities of the bodies of supervision and administration of the insurance undertaking, its other employees having powers to make decisions from which commitments of the insurance undertaking to other persons arise, and the financial situation of the insurance undertaking.
273. The Supervisory Commission shall determine the procedure for drawing up and submitting financial statements, other financial and statistical reports of an insurance undertaking.
274. The annual financial statement of the insurance undertaking must be verified by an independent audit company having experience in the field of audit of insurance undertakings and financial institutions. Within four months from the close of the financial year the financial statement must be approved by the general shareholders’ meeting and submitted to the Supervisory Commission. 5.Within ten days after choosing an audit company the insurance undertaking, following the procedure determined by the Supervisory Commission, must inform the Supervisory Commission about the audit company it has chosen. If the auditors lack experience in audit of insurance undertakings and financial institutions, the insurance undertaking has to find another audit company at request of the Supervisory Commission. The same audit company may conduct audit at the same insurance undertaking not more than for three years in succession.
275. An audit company shall have the following obligations when auditing financial accounts of an insurance undertaking: 1) an audit company must inform the Supervisory Commission without delay about the major violations of this Law and other legal acts regulating financial activity of insurance companies that were identified during the inspection of financial statements of the insurance undertaking, also the circumstances indicating that the insurance undertaking no longer meets requirements which have to be met when issuing a licence for insurance activity as well as the circumstances that cause or may cause threat to solvency and financial stability of the insurance undertaking or to the interests of the policyholders, insured persons, beneficiaries or any injured party; 2) an audit company must inform the Supervisory Commission in writing and without delay about any circumstances owing to which it is refused to state the auditor’s opinion to present an auditor account or auditor account is submitted provisory.
276. Under requirement of the Supervisory Commission, an audit company has to present explanations regarding financial reports and information indicated in auditor’s conclusions.
277. The audit company which audits an insurance holding company or a company controlled by an insurance undertaking must inform forthwith the Supervisory Commission about any circumstances indicated in paragraph 6 of this Article that are discovered during the audit.
278. Fair disclosure of information by an audit company to the Supervisory Commission about any circumstances indicated in this Article shall not be and may not be a breach of the duty prescribed by legal acts or a contract on non-disclosure of information and shall not incur nor may incur any form of liability.
279. Insurance undertakings must publish their annual financial statements publicly and the auditor’s opinion following the procedure determined by the Supervisory Commission.
280. The Supervisory Commission shall have the right to determine the procedure for the publication of other reports. CHAPTER FOUR SUPPLEMENTARY SUPERVISION OF UNDERTAKINGS BELONGING TO THE GROUP Article
281. Application of Provisions of This Chapter
282. Provisions of this section shall apply to insurance undertakings and other undertakings provided for in this Chapter.
283. Apart from the general supervision requirements covered in this Chapter supplementary supervision requirements set out in Articles 47, 48, 50 and 51 of this Law shall apply to the insurance undertaking which is a participating undertaking at least in one of any other insurance undertakings, an insurance undertaking of another European Union Member State, an reinsurance undertaking or an insurance undertaking of a non-member country.
284. Supplementary supervision requirements set out in Articles 47, 48, 50 and 52 of this Law shall apply to each insurance undertaking whose parent undertaking is an insurance holding company, a reinsurance undertaking or an insurance undertaking of a non-member country.
285. Supplementary supervision requirements set out in Articles 47, 48 and 50 of this Law shall apply to any insurance undertaking whose parent undertaking is a mixed- activity insurance holding company.
286. The rights and obligations of insurance undertakings belonging to a group including credit institutions, financial broker undertakings or other financial institutions as well as the rights and obligations of the Supervisory Commission in supervising groups of such undertakings shall be regulated by the Law on Financial Institutions. Provisions of this Chapter shall also apply to these undertakings. Article
287. Extent of Supplementary Supervision
288. When exercising supplementary supervision, the following shall also be taken into account: 1) undertakings related to the insurance undertaking; 2) participating undertakings of the insurance undertaking; 3) undertakings related to the participating undertakings of the insurance undertaking;
289. Supplementary supervision does not mean that the Supervisory Commission is supervising the undertakings listed in paragraph 1 of this Article; however, the requirements provided for in this Chapter shall apply to said undertakings.
290. In exercising supplementary supervision, the Supervisory Commission may not take account of undertakings of non-member countries there are legal obstacles to obtaining information. This shall be taken into consideration when calculating the adjusted solvency margin in accordance with the procedure determined by the Supervisory Commission.
291. The Supervisory Commission shall have the right to decide in each individual case whether to apply supplementary supervision requirements where: 1) an undertaking, which would be taken into consideration while exercising supplementary supervision, is insignificant for the goals of supplementary supervision of insurance undertakings; 2) application of supplementary supervision requirements would be unreasonable or misleading having regard to goals of supplementary supervision of insurance undertakings. Article
292. Competent Authorities
293. Supplementary supervision shall be exercised by a competent authority which has granted a license for insurance activity.
294. If a parent undertaking of an insurance undertaking and of one other or more insurance undertakings of another European Union Member State is the same insurance holding company, a reinsurance undertaking, an insurance undertaking of a non-member country or a mixed-activity insurance holding company, a competent authority responsible for supplementary supervision shall be determined by agreement of the Supervisory Commission with other supervision authorities of insurance undertakings of the European Union Member States. Under this agreement the Supervisory Commission may be assigned to exercise supplementary supervision.
295. If supplementary supervision the responsibility of a competent institution of another European Union Member State, it shall have the same rights to get access to information in respect of insurance undertakings and entities which are subject to supplementary supervision in the Republic of Lithuania as the Supervisory Commission. Article
296. Internal Control and Right to Access Information
297. Every insurance undertaking to which supplementary supervision is applied must have an adequate system of internal control to ensure gathering and provision of data and information necessary for supplementary supervision.
298. Entities listed in paragraph 1 of Article 45 of this Law having their office in the Republic of Lithuania, at the request of the insurance undertaking to which requirements of supplementary supervision apply, must provide to it all the information essential for supplementary supervision and shall have the a right to request such information from the insurance undertaking itself which must furnish it. Article
299. Right of the Supervisory Commission to Information
300. The Supervisory Commission shall have the right to apply directly to the undertakings listed in paragraph 1, Article 45 of this Law with a request to be provided information essential for supplementary supervision only where an insurance undertaking itself failed to provide such information to the Supervisory Commission.
301. The Supervisory Commission shall have the right to verify the information indicated in paragraph 1 of this Article itself or with the help of persons invited for that purpose in the course of inspection: 1) at the insurance undertaking which is subject to the requirements of supplementary supervision; 2) at the subsidiaries of that undertaking; 3) at the parent undertakings of that undertaking; 4) at the other subsidiaries of the parent company of the insurance undertaking. Article
302. Co-operation
303. Where insurance undertakings and insurance undertakings of another European Union Member State are directly or indirectly closely related or have a common participating undertaking, the Supervisory Commission, at the request of a competent authority of another European Union Member State, must provide information which may be essential for supplementary supervision, or shall have the right, on its own initiative, to provide information that could be essential for the competent authority of another European Union Member State.
304. When the insurance undertaking and credit institutions or financial broker undertakings, or those credit institutions and financial broker undertakings are directly or indirectly related or have a common participating undertaking, the Supervisory Commission must collaborate with relevant authorities of the Republic of Lithuania or another European Union Member State or a non-member country and provide information to them that would help simplify performance of the functions of all said authorities. Article
305. Transactions Within a Group
306. The Supervisory Commission shall have the right to obtain information about the transactions listed in paragraph 3 of this Article between an insurance undertaking and: 1) a related undertaking; 2) a participating undertaking; 3) undertakings related to the participating undertaking;
307. The Supervisory Commission shall also have the right to obtain information about the transactions listed in paragraph 3 of this Article between an insurance undertaking and a natural person who participates in: 1) an insurance undertaking or a related undertaking; 2) a participating company; 3) an undertaking related to the participating undertaking;
308. The Supervisory Commission shall have the right to obtain information about the following transactions: 1) loans; 2) guarantees, warranties and other off-balance sheet transactions; 3) transactions regarding elements included into the calculation of solvency margin; 4) investment; 5) reinsurance; 6) transactions regarding distribution of costs; 7) other contracts essential for supplementary supervision.
309. An insurance undertaking, following the procedure set by the Supervisory Commission, must inform the Supervisory Commission about transactions listed in this Article. The Supervisory Commission, in exercising its right to obtain information about the transactions referred to in subparagraph 7, paragraph 3 of this Article, must point out to the insurance undertaking which transactions shall be essential for supplementary supervision.
310. If it is evident from the provided information that an insurance undertaking faces or might face a threat, the Supervisory Commission must resort to sanctions provided for in this Law. Article
311. Adjusted Solvency Margin of the Insurance Undertaking Referred to in Paragraph 2 of Article 44
312. Requirements for the calculation of the adjusted solvency margin set by the Supervisory Commission shall apply to the insurance undertaking referred to paragraph 2, Article 44 of this Law.
313. Any related undertaking, participating undertaking or an undertaking related to the participating undertaking shall be included when calculating the adjusted solvency margin of an insurance undertaking.
314. If the calculation shows that the solvency margin is not adequate to the solvency margin of an insurance undertaking specified in paragraph 2, Article 44 of this Law, the Supervisory Commission must resort to sanctions provided for in this Law. Article
315. Adjusted Solvency Margin of the Insurance Undertaking Indicated in Paragraph 3 of Article 44
316. Requirements for the calculation of the adjusted solvency margin set by the Supervisory Commission shall apply to the insurance undertaking indicated in paragraph 3, Article 44 of this Law
317. All undertakings related to the insurance holding company as well as reinsurance undertakings or undertakings of a non-member country shall be included when calculating the adjusted solvency margin of an insurance undertaking.
318. If the calculation shows that the solvency of the insurance undertaking is or may be under a threat, the Supervisory Commission must resort to sanctions provided for by this Law. SECTION FIVE ACTIVITY OF INSURANCE COMPANIES IN THE EUROPEAN UNION MEMBER STATES Article
319. Right of an Insurance Undertaking to Provide Services in Another European Union Member State
320. An insurance undertaking which intends to provide services in another European Union Member State must notify the Supervisory Commission indicating at the same time the risks which it intends to cover by insurance contracts and file documents referred to in subparagraph 4, paragraph 2 of this Article. Information and documents must be filed in Lithuanian and English and the state language or one of the state languages of another European Union Member State where under the legal acts of another European Union Member State all documents filed with the competent authority of that Member State must be in the state language or one of the state languages of that Member State.
321. Within one month after receiving information specified in paragraph 1 of this Article, provided that the conditions referred to in paragraph 3 of this Article are not present, the Supervisory Commission must send, notifying of it on the same day the insurance undertaking, to the competent authority of the European Union Member State in which the insurance undertaking intends to provide services the following information: 1) proof that the insurance undertaking meets the solvency margin requirements set out in the legal acts of the Republic of Lithuania; 2) a list of insurance classes in which the insurance undertaking is authorised to engage in its activity; 3) information on insurance risks filed by the insurance undertaking which will be covered by contracts of insurance; 4) where the insurance undertaking intends to engage in the activity of insurance class referred to in subparagraph 10, paragraph 3, Article 7 of this Law, except carriers’ civil liability/third party insurance, documents certifying that the insurance undertaking is a member of the Insurer’s Bureau and the guarantee reserve of that this European Union Member State and that it has assigned a representative for settlement of claims granting appropriate powers to him, the name, surname and address of the representative;
322. The Supervisory Commission may, within 1 month after receiving all the information specified under paragraph 1 of