taxud/2414/08 - European Commission - Europa

(k)
services which grant the right or the option of receiving goods or services.
These usually involve the supply of derivatives, for example commodity derivatives,
which contain the possibility that either the supplier or the acquirer of that derivative
becomes the owner of the underlying goods or taxable services;
Article 14
1. The following shall be considered to be services having the specific and essential
character of "insurance and reinsurance" as defined in point (1) of Article 135a of
Directive 2006/112/EC:
(a)
underwriting of risk;
Such services consist of an assessment of the insurance risk and the underwriting of the
insurance proposals, putting the insurer “on risk”; the risk passes from the insured to the
insurer. Without such services no insurance commitment would be established; these
services change the legal and financial situation;
(b) risk and investment management;
Risk management consists of the review of the insurer‘s exposure to risk and verifying
options such as reinsurance, product mix or derivatives to reduce them to the required
level; without such services the insurer could not accept the risk; these services change
financial situation in a way which allows the insurer to take over the risk; these services
are at the heart of creating a financial situation allowing the insurer to accept a risk;
investment management consists of the management of the investment portfolio to
ensure that the investment return matches the liabilities of the insurer; in fact, it is the
return from the investment portfolio and the amount of the earned premium which are
essential for the insurer in supplying the policy and accepting the risk transfer;
(c)
claims handling;
Claims handling services consist of reviewing claims received to ensure they are covered
by the policy, clearing and settlement, including agreeing the amount of the claim with
policyholder and paying the claim. In reality this service requires the claim handler to
have the full picture of contractual obligations and contractual insurance standards
involved; on this basis the claims handler verifies whether the reported facts are coming
under the risk profile covered by the policy (it is there where the claim handler's knowhow
lies!) and oblige the insurer to compensate; the claims handler then negotiates the
amount with the policy holder and pays the agreed amount. Claims handling does not
involve a risk transfer but it is so closely linked to risk covered by the insurance that it
still and recognisably has the specific and essential character of the exempt insurance
service. (Some lawyers in the Commission's Legal Service were sceptic about this
approach.)
(d)
the issuance of non-tradable insurance derivatives.
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