Translated by the Ministry of Finance

Consolidated version as of 1 January 2016

Law published in the Official Gazette Valstybės žinios, 2012, No 127-6385, ID code 1121010ISTA0XI-2277

REPUBLIC OF LITHUANIA

LAW

AMENDING THE LAW ON INSURANCE

16 October 2012 No. XI-2277

Vilnius

(Official Gazette Valstybės žinios, 2003, No 94-4246; 2011, No 145-6816)

Article 1. New version of the Republic of Lithuania Law on Insurance

To amend the Republic of Lithuania Law on Insurance to read as follows:

“REPUBLIC OF LITHUANIA

LAW ON INSURANCE

CHAPTER I

general provisions

Article 1. Purpose of the Law

1. The purpose of this Law shall be to regulate insurance, reinsurance, insurance and reinsurance mediation activities with a view to making the insurance system credible, efficient, safe and sound.

2. This Law shall specify persons who have the right to engage in insurance and reinsurance activity as well as insurance and reinsurance mediation activities in the Republic of Lithuania, determine the main principles of state regulation of these activities, and regulate these activities. This Law shall also regulate the specific features of pre-contractual relations between parties to the insurance contract, the terms and conditions of the insurance contract, the relations arising from the insurance contract and relating to it, as well as other relations set out in this Law.

3. The provisions of this Law shall not apply to:

1) state social insurance relations;

2) relations regulated by the Republic of Lithuania Law on Insurance of Deposits and Liabilities to Investors;

3) reinsurance activity carried out or fully secured by the State which, in the public interest in extreme cases, acts as a reinsurer, including cases in which it has to assume such a role due to the existing situation in the market where it is impossible to get adequate protection afforded by commercial insurance;

4) other legal relations which, according to the description of the groups of life assurance and non-life insurance branch, are not attributable to licensed insurance activity.

4. Specific features of the establishment, licensing, activities, winding-up, bankruptcy and state supervision of entities having the right to engage in the activities of accumulation of a portion of the state social insurance contribution shall be established by other laws.

5. Specific features of insurance activity of certain insurance undertakings and reinsurance activity of reinsurance undertakings may be established by other laws.

6. The pension accumulation activities provided for in subparagraph 5 of paragraph 2 of Article 7 of this Law shall be regulated by other laws of the Republic of Lithuania.

7. The provisions of this Law applicable to reinsurance activity must also apply in cases where a reinsurer takes over the risks of entities which, pursuant to the Republic of Lithuania Law on the Accumulation of Occupational Pensions, have the right to engage in the accumulation of occupational pensions.

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. The provisions of the Law in relation to compulsory insurance against civil liability in respect of use of motor vehicles shall be apply to the extent they are not regulated by the Republic of Lithuania Law on Compulsory Insurance against Civil Liability in Respect of Use of Motor Vehicles.

9. The provisions of this Law shall implement the legal acts of the European Union listed in the Annex to this Law.

Article 2. Definitions

1. The “insured person” shall mean a natural person specified in a life and health insurance contract to whom, upon occurrence of an insured event in his life, the insurer must pay an insurance benefit; a person specified in a third party liability insurance contract whose property interests arising from civil liability are covered by insurance; a person specified in a property insurance contract whose property interests are covered by insurance.

2. The “home Member State” shall mean:

1) for provision of non-life insurances services, a Member State of the European Economic Area in which the head office of the insurance undertaking covering the risk is situated;

2) for provision of life assurance services, a Member State of the European Economic Area in which the head office of the insurance undertaking covering the commitment is situated;

3) for reinsurance services, a Member State of the European Economic Area in which the head office of the reinsurance undertaking is situated;

4) for insurance or reinsurance mediation services, a Member State of the European Economic Area in which the head office of the insurance or reinsurance intermediary is situated.

3. The “insurance against civil liability” shall mean the insurance of property interests of a person arising from possible civil liability for the damage caused to the injured third party and/or his property where the amount of the insurance benefit paid by the insurer depends on the amount of indemnity which the insured person must pay to the injured third party for the damage which, however, does not exceed the sum insured if it specified in the insurance contract.

4. The “participating undertaking” shall mean:

1) a parent undertaking;

2) an undertaking participating in another undertaking in the manner specified in paragraph 5 of this Article;

3) an undertaking which, even though not affiliated to any other undertaking or undertakings in the manner specified in paragraphs 62 and 63 of this Article, is managed jointly under the agreements concluded with those undertakings or the provisions of the memorandum or articles of association;

4) an undertaking which, even though not affiliated to any other undertaking or undertakings in the manner specified in paragraphs 62 and 63 of this Article, but in which the majority of members of its administration, management or supervisory bodies during a financial year until the drawing up of consolidated financial accounts have been the same persons as in the other undertaking or undertakings.

5. The “participation” shall mean a direct or indirect holding of 20% or more of all the voting rights at the meeting of the highest management body of an undertaking or 20% or more of the share (member share, etc.) capital of an undertaking, as well as any other real and long-term possibility to exercise influence over the decisions related to the activities of the undertaking both as a shareholder or participant and a holder of any other rights related to the share (member share, etc.) capital. In case of supervision of a group of insurance and/or reinsurance undertakings, participation shall also be deemed to be a direct or indirect holding of the voting rights or capital due to which, in the opinion of the insurance supervisory authority, a dominant influence over that the undertaking is exercised.

6. The “large insurance risk” shall mean insurance risk corresponding to the criteria set out in Article 10 of this Law.

7. The “policyholder” shall mean a person who has either 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.

8. The “insurer” shall mean a person that enter into or has entered into an insurance contract and authorised under law to engage in insurance activity.

9. The “insurer’s (surplus share) bonus” shall mean the amount of the insurer’s earnings attributed to a policyholder and or a beneficiary in the cases provided for in a capital accumulation life assurance contract, calculated and paid according to the procedure established in the insurance contract.

10. The “insurance cover” shall mean the commitment of the insurer to pay an insurance benefit upon occurrence of an insured event.

11. The “branch of the insurance or reinsurance undertaking” shall mean a structural unit or agency of the insurance or reinsurance undertaking established under the right of established and situated in the territory of the European Economic Area, except for the home Member State, and fulfilling all or any functions of the legal person.

12. The “insurance premium” shall mean the amount of money specified in the insurance contract which the policyholder pays under the insurance contract to the insurer for the insurance cover.

13. The “insurance undertaking” shall mean an undertaking which, according to the procedure prescribed by this Law, has been granted a licence to engage in insurance activity.

14. The “insurable interest” means losses that the policyholder, the insured person or the beneficiary may incur upon occurrence of an insured event.

15. The “group of insurance and/or reinsurance undertakings” shall mean a group consisting of the participating undertaking, subsidiaries thereof or the undertakings in which the participating undertaking or its subsidiaries hold a participation as well as undertakings linked to each other by a relationship as set out in paragraph 5 of this Article or a group based on the establishment, contractually or otherwise, of financial relationships among those undertakings, and that may include mutual or mutual-type associations, provided that:

1) one of those undertakings effectively exercises, through centralised coordination, a dominant influence over the decisions, including financial decisions, of the other undertakings that are part of the group (where the undertaking exercising the centralised coordination shall be considered as the parent undertaking, and the other undertakings shall be considered as subsidiaries);

2) the establishment and dissolution of such relationships for the purposes set out in Section 4 of Chapter II of this Law are subject to prior approval by the supervisory authority of the group of insurance and/or reinsurance undertakings.

16. The “intra-transaction within the group of insurance and/or reassurance undertakings” shall mean a transaction within the group of insurance and/or reinsurance undertakings by which an insurance or reinsurance undertaking relies, either directly or indirectly, on other undertakings within the same group or on any natural or legal person linked to the undertakings within that group by close links, for the fulfilment of an obligation, whether or not contractual, and whether or not for payment.

17. The “supervisory authority of the group of insurance and/or reinsurance undertakings” shall mean a supervisory authority designated in accordance with the rules set out in Article 63 of this Law and responsible for supervision of the group of insurance and/or reinsurance undertaking.

18. The “insurance and/or reinsurance technical provisions” shall mean the insurer’s or reinsurer’s obligations arising from insurance and/or reinsurance contracts or relating to them which are calculated in accordance with the procedure set out by legal acts.

19. The “insurance benefit” shall mean an amount of money which the insurer must pay 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 the benefit provided for in the insurance contract.

20. The “insurance holding company” shall mean a parent undertaking which is not a mixed-activity financial holding and the principle objective of whose activities is to acquire and hold participations in subsidiary undertakings, where those subsidiary undertakings are exclusively or mainly insurance or reinsurance undertakings, or insurance or reinsurance undertakings of a Member State of the European Economic Area or insurance or reinsurance undertakings of a third country.

21. The “insurance period” means the period of time from the beginning until the end of insurance cover, which does not necessarily coincide with the period of validity of the insurance contract.

22. The “insurance policy” means the document issued by the insurer certifying the conclusion of the insurance contract.

23. The “insurance object” means property interests related to a person’s life, health, property or civil liability.

24. The “insurance supervisory authority” shall mean an authority which supervises insurance, reinsurance and insurance or reinsurance mediation activities. The Bank of Lithuania shall be the supervisory authority of the Republic of Lithuania.

25. The “college of insurance supervisory authorities” shall mean a permanent body of changing composition made up of insurance supervisory authorities of Member States of the European Economic Area the objective of which is creation of favourable conditions for making of decisions on supervision of the group of insurance and/or reinsurance undertakings, coordination of supervision of the group of insurance and/or reinsurance undertakings conducted by the members of the college and promotion of cooperation.

Amendments to the paragraph of this Article:

No XII-1603, 9 April 2015, published in the Register of Legal Acts (TAR), 17 April 2015, ID code 2015-05897

26. The “insurance risk” shall mean a possible danger threatening the insurance object

27. The “sum insured” shall mean the sum of money specified in the insurance contract or calculated according to the method specified in the insurance contract which the insurance benefit may not exceed, except for the cases provided for in the insurance contract.

28. The “insurance policy conditions” shall mean standard conditions of an insurance contract drawn up by the insurer.

29. The “insurance intermediary” shall mean a person carrying out insurance mediation activities for remuneration.

30. The “insurance mediation” shall mean economic and commercial activities whereby it is sought to introduce a possibility of concluding an insurance contract, it is proposed to conclude an insurance contract or other preparatory work is carried out assessing the policyholder’s insurance cover needs and providing information on conformity of the insurance contract with such needs for the purpose of conclusion of insurance contracts, as well as economic and commercial activities whereby it is sought to conclude an insurance contract, assistance in administering or performing the concluded insurance contracts or in administering insured events. These activities when undertaken by an insurer or an employee of an insurer regarding the insurance contracts of this insurer shall not be considered as insurance mediation. The provision of information regarding insurance on an incidental basis in the context of another professional activity, where the purpose of the provision of information is not to assist the recipient of information in concluding or performing an insurance contract shall not be considered as insurance mediation. The mere management of insured events on the basis of a contract with the insurer and loss adjusting and appraisal of claims shall not be considered as insurance mediation.

31. The “insurance activity” means economic and commercial activities whereby the risk of other persons’ losses is assumed on the basis of an 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 purpose of securing those interests, the insurer’s property and other assets covering technical provisions calculated by the insurer. For the purposes of this Law, insurance activity shall also be the activities set out in subparagraph 5 of paragraph 2 of Article 7 of this Law.

32. The “underwriting risk” shall mean the risk of loss or of adverse change in the value of insurance liabilities, due to inadequate pricing and provisioning assumptions.

33. The “insured event” shall mean an event specified in the insurance contract upon occurrence of which the insurer must pay the insurance benefit.

34. The “Member State of the European Economic Area” shall mean a Member State of the European Union, the Republic of Iceland, the Kingdom of Norway, the Principality of Liechtenstein.

35. The “Member State of the European Economic Area where the risk is situated” shall mean a Member State of the European Economic Area where:

1) the property is located when an insurance contract relates to buildings or buildings together with property therein, if this property is insured under the same insurance contract;

2) a vehicle of any type related to an insurance contract is registered. In case of compulsory insurance against civil liability in respect of the use of motor vehicles, under this subparagraph, a Member State of the European Economic Area into which a vehicle that is normally based in the territory of another Member State of the European Economic Area is brought, for a period of 30 days from the buyer’s confirmation that the vehicle has been delivered, shall also be considered as the Member State of the European Economic Area where the risk is situated;

3) the policyholder has concluded an insurance contract for a term not longer than four months for travel or holiday risk insurance, irrespective of the insurance class to which these risks might belong;

4) the policyholder’s domicile, his registered office, a branch or agency that are related to the insurance contract is located, however, in all other cases which have not been specified in subparagraphs 1, 2 and 3 of this paragraph.

36. The “Member State of the European Economic Area of provision of insurance services” shall, for the purposes of insurance services, mean a Member State of the European Economic Area where the risk is situated or a Member State of the European Economic Area of commitment under a life assurance contract, if the insurance contract regarding that risk or commitment is concluded not by an insurance undertaking of this Member State of the European Economic Area or a branch of an insurance undertaking established in this European Economic Area Member State or a branch of an insurance undertaking of another Member State of the European Economic Area. In case of provision of reinsurance, insurance or reinsurance mediation services, this shall mean a Member State of the European Economic Area other than the home Member State where reinsurance, insurance or reinsurance mediation activity is carried out without establishing a branch.

37. The “financial supervision of insurance and reinsurance undertakings” shall mean supervision of activities of insurance and reinsurance undertakings, solvency thereof, calculation of technical provisions, fulfilment of the requirements for the property of insurance and reinsurance undertakings. If the insurance undertaking is entitled to carry out assistance insurance activity, the insurance supervision authority shall also carry out supervision of the technical provisions disposed of by the insurance undertakings necessary for the assistance actions it has undertaken to carry out.

38. The “financial institutions” shall have the meaning defined in the Republic of Lithuania Law on Financial Institutions. For the purposes of this Law, the financial institution shall also be an insurance undertaking, reinsurance undertaking, insurance holding company and mixed-activity financial holding company.

39. The “guarantee fund” shall mean the reserve of an association of insurers engaged in the activities of the insurance class specified in subparagraph 10 of paragraph 3 of Article 7 of this Law (except for insurance against civil liability of carriers) in the Republic of Lithuania or any analogous formation provided for by legislation of another Member State of the European Economic Area.

40. The “life assurance” shall mean the insurance of property interests related to life and/or capital accumulation of a natural person where due to death of the insured person, another insured event or maturity of the insurance term established in the insurance contract insurance benefits are paid in lump sum or in instalments.

41. The “close link” shall mean a situation in which persons are linked by control or participation. If one person controls two or more persons, it shall be considered that there is a close link between these persons.

42. The “intervention measures” shall mean measures applied by the court or the Bank of Lithuania the purpose of which is to preserve or restore the financial standing of an insurance undertaking or a branch of a third country insurance undertaking, to protect the interests of policyholders, the insured persons, beneficiaries, the injured third parties and other creditors or to implement the objectives established in Article 2.124 of the Civil Code of the Republic of Lithuania (hereinafter referred to as the “Civil Code”), and which due to their nature have an effect not only on the rights and duties of an insurance undertaking or a branch of a third country insurance undertaking but also of other persons.

43. The “Member State of the European Economic Area of the commitment under a life assurance contract” shall mean a Member State of the European Economic Area where the policyholder that has entered into a life assurance contract has his domicile or, where the policyholder is a legal person, a Member State of the European Economic Area where his division, to which the life assurance contract is related, is situated.

44. The “right of establishment” shall mean the right to establish in another Member State of the European Economic Area a branch of an insurance or reinsurance undertaking, a branch of an undertaking of insurance intermediaries, or the right to establish in the Republic of Lithuania a branch of an insurance or reinsurance undertaking of another Member State of the European Economic Area, a branch of an undertaking of insurance or reinsurance intermediaries of another Member State of the European Economic Area.

45. The “surrender value” means the sum calculated by actuarial methods having regard to the share of paid insurance premiums intended for capital accumulation, the interest accrued during the period of validity of the contract, the share of the insurer’s profit due to the policyholder under the insurance contract and other circumstances specified in the insurance contract.

46. The “persons acting in concert” shall mean two or more persons who, on the basis of a verbal or written agreement concluded explicitly between them, exercise or seek to exercise their rights granted by the proportion of the authorised capital and/or voting rights of the insurance undertaking specified in paragraph 60 of this Article.

47. “Another Member State of the European Economic Area” shall mean a Member State of the European Economic Area other than the Republic of Lithuania.

48. The “insurance undertaking of another Member State of the European Economic Area” shall mean an undertaking that has a right to carry out insurance activity under the legal acts of another Member State of the European Economic Area.

49. The “reinsurance undertaking of another Member State of the European Economic Area” shall mean an undertaking that has a right to carry out reinsurance activity under the legal acts of another Member State of the European Economic Area.

50. The “control” shall mean the relationship between a parent undertaking and a subsidiary, corresponding to the criteria set out in paragraphs 62 and 63 of this Article, or a similar relationship between any natural or legal person and an undertaking. Control may be direct and indirect.

51. The “credit risk” shall mean the risk of loss or of adverse change in the financial situation, resulting from fluctuations in the credit standing of issuers of securities, counterparties and any debtors to which insurance and reinsurance undertakings are exposed, in the form of counterparty default risk, or spread risk, or market risk concentrations.

52. The “liquidity risk” shall mean the risk that insurance and reinsurance undertakings are unable to realise investments and other assets in order to settle their financial obligations when they fall due.

53. The “mixed-activity insurance holding company” shall mean a parent undertaking at least one of whose subsidiaries is an insurance or reinsurance undertaking, insurance or reinsurance undertakings of another Member State of the European Economic Area or a third country insurance or reinsurance undertaking, which itself is not an insurance or reinsurance undertaking, an insurance or reinsurance undertaking of another Member State of the European Economic Area or a third country insurance or reinsurance undertaking, an insurance holding company or a mixed-activity financial holding company.

54. The “mixed-activity financial holding company” shall be interpreted as defined in the Republic of Lithuania Law on the Supplementary Supervision of Entities in a Financial Conglomerate (hereinafter referred to as the “Law on the Supplementary Supervision of Entities in a Financial Conglomerate”).

55. The “National Insurers’ Bureau” shall mean an organisation established in accordance with Recommendation No 5 adopted on 25 January 1949 by the Road Transport Sub-committee of the Inland Transport Committee of the United Nations Economic Commission for Europe which unites insurance undertakings authorized to engage in the activities of compulsory insurance against civil liability in respect of the use of motor vehicles in that country. The Motor Insurers’ Bureau of the Republic of Lithuania shall be the National Insurers’ Bureau in Lithuania.

56. The “beneficiary” shall mean the person specified in the insurance contract or the person appointed by the policyholder and, in the cases specified in the insurance contract, also the person appointed by the insured person who is entitled to the insurance benefit.

57. The “irrevocable beneficiary” shall mean the beneficiary who may not be revoked and 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.

58. The “injured third party” shall mean in case of insurance against civil liability – the person to whom damage or injury has been caused by the policyholder or the insured person.

59. The “operational risk” shall mean the risk of loss arising from personnel and systems, inadequate or failed internal processes, or from external events.

60. The “qualifying holding of the insurance or reinsurance undertaking” shall mean a direct or indirect holding in an insurance or reinsurance undertaking which represents at least 1/10 of the authorised capital or of the voting rights at the general meeting of shareholders or which makes it possible to exercise a significant influence over the management of the insurance or reinsurance undertaking. When calculating a qualifying holding, account shall be taken of the votes held by a person in accordance with the procedure established by the supervisory authority.

61. The “retrocession” shall mean reinsurance of assumed or transferred reinsurance.

62. The “subsidiary” shall mean an undertaking which meets at least one of the following criteria:

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, being a shareholder (participant) of the first undertaking, 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 or articles of association or agreements concluded with another undertaking, the other undertaking may exercise a significant influence;

4) an undertaking in which another undertaking, under the agreements concluded with its shareholders or participants, controls the majority of the former undertaking’s shareholders’ or participants’ voting rights;

5) an undertaking over which, in the opinion of the insurance supervisory authority, another undertaking is exercising a significant influence;

6) an undertaking which, under the criteria of subparagraphs 1–5 of this paragraph, is a subsidiary of a subsidiary. In this case, it shall be considered a subsidiary of the parent undertaking whose subsidiary has a subsidiary.

63. The “parent undertaking” shall mean an undertaking which meets at least one of the following criteria:

1) it has the majority of shareholders’ or other participants’ votes in another undertaking;

2) as a shareholder or participant of another undertaking, it has the right to appoint and recall the majority of members of administration, management and supervisory bodies of that undertaking;

3) it may exercise a significant influence over another undertaking because of the agreements concluded with that undertaking or because of the provisions of the memorandum or articles of association of that undertaking;

4) under the agreements concluded with the shareholders or participants of another undertaking, it has control over the majority of votes of the shareholders or participants of that undertaking;

5) in case of supervision of the group of insurance and/or reinsurance undertakings, an undertaking which, in the opinion of the insurance supervisory authority, exercises a significant influence over another undertaking.

64. The “reinsured” shall mean an insurance or reinsurance undertaking transferring a share of the risk assumed by it to another insurance or reinsurance undertaking.

65. The “reinsurer” shall mean an insurance or reinsurance undertaking taking over a certain share of the risk assumed by another insurance or reinsurance undertaking.

66. The “reinsurance undertaking” shall mean an undertaking which, according to the procedure prescribed by this Law, has been granted a licence to engage in reinsurance activity.

67. The “reinsurance intermediary” shall mean a person carrying out reinsurance mediation activities for remuneration.

68. The “reinsurance mediation” shall mean economic and commercial activities whereby it is sought to introduce a possibility of concluding a reinsurance contract, it is proposed to conclude a reinsurance contract or other preparatory work is carried out assessing the policyholder’s insurance cover needs and providing information on conformity of the insurance contract with such needs for the purpose of conclusion of reinsurance contracts, as well as economic and commercial activities related to conclusion of a reinsurance contract, assistance in administering or performing the concluded reinsurance contracts or in administering reinsured events. These activities when undertaken by a reinsurer or an employee of a reinsurer regarding the reinsurance contracts of this reinsurer shall not be considered as reinsurance mediation. The provision of information regarding insurance on an incidental basis in the context of another professional activity, where the purpose of the provision of information is not to assist the recipient of information in concluding or performing a reinsurance contract shall not be considered as reinsurance mediation. The mere management of reinsured events on the basis of a contract with the reinsurer and loss adjusting and appraisal of claims shall not be considered as reinsurance mediation.

69. The “reinsurance activity” shall mean economic and commercial activities whereby risk transferred by an insurance or reinsurance undertaking is assumed. Activities whereby an insurance or reinsurance undertaking, except for Lloyd’s Association, assumes risk transferred by any member of Lloyd’s shall also be considered as reinsurance activity.

70. The “captive insurance or reinsurance undertaking” shall mean an insurance or reinsurance undertaking the objective of which shall be provision of insurance or reinsurance services only to the parent undertaking or undertakings of the group of undertakings to which such insurance or reinsurance undertakings belongs and which is not a subsidiary insurance or reinsurance undertaking and does not belong to the group of insurance and/or reinsurance undertakings.

71. The “tied insurance intermediary” means a person who carries out insurance mediation activities on behalf of one or more insurers and in their interests. Any person who carries out insurance mediation activities on behalf of one or more insurers and in their interests in addition to his principal economic and commercial activities, while the insurance offered is complementary to the goods and services supplied by him shall also be considered as a tied insurance intermediary.

72. The “regulated market” shall mean:

1) the market operating in the Republic of Lithuania included in the list of regulated markets of the Republic of Lithuania;

2) the market operating in another Member State of the European Union included in the list of regulated markets of the Member State of the European Union;

3) the market operating in a third country which is recognised by the home Member State of the insurance undertaking and fulfils the requirements comparable to those laid down in the Republic of Lithuania Law on Markets in Financial Instruments and the financial instruments dealt in on that market are of a quality comparable to that of the instruments dealt in on the regulated market or markets of the home Member State.

73. The “finite reinsurance” shall mean reinsurance where the direct maximum possible losses (understood as the maximum economic risk transferred, conditioned by both the significance of the risk insured and the time chosen for the transfer of risk) for the whole period of duration of the contract, by a fixed amount, but significantly exceed the insurance premium. The typical features of this reinsurance are the provisions of a financial reinsurance contract aiming at consistent balancing of mutual economic experience of the parties in order to achieve the desired transfer of risk, and/or the fact that the change in the value of money, in the course of time, is significant.

74. The “market risk” shall mean the risk of loss or of adverse change in the financial situation resulting, directly or indirectly, from fluctuations in the level and in the volatility of market prices of assets, liabilities and financial instruments.

Amendments to the paragraph of this Article:

No XII-1603, 9 April 2015, published in the Register of Legal Acts (TAR), 17 April 2015, ID code 2015-05897

75. The “market risk concentrations” shall mean risk concentration that may result in losses posing a threat to the solvency and financial situation of the insurance or reinsurance undertaking.

76. The “risk-mitigation techniques” shall mean techniques which enable insurance and reinsurance undertakings to transfer part or all of their risks to another party.

77. The “special purpose vehicle” shall mean an undertaking which assumes risks from insurance or reinsurance undertakings and which seeks to ensure performance of the assumed obligations through the proceeds of a debt issuance or any other financing mechanism where the rights of the creditors that provided financing are exercised only after performance of the undertaking’s obligations arising from reinsurance legal relations.

78. The “harmonised collective investment undertakings” shall be interpreted as defined in the Republic of Lithuania Law on Collective Investment Undertakings.

79. The “related undertaking” shall mean a subsidiary or an undertaking in which another undertaking participates in the manner specified in paragraph 4 of this Article.

80. The “health insurance” means insurance of property interests related to health of a natural person, covering accident insurance and sickness insurance.

81. The “right to provide insurance or reinsurance, reinsurance or insurance mediation services” shall mean the right of an insurance or reinsurance undertaking to engage in insurance or reinsurance activity in another Member State of the European Economic Area without establishing a branch of an insurance or reinsurance undertaking, the right of insurance or reinsurance intermediaries to engage in insurance mediation activity in another Member State of the European Economic Area without establishing a branch of an undertaking of insurance intermediaries, or the right of an insurance or reinsurance undertaking of another Member State of the European Economic Area to engage in insurance or reinsurance activity in the Republic of Lithuania without establishing a branch of an insurance or reinsurance undertaking, and the right of insurance or reinsurance intermediaries of another Member State of the European Economic Area to engage in insurance or reinsurance mediation activity in the Republic of Lithuania without establishing a branch of an undertaking of insurance or reinsurance intermediaries.

82. The “third country” shall mean a state other than a Member State of the European Economic Area.

83. The “third country insurance undertaking” shall mean an undertaking engaged in insurance activity, registered in a third 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 Member State of the European Economic Area.

84. The “third country reinsurance undertaking” shall mean an undertaking engaged in reinsurance activity, registered in a third country which, according to the nature of its activity, should have to obtain a licence to engage in reinsurance activity as set out in this Law or an equivalent authorisation if it were registered in the Republic of Lithuania or any other Member State of the European Economic Area.

85. The “property insurance” shall mean insurance of a person’s property interests where the amount of the insurance benefit depends, within the limits of the sum insured, on the amount of damage caused to or the loss and other expenses incurred by the person.

86. The “outsourcing” shall mean activities carried out according to an arrangement an insurance or reinsurance undertaking and a service provider, whether a supervised entity or not (fulfilment of the functions, services or other activities of an insurance or reinsurance undertaking), which would otherwise be performed by the insurance or reinsurance undertaking itself.

Article 3. Insurance Activity

1. Only the following shall have the right to engage in insurance activity in the Republic of Lithuania:

1) insurance undertakings established in accordance with the laws of the Republic of Lithuania: public limited liability companies, private limited liability companies and European companies (Societas Europaea) which have obtained a licence to engage in insurance activity according to the procedure set out in this Law;

2) insurance undertakings of other Member States of the European Economic Area, exercising the right of establishment and/or the right to provide services);

3) branches of third country insurance undertakings established in the Republic of Lithuania which have obtained a licence to engage in insurance activity as branches according to the procedure set out in this Law;

4) insurance undertakings of the members of the World Trade Organisation (which are third countries) which have not established a branch, but have the right to carry out the activities of voluntary insurance of insurance classes listed in subparagraphs 5, 6, 11 and 12 of paragraph 3 of Article 7 of this Law as well as activities of voluntary insurance of cargo transported by ships (sea and internal waters) and aircraft. The afore-mentioned activities shall mutatis mutandis be subject to the restrictions set out in paragraph 4 of Article 73 of this Law.

2. The entities referred to in subparagraphs 1, 2 and 3 of paragraph 1 of this Article may not engage in any economic and commercial activities in the Republic of Lithuania other than insurance, reinsurance and related activities: management of insured and reinsured events, insurance and reinsurance mediation, consulting on issues relating to insurance and reinsurance, mediation in concluding pension accumulation agreements (except for supplementary voluntary accumulation), training of insurance and reinsurance specialists, in-service training, as well as leasing of immovable property and valuation of property to be insured.

3. The entities referred to in subparagraphs 1, 2 and 3 of paragraph 1 of this Article may engage in insurance-related insurance mediation activity only as tied insurance intermediaries

4. All other persons not specified in this Law shall be prohibited from engaging in insurance activity in the Republic of Lithuania, except in the cases established by the insurance supervisory authority (hereinafter referred to as the “supervisory authority”), where the insurance cover of an insurance undertaking, a branch of a third country insurance undertaking established in the Republic of Lithuania or a branch of an insurance undertaking of another Member State of the European Economic Area established in the Republic of Lithuania is not recognised due to compulsory insurance applicable in a third country.

Article 4. Reinsurance Activity

1. Only the entities referred to in subparagraphs 1, 2 and 3 of paragraph 1 of Article 3 of this Law as well as those listed below shall have the right to engage in reinsurance activity in the Republic of Lithuania:

1) reinsurance undertakings established in accordance with the laws of the Republic of Lithuania: public limited liability companies, private limited liability companies and European companies (Societas Europaea) which have obtained a licence to engage in reinsurance activity according to the procedure set out in this Law;

2) reinsurance undertakings of other European Economic Area Member States, both those which have established a branch in the Republic of Lithuania and those which have not;

3) third country reinsurance undertakings, both those which have established a branch in the Republic of Lithuania and those which have not.

2. The entities referred to in subparagraphs 1, 2 and 3 of paragraph 1 of this Article may not engage in any economic and commercial activities in the Republic of Lithuania other than reinsurance and related activities: management of reinsured events, reinsurance mediation, consulting on issues relating to reinsurance, training of reinsurance specialists, in-service training, as well as leasing of immovable property and valuation of property to be reinsured.

Article 5. Insurance and Reinsurance Mediation Activity

1. Only the following shall have the right to engage in insurance mediation activity in the Republic of Lithuania:

1) undertakings (undertakings of insurance agents) 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) in accordance with the procedure established by the laws of the Republic of Lithuania. Insurance agent undertakings and insurance agents shall be tied insurance intermediaries;

2) insurance broker undertakings established in accordance with the laws of the Republic of Lithuania: public limited liability companies, private limited liability companies and European companies (Societas Europaea) which have obtained a licence to engage in insurance brokerage activity according to the procedure set out in this Law. Insurance broker undertakings shall be independent insurance intermediaries;

3) insurance intermediaries of other European Economic Area Member States which carry out insurance mediation activity in the Republic of Lithuania, exercising the right of establishment and/or the right to provide services;

4) branches of third country insurance intermediaries established in the Republic of Lithuania.

2. Only the entities referred to in subparagraphs 1, 2, 3 of paragraph 1 of Article 3 and Article 4 of this Law as well as those listed below shall have the right to engage in reinsurance mediation activity in the Republic of Lithuania:

1) insurance broker undertakings;

2) reinsurance intermediaries of other European Economic Area 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) third country reinsurance intermediaries which have not established a branch in the Republic of Lithuania or branches of independent insurance intermediaries and/or reinsurance intermediaries of third countries established in the Republic of Lithuania.

3. Insurance undertakings or branches of third country insurance undertakings, insurance undertakings of other Member States of the European Economic Area exercising the right of establishment and/or the right to provide services shall be prohibited from using insurance or reinsurance mediation services offered by persons who do not have the right to engage in insurance or reinsurance mediation activity.

Article 6. Agencies

The regulations set out in this Law regarding notification of activities exercising the right of establishment, activity and supervision of the activity of branches shall also apply to agencies or any other offices headed by the employees of the undertaking which established them or persons who have a permanent or long-term authorisation to operate on behalf of the undertaking they represent, where:

1) the agency or office is established in another Member State of the European Economic Area by an insurance or reinsurance undertaking, or an undertaking of insurance or reinsurance intermediaries of the Republic of Lithuania;

2) the agency or office in the Republic of Lithuania is established by an insurance undertaking, reinsurance undertaking or an undertaking of insurance or reinsurance intermediaries of another Member State of the European Economic Area.

Article 7. Branches and Classes of Insurance

1. Insurance branches shall be life assurance and non-life insurance.

2. The life assurance branch shall comprise the following assurance classes:

1) life assurance other than provided for in subparagraphs 2–5 of this paragraph;

2) marriage and birth insurance;

3) life assurance related to investment funds;

4) tontines;

5) pension accumulation activity.

3. The non-life insurance branch shall comprise the following assurance classes:

1) accident insurance;

2) sickness insurance;

3) land motor vehicles, except for 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 (except for subparagraphs 3–7) insurance against fire and natural forces;

9) property insurance against other risks (except for subparagraph 8 of this paragraph);

10) insurance against civil liability arising out of the use of land motor vehicles;

11) insurance against civil liability arising out of the use of aircraft;

12) insurance against civil liability arising out of the use of ships (sea and internal waters);

13) general civil liability insurance;

14) credit insurance;

15) suretyship insurance;

16) financial loss insurance;

17) legal expenses insurance;

18) assistance insurance.

4. Where the licence to engage in insurance activity or the authorisation for the activity of a branch of a third country insurance undertaking simultaneously covers:

1) the insurance classes specified in subparagraphs 1 and 2 of paragraph 3 of this Article, such activity shall be referred to as accident and sickness insurance (health insurance);

2) the insurance class specified in subparagraph 1 of paragraph 3 of this Article covering passenger injury risk insurance and insurance classes specified in subparagraphs 3, 7 and 10 of paragraph 3 of this Article, such activity shall be referred to as motor insurance;

3) the insurance class specified in subparagraph 1 of paragraph 3 of this Article covering passenger injury risk insurance and the insurance classes specified in subparagraphs 4, 6, 7 and 12 of paragraph 3 of this Article, such activity shall be referred to as marine and transport insurance;

4) the insurance class specified in subparagraph 1 of paragraph 3 of this Article covering passenger injury risk insurance and the insurance classes specified in subparagraphs 5, 7 and 11 of paragraph 3 of this Article, such activity shall be referred to as aviation insurance;

5) the insurance classes specified in subparagraphs 8 and 9 of paragraph 3 of this Article, such activity shall be referred to as fire and other damage to (destruction of) property insurance;

6) the insurance classes specified in subparagraphs 10–13 of paragraph 3 of this Article, such activity shall be referred to as civil liability insurance;

7) the insurance classes specified in subparagraphs 14 and 15 of paragraph 3 of this Article, such activity shall be referred to as credit and suretyship insurance;

8) all insurance classes specified in paragraph 3, such activity shall be referred to as risk insurance of the non-life insurance branch.

5. The supervisory authority shall approve the description of insurance classes of life assurance and non-life insurance branches which must be observed by insurance undertakings and branches of third country insurance undertakings.

Article 8. Separation of Life Assurance and Non-life Insurance Activity in the Republic of Lithuania

1. None of the entities specified in subparagraphs 1, 2 and 3 of paragraph 1 of Article 3 of this Law shall have the right to engage in both life and non-life insurance activity, save for the exceptions and cases referred to in paragraph 2 of this Article and Article 221 of this Law, as well as cases where the legislation of another European Economic Area Member State authorises an insurance undertaking of another Member State of the European Economic Area to engage in both life and non-life insurance activity.

2. The entities referred to in subparagraphs 1, 2 and 3 of paragraph 1 of Article 3 of this Law engaged in life assurance activity shall also have the right to engage only in activities of the insurance classes of the non-life insurance branch specified in subparagraphs 1 and 2 of paragraph 3 of Article 7 of this Law, following the procedure established by laws.

3. The entities referred to in subparagraphs 1 and 3 of paragraph 1 of Article 3 of this Law engaged only in activities of the insurance classes of the non-life insurance branch specified in subparagraphs 1 and 2 of paragraph 3 of Article 7 of this Law, shall be entitled to apply for issue of a licence to engage in life assurance activity.

4. Insurance undertakings and branches of third country insurance undertakings 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 of paragraph 3 of Article 7 of this Law, approved by the supervisory authority.

Article 9. Ancillary Insurance Risks of Non-life Insurance Branch

1. An insurance undertaking which has a licence to engage in insurance activity or a branch of a third country insurance undertaking which has an authorisation for insurance activity of the branch granted for carrying out the insurance activity of the principal risk belonging to the non-life insurance class or several of them shall have the right, without changing the licence to engage in 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 the non-life insurance branch, provided that all the following conditions are met:

1) ancillary insurance risk is connected with the principal insurance risk;

2) ancillary insurance risk is related to the same object that is covered against the principal insurance risk;

3) ancillary risk is covered by the same insurance contract insuring against the principal insurance risk.

2. The risks of insurance classes listed in subparagraphs 14, 15 and 17 of paragraph 3 of Article 7 of this Law may not be regarded as risks ancillary to other insurance classes, with the exception of cases indicated in paragraphs 3 and 4 of this Article.

3. Insurance risk belonging to the insurance class specified in subparagraph 17 of paragraph 3 of Article 7 of this Law may be considered as ancillary to the risks of the insurance class referred to in subparagraph 18 of paragraph 3 of 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 the provision of assistance to persons who encounter difficulties while travelling, while away from home or from their permanent place of residence.

4. Insurance risk belonging to the insurance class referred to in subparagraph 17 of paragraph 3 of Article 7 of this Law may also be considered as ancillary insurance risk only when the conditions specified in paragraph 1 of this Article are fulfilled and when it is related to disputes or risks arising out of the use of sea vessels or related thereto.

Article 10. Large Insurance Risk

1. Insurance risk shall be considered as large if it belongs to the following:

1) the insurance classes specified in subparagraphs 4–7, 11 and 12 of paragraph 3 of Article 7 of this Law;

2) the insurance classes referred to in subparagraphs 14 and 15 of paragraph 3 of Article 7 of this Law, where the policyholder is engaged in economic and commercial activities or is a self-employed professional, and the insurance risks are related to these activities.

2. Insurance risk shall also be considered as large if it belongs to the insurance classes referred to in subparagraphs 3, 8, 9, 10, 13 and 16 of paragraph 3 of Article 7 of this Law, and the policyholder of the risk exceeds at least two of the following values:

1) the value of assets indicated in the balance sheet of the policyholder is not less than EUR 6,200,000;

2) the net sales income of the policyholder during the reporting financial year totals or exceeds EUR 12,800,000;

3) the average number of personnel employed by the policyholder is at least 250 during the reporting financial year;

3. If the policyholder belongs to a group of undertakings the sets of consolidated financial statements whereof are drawn up in compliance with the requirements set forth in the Republic of Lithuania Law on Consolidated Accounts of Groups of Undertakings or an equivalent legal act of another Member State of the European Economic Area, the values referred to in paragraph 2 of this Article shall be established on the basis of the size of the group of undertakings.

Article 11. Evaluation of Good Repute, Professional Qualifications and Experience

1. A natural person shall not be considered to be 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 penalty to dismiss this person from office or a service-related penalty to dismiss a civil servant from office is still effective;

3) the person abuses narcotic, toxic, psychotropic substances or alcohol or is an addicted gambler;

4) there are other important reasons for which the natural person may not be considered to be of good repute.

2. A legal person shall not be considered to be of good repute if:

1) he has been subject to criminal liability;

2) members of the management bodies of this legal person and natural persons exercising control over this legal person are not of good repute, or the legal person exercising control over this legal person has been subject to criminal liability;

3) there are other important reasons for which the legal person may not be considered to be of good repute.

3. When evaluating professional qualifications and experience of a natural person, the entities provided for in this Law must take into consideration the person’s educational background, the positions held, length of service and other factors which may have an influence on the professional qualifications and experience of the person.

4. When good repute, professional qualifications and experience is evaluated by the supervisory authority, the data about the person’s good repute, professional qualifications or experience shall be submitted in special forms set by the supervisory authority. When verification of the data provided in the forms is needed, the supervisory authority shall have the right to request the person to provide additional documentation and information essential for the evaluation of good repute, professional qualifications and experience as well as the right to refer to the persons specified in Article 203 of this Law for the provision of information. The requirements for the documents submitted for evaluation of regulation, qualification and experience shall be established by the supervisory authority.

CHAPTER II

INSURANCE AND REINSURANCE UNDERTAKINGS OF THE REPUBLIC OF LITHUANIA

SECTION ONE

LICENCE TO ENGAGE IN INSURANCE AND REINSURANCE ACTIVITY

Article 12. Rights Granted by the License to Engage in Insurance and Reinsurance Activity

1. An insurance and reinsurance undertaking shall have the right to engage in insurance and reinsurance activity only subject to a licence to engage in insurance or reinsurance activity issued by the supervisory authority (hereinafter referred to as the “licence to engage in activities”).

2. A licence to engage in activities shall be effective in all the other Member States of the European Economic Area, granting the right to engage in insurance or reinsurance activity through exercising the right of establishment and/or the right to provide services under the conditions specified in Section V of this Chapter.

3. A licence to engage in insurance activity shall be issued to engage in insurance activity of the entire insurance class or several insurance classes belonging to branches of life assurance or non-life insurance, except for the cases when the applicant wishes to engage in insurance activity of only some of the risks belonging to the insurance class (classes).

4. The insurance classes specified in the licence to engage in activities shall cover the risks of compulsory insurance only in the cases where this is indicated in the licence to engage in insurance activity issued. The insurer engaged in compulsory insurance shall be obliged to enter into an insurance contract with the policyholder, except for the cases set out in the legal acts. A refusal to enter into an insurance contract by the insurer may be contested before the court.

5. A licence to engage in reinsurance activity shall be issued for reinsurance of the insurance contracts for insurance classes of life assurance and/or non-life insurance branches.

6. A licence to engage in insurance activity shall grant the right to an insurance undertaking to engage in reinsurance activity.

7. Insurance undertakings may engage in reinsurance activity only in those insurance classes in which they carry out insurance activity following the procedure set out in this Law.

8. A licence to engage in activities shall be issued for an indefinite period of time.

Article 13. Legal Form and Registration of the Insurance and Reinsurance Undertaking Issued with a Licence to engage in activities

1. A licence to engage in activities shall be issued:

1) to a public limited liability company, a private limited liability company or a European company (Societas Europaea) which is being established;

2) to a new public limited liability company, a private limited liability company or a European company (Societas Europaea) which will operate upon the reorganisation of legal persons and is intending to engage in insurance or reinsurance activity;

3) to a public limited liability company, a private limited liability company or a European company (Societas Europaea) which is changing its type of activities into insurance

2. A licence to engage in activities shall be issued only for a particular insurance undertaking and may not be transferred or assigned to another person.

3. An insurance or reinsurance undertaking being established may be registered in the Register of Legal Entities and where a licence to engage in activities is issued not to the undertaking being established, appropriate changes in the Register of Legal Entities may be made only upon issuing the licence to engage in activities.

4. The supervisory authority must inform the Register of Legal Entities about the issuance, suspension or withdrawal of a licence to engage in insurance activity according to the procedure set out in the regulations of the Register of Legal Entities.

5. The manager of the Register of Legal Entities must, within five working days, inform the supervisory authority about registration of the insurance or reinsurance undertaking in the Register of Legal Entities.

6. The documents of incorporation of the insurance or reinsurance undertaking shall become invalid if they are not submitted to the Register of Legal Entities within nine months from the date of their execution.

Article 14. Name of the Insurance Undertaking

1. The name or the combination reflecting the legal form of the company of an insurance undertaking must contain the word “draudimas” (insurance). No other legal person, except for the persons engaged in insurance, reinsurance, insurance or reinsurance mediation activity in accordance with the procedure prescribed in this Law, shall have the right to use in its name this word, save for the exceptions provided for by law.

2. No other legal person shall be entitled to use the combination “draudimo įmonė” (insurance undertaking) in its name, except for the cases provided for in the law.

3. Taking into account the planned territory of activity, the word “draudimas” (insurance) may also be used in the foreign language.

Article 15. Application for Granting a Licence to Engage in Activities

1. Applicants must submit an application to the supervisory authority for a licence to engage in activities.

2. The application shall be accompanied by the following:

1) the articles of association and memorandum of association of the undertaking;

2) a business plan of the insurance or reinsurance undertaking of the contents and form prescribed by the supervisory authority;

3) documents evidencing that the undertaking’s eligible basic own funds to cover the minimum capital requirement are not lower than the absolute floor of the minimum capital requirement set forth in paragraph 4 of Article 40 of this Law. The funds of the organisation funds have not been included in calculation of the minimum capital. The applicants must provide the documents evidencing formation of the minimum capital in cash and data on the sources of such cash;

4) documents evidencing that the undertaking will continue to have eligible own funds available to cover the solvency capital requirement (financial documents, certificates issued by the bank, contracts etc.);

5) documents evidencing that the undertaking will continue to have eligible basic own funds available to cover the minimum capital requirement (financial documents, certificates issued by the bank, contracts etc.);

6) documents evidencing that the undertaking will be able to comply with the requirements for the management system set out in Section Two of this Chapter and other legal acts (procedures, policies, strategy descriptions etc.);

7) information in the form prescribed by the supervisory authority about the controlling persons of the insurance or reinsurance undertaking, the participating undertakings and other persons and shareholders with a qualifying holding. Information shall also be submitted about the members of the controlling legal persons and of the supervisory and management bodies of the participating undertakings;

8) information in the form prescribed by the supervisory authority 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 or reinsurance undertaking;

9) documents certifying the accumulation in cash of the organisational fund of the insurance or reinsurance undertaking, its use and balance;

10) documents certifying the payment in cash for shares of the insurance or reinsurance undertaking being established;

11) information about the sources of the organisational fund and the financial resources used to pay for the shares of the insurance or reinsurance undertaking being established or to form its authorised capital;

12) contracts of independent work concluded on behalf of the insurance or reinsurance undertaking whereby the essential or key functions or performance of activity has been assigned;

13) where the insurance undertaking intends to engage in the insurance class listed in subparagraph 10 of paragraph 3 of Article 7 of this Law (except for insurance against civil liability of carriers), the documents certifying that the insurance undertaking has its representatives with adequate authorisations appointed in every other European Economic Area Member State for settlement of claims (and the name, surname or business name and address of the representative shall be indicated).

3. Where the founder of an insurance or reinsurance undertaking is a legal person, the following must be submitted in addition:

1) a copy of the registration certificate or any other equivalent document of the founder who is a legal person;

2) a set of audited financial statements of the founder who is a legal person 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 being established.

4. Where a legal person or legal persons are reorganised into a new legal person – an insurance undertaking or where a public limited liability company, a private limited liability company or a European company (Societas Europaea) change the type of their activity into insurance or reinsurance activity, the documents listed in subparagraph 10 of paragraph 2 of this Article need not be submitted, however, the following must be submitted in addition:

1) the terms and conditions of reorganisation, the decision on reorganisation or changing of the type of activity of the legal person;

2) a copy of the registration certificate or any other equivalent document of each legal person, a description of their previous activity, a set of audited financial statements for the last year along with an auditor’s opinion;

3) information in the form prescribed by the supervisory authority about the controlling persons of each legal person, the participating undertakings and shareholders with a qualifying holding;

4) documents certifying that the financial resources of the insurance or reinsurance undertaking are not less than the organisational fund and the authorised capital as provided for in this Law as well as the information about the sources of the financial resources;

5) proof of tax payment and debts to creditors of each legal person.

5. Where an insurance or reinsurance undertaking of a third country is the founder of a subsidiary, it must, in addition, submit:

1) a licence to engage in insurance or reinsurance activity or any other equivalent document issued by the supervisory authority of the third country;

2) an authorisation for the establishment of the insurance or reinsurance undertaking in the Republic of Lithuania issued by the supervisory authority of the third country or the information that the supervisory authority of the third country does not object to the establishment of a subsidiary of the insurance or reinsurance undertaking in the Republic of Lithuania.

Article 16. Issuance of a Licence to Engage in Activities

1. Within six months from the submission of the application and all the relevant documents for the issuance of a licence to engage in insurance activity, the supervisory authority shall adopt a decision concerning the issuance of a licence to engage in activities and inform the applicant thereof in writing.

2. The supervisory authority shall refuse to issue a licence to engage in activities where:

1) the documents provided for by this Law or the documents required according to the procedure established by this Law have not been submitted or the submitted documents do not meet the requirements set out in this Law and the legal acts of the supervisory authority;

2) the reputation of the founders of the insurance or reinsurance undertaking and/or the controlling persons, the participating undertakings and persons and the persons directly or indirectly holding the shares of the insurance or reinsurance undertaking is not considered as impeccable and/or their qualification is not inappropriate for ensuring reliable and risk limiting management of the insurance or reinsurance company and/or, in view of the results of their activity, legislative provisions and other significant circumstances, their financial standing is not stable and sound;

3) the members of the supervisory and management bodies of the insurance or reinsurance undertaking, other persons holding managerial positions and persons responsible for risk management, actuarial, compliance assessment and internal audit functions do not meet the requirements set forth in paragraph 5 of Article 22 of this Law;

4) the management system of the insurance or reinsurance company does not satisfy the requirements in Section Two of his Chapter and other legal acts;

5) it may be assumed from the submitted business plan that the interests of the policyholders, the insured persons, the beneficiaries, and the injured third parties will not be properly protected, or evaluation of the business plan of the insurance or reinsurance undertaking suggests there is a reasonable ground to assume that the obligations of the insurance or reinsurance undertaking arising from insurance contracts will not be met on a continuous basis or the business plan of the insurance or reinsurance undertaking does not meet the requirements of the legal acts;

6) the authorised capital has not been fully paid-up;

7) the organisational fund and the authorised capital of the insurance undertaking have been paid up in cash of illegal origin;

8) the structure of the insurance or reinsurance undertaking or a group of insurance and/or reinsurance undertakings (hereinafter referred to as the “group”) to which the insurance or reinsurance undertaking belongs or other close links with natural or legal persons make effective supervision impossible;

9) legal acts of a third country which are applicable to members of a group of undertakings to which the insurance or reinsurance undertaking belongs or to natural or legal persons having close links with the insurance or reinsurance undertaking, or difficulties in the implementation of these legal acts make effective supervision impossible

10) the insurance or reinsurance undertaking is a successor to the rights and duties of a legal person or legal persons the implementation of which would violate the provisions of paragraph 2 of Article 3 of this Law and/or would endanger the interests of the policyholders, the insured persons, the beneficiaries and the injured third parties;

11) the members of the supervisory and management bodies of the insurance or reinsurance undertaking, other persons holding managerial positions and persons responsible for risk management, actuarial, internal audit and compliance assessment functions hold positions which they are prohibited to hold according to this Law and other laws;

12) the requirement specified in subparagraphs 3, 4 and 5 of paragraph 2 of Article 15 of this Law has not been complied with or the source of the financial resources of the guarantee fund is illegal.

3. The supervisory authority shall not be entitled to refuse to issue a licence to engage in activities taking into account the economic market needs.

4. When there is a suspicion that the authorised capital, the organisational fund and/or the minimum capital requirement may be paid up in cash of illegal origin, the supervisory authority must apply to the State Security Department of the Republic of Lithuania (hereinafter referred to as the “State Security Department”) and other competent authorities seeking a conclusion about the sources of the financial resources. In this case, the time periods specified in paragraph 1 of this Article and paragraph 6 of Article 13 of this Law shall be suspended and shall be resumed upon receipt of the conclusion from the State Security Department or other competent authorities.

5. The form of the licence to engage in activities shall be established by the supervisory authority.

6. The rules for licensing of insurance and reinsurance activity shall be approved by the supervisory authority.

Article 17. Consultation with Other Institutions

1. Prior to issuing the licence to engage in insurance or reinsurance activity, the supervisory authority must consult the supervisory authority of another European Economic Area Member State about the circumstances significant when adopting a decision on the issuance of the licence to engage in insurance activity, where the insurance or reinsurance undertaking is:

1) a subsidiary of an insurance undertaking of any other Member State of the European Economic Area;

2) a subsidiary of the parent undertaking of an insurance or reinsurance undertaking of any other Member State of the European Economic Area;

3) under the control of the same person who controls the insurance or reinsurance undertaking of any other Member State of the European Economic Area.

2. Prior to issuing the licence to engage in insurance activity, the supervisory authority must consult the supervisory authority of another Member State of the European Economic Area supervising the relevant financial sector, where the insurance undertaking is:

1) a subsidiary of a credit institution, a financial brokerage firm or a management company of a Member State of the European Economic Area;

2) a subsidiary of the parent undertaking of a credit institution, a financial brokerage firm or a management company of a Member State of the European Economic Area;

3) under the control of the same person who controls the credit institution or the financial brokerage firm or the management company of another European Economic Area Member State.

3. In evaluating the good repute of the persons controlling the insurance or reinsurance undertaking as well as the good repute, professional qualifications and experience of the members of its supervisory and management bodies, other persons holding managerial positions and persons responsible for risk management, actuarial, compliance assessment and internal audit functions shall consult the institutions referred to in paragraphs 1 and 2 of this Article about the circumstances significant for the evaluation of good repute, professional qualifications and experience and must provide other institutions with the information about these persons significant for the performance of functions of the above-mentioned institutions.

Article 18. Information about Changes

The insurance or reinsurance undertaking must inform the supervisory authority, in accordance with the licensing procedure established by it, about changes in the information provided in the documentation submitted to the supervisory authority for issuance of the licence to engage in insurance or reinsurance activity.

Article 19. Change of a Licence to Engage in Activities

1. The insurance undertaking intending to engage in insurance activity of yet another insurance class or classes belonging to the same insurance branch or to expand the current insurance activity to insurance of all the risks of the same insurance class must furnish the supervisory authority with the business plan provided for in subparagraph 2 of paragraph 2 of Article 15 of this Law; furthermore, it must provide documents evidencing that the insurance undertaking has eligible own funds to cover the solvency capital requirement and the minimum capital requirement provided for in Articles 37 and 40 hereof.

2. The insurance undertaking engaged in life assurance activity and intending to engage in activities of the insurance classes of the non-life insurance branch provided for in subparagraphs 1 and 2 of paragraph 3 of Article 7 of this Law or the insurance undertaking engaged in activities of non-life assurance classes set forth in subparagraphs 1 and 2 of paragraph 3 of Article 7 of this Law and intending to engage in activities of the insurance classes of the life assurance branch referred to in paragraph 2 of Article 7 of this Law must furnish the supervisory authority with documents evidencing that the insurance undertaking’s eligible basic own funds to cover the minimum capital requirement meet the absolute floor of the minimum capital requirement of life assurance undertakings and the absolute floor of the minimum capital requirement of non-life insurance undertakings as provided for in subparagraph 5 of paragraph 4 of Article 40 of this Law and undertake to further perform the afore-mentioned minimum financial obligations.

Amendments to the paragraph of this Article:

No XII-1603, 9 April 2015, published in the Register of Legal Acts (TAR), 17 April 2015, ID code 2015-05897

3. In the cases provided for in paragraphs 1 and 2 herein above and in case where the insurance undertaking intends to fully or partially refuse the insurance activity of risks of the insurance class must apply to the supervisory authority for the changes in the licence to engage in insurance activity in accordance with the procedure prescribed in the licencing rules approved by the supervisory authority.

4. The reinsurance undertaking intending to engage in activities of reinsurance of the insurance contracts concerning the insurance classes belonging to another insurance branch or partially refuse the activity of reinsurance of risks must apply to the supervisory authority for the changes in the licence to engage in reinsurance activity in accordance with the procedure prescribed in the licencing rules approved by the supervisory authority.

5. The supervisory authority shall make a decision of changes in the licence within one month from the date of submission of the documents provided for in the licencing rules.

Article 20. Suspension and Withdrawal of a Licence to Engage in Activities

1. Where there are grounds specified in paragraph 1 of Article 205 of this Law, the supervisory authority shall have the right to suspend an operating license until the grounds for the suspension of the licence to engage in insurance activity exist.

2. The supervisory authority shall have the right to withdraw the licence to engage in activities where:

1) the insurance or reinsurance undertaking beached the conditions of insurance or reinsurance activity;

2) the insurance or reinsurance undertaken has breached the legal acts governing its activities;

3) the insurance or reinsurance undertaking has applied for revocation of the licence to engage in activities;

4) the insurance or reinsurance undertaking does not commence carrying out of insurance activity or related activities within 12 months from the issuance of the licence to engage in activities;

5) the insurance or reinsurance undertaking has not been engaged in activity for more than six months;

6) in the case specified in paragraph 6 of Article 13 of this Law.

3. The supervisory authority shall also withdraw the licence if the insurance or reinsurance undertaking has failed to comply with the minimum capital requirements and the supervisory authority believes that the short-term plan for restoration of financial standing provided for in Article 46 of this Law is inappropriate or the insurance and reinsurance company has failed to observe the approved short-term plan for restoration of financial standing within 3 months from the moment of noticing that the minimum capital requirement has not been complied with.

4. The supervisory authority shall notify the supervisory authorities of other Member States of the European Economic Area of its decision on withdrawal of the licence to engage in activities.

5. Having withdrawn the licence to engage in activities, the supervisory authority must take all possible measures to protect the interests of the policyholders, the insured persons, beneficiaries and the third injured parties provided for in this Law and, having notified the supervisory authority of another Member State of the European Economic Area within which the insurance risk is situated or the supervisory authority of the European Economic Area Member State of the commitment, it shall have the right to seize the assets of the insurance or reinsurance undertaking or request that the supervisory authority of another Member State of the European Economic Area imposed analogous restrictions on the assets of the insurance and reinsurance undertaking specified by the supervisory authority.

6. The decision to withdraw the licence to engage in insurance activity must be thoroughly substantiated. The supervisory institution must, without delay, inform the insurance or reinsurance undertaking about the adopted decision and the reasons for it in writing.

7. At the request of the insurance or reinsurance undertaking filed in accordance with the procedure prescribed in Article 19 of this Law, the supervisory authority shall be entitled to partially withdraw the licence.

SECTION TWO

MANAGEMENT OF AN INSURANCE AND REINSURANCE UNDERTAKING

Article 21. Bodies of the insurance or reinsurance undertaking

1. An insurance or reinsurance undertaking must have the following bodies: the General Meeting of Shareholders, the Board and the manager of the undertaking.

2. The Supervisory Board may be formed in an insurance ore reinsurance undertaking.

3. The management bodies of an insurance or reinsurance undertaking shall be the Board and the manager of the company.

4. The procedure for setting up and work of the bodies of an insurance or reinsurance undertaking, the competence, functions and responsibility thereof shall be set forth in the articles of association of the company, the Civil Code, this Law and the Republic of Lithuania Law on Companies (hereinafter referred to as the “Law on Companies”) unless this Law provides for otherwise.

Article 22. General Provisions Concerning Management

1. The management bodies of an insurance or reinsurance undereating shall be responsible for compliance with the provisions of the legal acts.

2. An effective system of governance which provides for sound and prudent management of the business shall be implemented in an insurance or reinsurance undertaking. The afore-mentioned system shall at least include an adequate transparent organisational structure with a clear allocation and appropriate segregation of responsibilities and an effective system for ensuring the transmission of information. The system of governance shall be subject to regular internal review. The system of governance shall be proportionate to the nature, scale and complexity of the operations of the insurance or reinsurance undertaking. The system of governance of an insurance or reinsurance undertaking must include the following main functions: risk management, actuarial, internal audit and compliance assessment.

3. Insurance and reinsurance undertakings shall have written policies in relation to at least risk management, internal control, internal audit and, where relevant, outsourcing. The descriptions of the afore-mentioned areas must be approved by the Supervisory Board or the Board of the insurance or reinsurance undertaking and be amended in view of any significant change in the system or area concerned. The descriptions of the policies referred to in this paragraph shall be reviewed at least annually. The insurance or reinsurance undertaking must ensure implementation of the afore-mentioned policies.

4. An insurance and reinsurance undertaking shall be obliged to ensure continuous activity of the undertaking, to this end an activity continuity plan must be in place in the undertaking and implementation of the plan must be ensured.

5. An insurance or reinsurance undertaking must ensure that the members of the supervisory and management bodies of the insurance undertaking and other persons holding the management positions or fulfilling other key functions always were of good repute and honest and their professional qualification, knowledge and experience must be appropriate for ensuring reliable and prudent management. An insurance and reinsurance undertaking shall notify the supervisory authority of any changes in relation to the identity of the members of the supervisory and management bodies of the insurance undertaking and other persons holding the management positions or fulfilling other key functions in accordance with the procedure prescribed by the latter and provide it with all information necessary for assessing if the new persons appointed as managers of the undertaking are competent and appropriate. An insurance and reinsurance undertaking shall notify the supervisory authority if such persons were replaced with other persons because the persons did not meet the requirements set out in this paragraph any longer.

Article 23. Acquisition and Transfer of Directly or Indirectly Held Shares of the Insurance or Reinsurance Undertaking

1. Any natural or legal person or persons acting in concert (hereinafter in this Article referred to as the “acquirer”) who have taken a decision either to acquire, directly or indirectly, a qualifying holding or to further increase such a qualifying holding to the size equal to 20%, 30% or 50% or more of the authorised capital of the insurance or reinsurance undertaking, or to increase the number of voting rights held at the general shareholders’ meeting to the proportion equal to 20%, 30% or 50% or more of all the voting rights, or where the insurance or reinsurance undertaking which has directly or indirectly acquired shares will become a subsidiary of the person who has acquired shares (hereinafter in this Article referred to as “proposed acquisition”), must obtain a decision from the supervisory institution not to oppose the proposed acquisition. The acquirer must notify the supervisory authority in writing about the proposed acquisition, indicating the size of the intended qualifying holding, and submit the documents and information specified in the list referred to in paragraph 3 of this Article.

2. Any natural or legal person who has taken a decision to dispose, directly or indirectly, of a qualifying holding or to reduce, directly or indirectly, the size of the qualifying holding so that after the disposal its size would be less than 20%, 30% or 50% of the authorised capital of the insurance or reinsurance undertaking or it would reduce the proportion of the voting rights held at the general shareholders’ meeting so that after the direct or indirect disposal of the qualifying holding it would be less than 20%, 30% or 50% of all the voting rights, or where following the disposal of directly or indirectly held shares, the insurance or reinsurance undertaking would cease to be a subsidiary of the person disposing of the shares, must notify the supervisory authority thereof in writing, indicating the size of the intended qualifying holding.

3. The supervisory authority shall establish a list of documents and data to be submitted together with the notification of the proposed acquisition and required for the assessment of the acquirer and the proposed acquisition. The list may not contain the documents and data which are not required for the assessment of the acquirer and the proposed acquisition according to the criteria established in paragraph 8 of this Article. The documents and data requested by the supervisory authority must be proportionate to and adjusted for the acquirer and the proposed acquisition.

4. Having received the notification, documents and data required in accordance with paragraph 1 of this Article necessary for the assessment of the acquirer and the proposed acquisition, as well as additional documents and information referred to in paragraph 6 of this Article, required for the assessment, the supervisory authority shall, forthwith and not later than within two working days, confirm the receipt thereof and inform the acquirer in writing about the date of the expiry of the assessment period.

5. Having received the notification, documents and data required in accordance with paragraph 1 of this Article necessary for the assessment of the acquirer and the proposed acquisition, as well as additional documents and information referred to in paragraph 6 of this Article, required for the assessment, the supervisory authority shall, forthwith and not later than within two working days, confirm the receipt thereof and inform the acquirer in writing about the date of the expiry of the assessment period.

6. The supervisory authority may, during the assessment period, if necessary, and no later than on the fiftieth working day of the assessment period, request any further documents and data necessary to complete the assessment. Such request shall be made in writing and shall specify the additional documents and data needed. For the period between the date of request to submit additional documents and data by the supervisory authority and the receipt of a response thereto by the acquirer, the assessment period shall be interrupted. The interruption of the assessment period may not exceed 20 working days. Moreover, the supervisory authority shall have the right to request further completion or clarification of the documents and data at its own discretion, but this may not result in an interruption of the assessment period.

7. The supervisory authority shall have the right to extend the interruption of the assessment period as indicated in paragraph 6 of this Article for a period not exceeding 30 working days where the acquirer is:

1) situated or regulated in a third country;

2) a natural or legal person not subject to supervision under legal acts of the Republic of Lithuania or other European Economic Area Member States regulating the activities of credit institutions, insurance undertakings, reinsurance undertakings, financial brokerage firms or management companies of harmonised collective investment undertakings.

8. In assessing the submitted notification, referred to in paragraph 1 of this Article, of the proposed acquisition and the documents and data necessary for the assessment of the acquirer and the proposed acquisition as well as the submitted additional documents and data, the supervisory authority shall, in order to ensure the sound and prudential management of an insurance undertaking the qualifying holding whereof is intended to be acquired, and having regard to the likely influence of the acquirer on the insurance or reinsurance undertaking, appraise the suitability of the acquirer and the financial soundness of the proposed acquisition against all of the following criteria:

1) the good repute of the acquirer;

2) the good repute and experience of any persons who will direct the business of the insurance or reinsurance undertaking as a result of the proposed acquisition;

3) the financial standing of the acquirer is stable and sound, in particular in relation to the type of business pursued and envisaged by the insurance or reinsurance undertaking in respect of which the acquisition is proposed;

4) whether the insurance or reinsurance undertaking will be able to comply and continue to comply with the prudential requirements set forth in this Law and other legal acts, in particular, whether the group of which it will become a part has a structure that makes it possible to exercise effective supervision, effectively exchange information among the supervisory authority and supervisory authorities of other European Economic Area Member States and determine the allocation of responsibilities among the supervisory authority and supervisory authorities of other European Economic Area Member States;

5) whether there are grounds to suspect that, in connection with the proposed acquisition, the activities of money laundering or terrorist financing as defined by the Republic of Lithuania Law on Prevention of Money Laundering and Terrorist Financing (hereinafter referred to as the “Law on Prevention of Money Laundering and Terrorist Financing”) are being or have been carried out or attempted, or that the proposed acquisition could increase the risk thereof.

9. The supervisory authority shall have the right to oppose the proposed acquisition where:

1) the documents established by the supervisory authority or required in accordance with this Law and other legal acts of the Republic of Lithuania have not been submitted, or the documents submitted are not in compliance with the requirements provided for in this Law and the legal acts of the supervisory authority.

2) the acquirer or proposed acquisition is assessed as unsuitable or financially unsound based on the criteria specified in paragraph 8 of this Article.

10. If, having completed the assessment of the acquirer and proposed acquisition, the supervisory authority decides to oppose the proposed acquisition, it shall, within two working days and not exceeding the assessment period, inform the acquirer thereof in writing, specifying the reasons for the decision. Moreover, the decision shall indicate all opinions or reservations received from the supervisory authorities of other European Economic Area Member States supervising the relevant financial sector, following consultation according to paragraphs 14 and 15 of this Article. The supervisory authority shall have the right, at the request of the acquirer or on its own initiative, to publish information about the reasons for taking the decision to oppose the proposed acquisition and the actual decision on its website.

11. If the supervisory authority takes a decision not to oppose the proposed acquisition prior to expiry of the assessment period, it must notify the acquirer thereof in writing within two working days. Where the supervisory authority does not declare its opposition to the proposed acquisition during the assessment period, it shall be held that the supervisory authority does not oppose the proposed acquisition.

12. The supervisory institution may neither impose any prior conditions in respect of the size of the qualifying holding that must be acquired nor examine the proposed acquisition in terms of the economic needs of the market.

13. Where two or more proposed acquisitions have been notified to the supervisory authority regarding the same insurance undertaking, the latter shall consider all the notifications received in accordance with the same procedure treating the acquirers in a non-discriminatory manner.

14. In carrying out the assessment, the supervisory authority must take into account the opinion of the supervisory authority of another European Economic Area Member State supervising the relevant financial sector if the proposed acquirer is one of the following:

1) an insurance or reinsurance undertaking of another European Economic Area Member State or a credit institution, a financial brokerage firm or management company of harmonised collective investment undertakings of another European Economic Area Member State or the Republic of Lithuania;

2) a parent undertaking of an insurance or reinsurance undertaking of another European Economic Area Member State or a credit institution, a financial brokerage firm or management company of harmonised collective investment undertakings of another European Economic Area Member State or the Republic of Lithuania;

3) a natural or legal person controlling an insurance or reinsurance undertaking of another European Economic Area Member State or a credit institution, a financial brokerage firm or management company of harmonised collective investment undertakings of another European Economic Area Member State or the Republic of Lithuania and where following the direct or indirect acquisition of a qualifying holding the insurance undertaking would become a subsidiary or an undertaking controlled by this person.

15. The supervisory authority shall, in application for the opinion referred to in paragraph 14 of this Article, shall be entitled to request for all information which is relevant for the assessment of suitability of the acquirer and the financial soundness of the proposed acquisition. The supervisory authority shall, on its own initiative or upon the request, provide information relevant for the assessment carried out by the supervisory authority of another European Economic Area Member State.

16. When taking a decision not to oppose the proposed acquisition, the supervisory authority shall have the right to fix a maximum period for concluding the proposed acquisition and to extend it where appropriate.

17. Transactions under which persons directly or indirectly acquire shares of an insurance or reinsurance undertaking failing to fulfil the obligation set out in paragraph 1 of this Article or ignoring the decision of the supervisory authority specified in paragraph 10 of this Article shall be null and void and the acquirers shall not acquire voting rights. All claims relating to the consequences of such transactions, including the claim relating to acquisition of voting rights, shall be heard in court of the Republic of Lithuania in accordance with the procedure laid down by laws of the Republic of Lithuania according to the location of the registered office of the insurance undertaking.

18. Insurance or reinsurance undertakings must notify the supervisory authority in accordance with the procedure established by the latter of any change of persons directly or indirectly holding shares of the insurance undertakings.

19. Where it is suspected that the directly or indirectly held shares of an insurance or reinsurance undertaking may have been paid up in cash of illegal origin, the supervisory authority must, in accordance with the procedure set forth by the Law on Prevention of Money Laundering and Terrorist Financing, apply to the State Security Department or another supervisory authority seeking a conclusion about the sources of these financial resources. Upon the request of the supervisory authority, the State Security Department and another supervisory authority, other state and municipal institutions also other persons must forthwith supply the available information on the acquirer, members and heads thereof, the financial standing, activities, discovered infringements of laws and other legal acts, conclusions of conducted verifications and examinations as well as other information required by the supervisory authority to carry out an assessment of the acquirer and the proposed acquisition.

20. If one founder or several founders of the insurance or reinsurance undertaking decides to transfer the shares to other persons before obtaining a licence to engage in activities, such transfer of directly or indirectly held shares of the undertaking shall be subject to the provisions of this Article and the time limit referred to in paragraph 1 of Article 16 of this Law shall be extended by the period provided for in paragraph 5 of this Article.

Article 24. Supervisory Board

1. If a supervisory board is formed at an insurance or reinsurance undertaking, the insurance undertaking must, after the election of members and the chairman of the supervisory board, within 10 days furnish information about these persons to the supervisory authority in the form established by the latter.

2. The supervisory board of an insurance or reinsurance undertaking shall, in addition to the functions prescribed by other laws or articles of association, appoint and recall the person responsible for implementation of the internal audit functions and establish methodological instructions for his activity. Where the supervisory board is not formed, these functions shall be performed by the board of the insurance or reinsurance undertaking.

Article 25. Board

1. Before members and the chairman of the board of the insurance or reinsurance undertaking are elected, the insurance undertaking must submit information to the supervisory authority in the established form and obtain approval of the supervisory authority for the candidates applying for the said positions. The supervisory authority shall adopt the decision on the approval of the candidates within 30 working days from the date of receipt of information of the prescribed form.

2. In addition to other functions specified in laws or articles of associations, the board shall perform the following functions:

1) establish the strategic objectives of the insurance or reinsurance undertaking, measures aimed at achieving these objectives and the procedure for monitoring of the measures and assessing the results, ensure that the undertaking’s activity was based on the business plan;

2) establish a risk management strategy of the insurance or reinsurance undertaking;

3) establish the procedure for the conclusion of insurance contracts of insurance undertakings which shall also be applicable to tied insurance intermediaries, paying particular attention to the disclosure of information essential in concluding an insurance contract to the policyholders, respect for and protection of interests of each policyholder, and ensure that insurance policy conditions are in line with the legislative provisions;

4) establish the procedure for reporting about insured events and events which could be recognised as insured events and the procedure for accounting of the results of investigation of these reports as well as the rules for investigating insured events and events which could be recognised as insured events;

5) establish the procedure for examination of complaints submitted by the policyholders, insured persons, beneficiaries and injured third parties as well as the procedure for providing responses to applicants; a description of this procedure must be published on the website of the insurance undertaking and provided upon request of any person concerned where the person concerned bears the costs of such provision;

6) having verified the repute, professional qualifications and experience, appoint and recall the manager, persons responsible for risk management, actuarial, compliance assessment functions and the persons holding the management positions;

7) establish the procedure for provision of information of the insurance or reinsurance undertaking to the public and the supervisory authority and ensure correctness of the provided information.

3. Before the manager of the insurance or reinsurance undertaking is elected, the board must submit to the supervisory authority information in the form established by the latter and obtain approval of the supervisory authority for the candidate applying for the position of the manager. The supervisory authority shall adopt the decision on the approval of the candidate applying for the position of the manager within 30 working days from the date of receipt of information of the prescribed form.

Article 26. Risk Management

1. Insurance and reinsurance undertakings shall have in place an effective risk-management system comprising strategies, processes and reporting procedures necessary to identify, measure, monitor, manage and report, on a continuous basis the risks, at an individual and at an aggregated level, to which they are or could be exposed, and their interdependencies.

2. That risk-management system shall be well integrated into the organisational structure and in the decision-making processes of the insurance or reinsurance undertaking. The members of the supervisory and management bodies, persons holding the management positions or fulfilling other key functions must be properly included in the risk management system.

3. The risk management system shall cover the risks referred to in paragraph 5 of Article 37 of this Law as well as the risks which are not or not fully included in the calculation of the solvency capital requirement.

4. The risk-management system shall cover at least the following areas which must be described in the risk management policy description:

1) underwriting and reserving;

2) asset-liability management;

3) investment, in particular derivatives and similar commitments;

4) liquidity and concentration risk management;

5) operational risk management;

6) reinsurance and other risk-mitigation techniques.

5. An insurance or reinsurance undertaking which applies the risk-free interest rate curve adjustment correction (hereinafter referred to as the “adjustment correction”) or the risk-free interest rate curve variation correction (hereinafter referred to as the “variation correction”) which shall be calculated in accordance with the procedure for calculation of insurance and/or reinsurance technical provisions (hereinafter referred to as the “technical provisions”) established by the supervisory authority, draw up a liquidity plan providing for the cash flows in relation to the assets and liabilities in respect of which such corrections are applied.

6. In management of assets and liabilities an insurance and reinsurance undertaking shall regularly, but at least once a year shall carry out the following actions:

1) assessment of the sensitivity of technical provisions and eligible own funds to cover the solvency capital requirement and the minimum capital requirement to the assumptions on which the risk-free interest rate curve extrapolation applied in accordance with the procedure for calculation of the technical provisions established by the supervisory authority is based;

2) in case of application of the adjustment correction, assessment of the sensitivity of technical provisions and eligible own funds to cover the solvency capital requirement and the minimum capital requirement to the assumptions on which calculation of the adjustment correction including calculation of the fundamental difference is based, the impact of the forced sales of assets on the eligible own funds to cover the solvency capital requirement and the minimum capital requirement, the sensitivity of the technical provisions and eligible own funds to cover the solvency capital requirement and the minimum capital requirement to the changes in the composition of the assigned portfolio of assets and the impact of reduction of the adjustment correction to zero;

3) in case of application of the variation correction, assessment of the technical provisions and eligible own funds to cover the solvency capital requirement and the minimum capital requirement to the assumptions on which calculation of the variation correction is based, the impact of the forced sales of assets on the eligible own funds to cover the solvency capital requirement and the minimum capital requirement and the impact of reduction of the variation correction to the zero.

7. An insurance or reinsurance undertaking shall present the results of the assessments referred to in paragraph 6 of this Article to the supervisory authority in its annual report.

8. If reduction of the adjustment correction o variation correction to zero results in non-compliance with the solvency capital requirement, the insurance and reinsurance undertaking shall also furnish the supervisory authority with results of the analysis of measures that could be applied in such circumstances with a view to restoring the level of eligible own funds to cover the solvency capital requirement and the minimum capital requirement or reduce the activity risk in order to satisfy the solvency capital requirement.

9. In case of application of the variation correction, the written risk management policy description must cover the policy of application of the criteria on the basis of which the variation correction is applied.

10. An insurance or reinsurance undertaking which refers to the credit risk assessment results provided by the external credit assessment institution, i.e. credit rating agency registered or certified in accordance with Regulation (EC) No 1060/2009 of the European Parliament and of the Council of 16 September 2009 on credit rating agencies (OJ 2009 L 302/1) in calculation of the technical provisions and the solvency capital requirement assessment or, where this regulation is not applicable, the central bank establishing the credit ratings must avoid automatic application of external assessment results and, where possible, apply the results of other assessments, verify if the external credit risk assessment results are appropriate.

11. The investment risk must be managed so that the undertaking satisfied the requirements set forth in Article 42 of this Law and the legal acts provided for in the legal acts of the supervisory authority and other legal acts.

12. For insurance and reinsurance undertakings using the approved partial or full internal model, the risk-management function shall cover the following additional tasks:

1) to design and implement the internal model;

2) to test and validate the internal model;

3) to document the internal model and any subsequent changes made to it;

4) to analyse the performance of the internal model and to produce summary reports thereof;

5) to inform the administrative, management or supervisory body about the performance of the internal model, suggesting areas needing improvement, and up-dating that body on the status of efforts to improve previously identified weaknesses.

13. The risk management system shall cover own-risk and solvency assessment.

14. When assessing own risk and solvency an insurance or reinsurance undertaking shall be obliged to do the following:

1) calculate the overall capital needs taking into account the specific risk profile of the undertaking, approved risk tolerance limits and the strategy of the undertaking laid down in the business plan;

2) established if the compliance with the requirements for solvency capital, minimum capital and technical provisions set forth in the legal acts is ensured on a continuous basis;

3) establish if the risk profile of the undertaking concerned significantly deviates from the assumptions underlying the solvency capital requirement calculated with the standard formula, with its partial or full internal model.

15. For the purposes of subparagraph 1 of paragraph 14 of this Law, the insurance or reinsurance undertaking concerned shall have in place processes which are proportionate to the nature, scale and complexity of the risks inherent in its business and which enable it to properly identify and assess the risks it faces in the short and long term and to which it is or could be exposed. The insurance or reinsurance undertaking shall demonstrate the methods used in that assessment.

16. An insurance or reinsurance undertaking applying the adjustment correction, the variation correction or the measures of the transitional period to risk-free interest rates or technical provisions shall carry out the assessment provided for in subparagraph 2 of paragraph 14 of this Article taking or not taking into account such corrections or the measures of the transitional period.

17. In case of carrying out the assessment according to subparagraph 3 of paragraph 14 of this Article, when an internal model is used, an insurance or reinsurance undertaking shall recalibrate the internal risk parameters according to the requirements for calibration of the solvency capital requirement.

18. The own-risk and solvency assessment shall be an integral part of the business strategy. When making strategic decisions an insurance or reinsurance undertaking must take into account the results of own risk and solvency assessment.

19. An insurance and reinsurance undertaking shall perform the assessment referred to in paragraph 14 of this Article regularly and without any delay following any significant change in their risk profile. The insurance and reinsurance undertakings shall inform the supervisory authority of the results of each own-risk and solvency assessment.

20. The own-risk and solvency assessment shall not serve to calculate the solvency capital requirement.

21. Fulfilment of the risk management function in an insurance or reinsurance undertaking shall be organised so that the risk management system was properly implemented.

22. An insurance or reinsurance undertaking shall appoint a person responsible for implementation of the risk management function. The person’s functions, rights, duties and responsibility shall be established in the internal legal acts of the insurance or reinsurance undertaking, the (outsourcing) contract between the insurance or reinsurance undertaking and the service provider if a third party is contracted for fulfilment of such functions.

Amendments to the paragraph of this Article:

No XII-1603, 9 April 2015, published in the Register of Legal Acts (TAR), 17 April 2015, ID code 2015-05897

Article 27. Actuarial Function

1. Insurance and reinsurance undertakings shall provide for an effective actuarial function covering the following:

1) coordination of the calculation of technical provisions;

2) ensuring the appropriateness of the methodologies and underlying models used as well as the assumptions made in the calculation of technical provisions;

3) assessment of the sufficiency and quality of the data used in the calculation of technical provisions;

4) comparison of best estimates against experience;

5) informing the board of the insurance or reinsurance undertaking of the reliability and adequacy of the calculation of technical provisions;

6) ensuring application of the appropriate methods of approximation if data of proper quality is not sufficient;

7) assessment of the overall underwriting policy;

8) assessment of the adequacy of reinsurance arrangements;

9) contribution to the effective implementation of the risk-management system, in particular with respect to the risk modelling underlying the calculation of the solvency capital and minimum capital requirements and to the assessment of own risk and solvency of the insurance or reinsurance undertaking.

Amendments to the paragraph of this Article:

No XII-1603, 9 April 2015, published in the Register of Legal Acts (TAR), 17 April 2015, ID code 2015-05897

2. An insurance or reinsurance undertaking shall appoint a person responsible for implementation of the actuarial function. When assessing the qualification and experience of the person implementing the actuarial function it must be taken into account if the person to be appointed has knowledge of actuarial and financial mathematics, commensurate with the nature, scale and complexity of the risks inherent in the business of the insurance or reinsurance undertaking, and if the person is able to demonstrate his relevant professional experience. If a third party is involved for fulfilment of the actuarial function, the afore-mentioned requirements shall be applicable to the employee of the third party to whom fulfilment of the actuarial function of the insurance or reinsurance undertaking has been assigned.

3. Other rights, duties and responsibility of the person fulfilling the actuarial function of the insurance undertaking shall be established in the internal legal acts of the insurance or reinsurance undertaking or the (outsourcing) contract between the insurance or reinsurance undertaking and the service provider if a third party is involved for fulfilment of such functions.

Article 28. Internal Control and Compliance Assessment

1. Insurance and reinsurance undertakings shall implement an effective internal activity control system. The internal control system shall at least include administrative and accounting procedures, an internal control framework, appropriate reporting arrangements at all levels of the undertaking and a compliance function.

2. The compliance assessment function shall include the following:

1) assessment of compliance with and implementation of the legal acts, articles of association of the insurance or reinsurance undertaking, decisions of the supervisory board and board of the undertaking, orders of the manager and other internal legal acts and advices to the board on the issues concerning compliance with this Law and other legal acts adopted under Directive 2009/138/EC of the European Parliament and of the Council of 25 November 2009 on the taking-up and pursuit of the business of Insurance and Reinsurance (Solvency II) (hereinafter referred to as the “Directive 2009/138/EC of the European Parliament and of the Council”);

2) monitoring of amendments to the legal acts and assessment of the possible impact thereof on the insurance or reinsurance undertaking, identification and assessment of the compliance risk.

3. An insurance or reinsurance undertaking shall appoint a person responsible for implementation of the compliance assessment function. The functions, rights, duties and responsibility of the person responsible for compliance assessment shall be established in the internal legal acts of the insurance or reinsurance undertaking, the (outsourcing) contract between the insurance or reinsurance undertaking and the service provider if the services of a third party are used for fulfilment of such functions.

Article 29. Internal Audit

1. Insurance and reinsurance undertakings shall provide for an effective internal audit function. The internal audit function shall cover inspection and assessment of the adequacy and effectiveness of the internal control system and other elements of the system of governance of the insurance or reinsurance undertaking.

2. An insurance or reinsurance undertaking shall appoint a person responsible for implementation of the internal audit function. The functions, rights, duties and responsibility of the person responsible for internal audit shall be established in the internal legal acts of the insurance or reinsurance undertaking, the (outsourcing) contract between the insurance or reinsurance undertaking and the service provider if the services of a third party are used for fulfilment of such functions.

3. Any findings and recommendations of the internal audit shall be reported to the supervisory board which shall determine what actions are to be taken with respect to each of the internal audit findings and recommendations and shall ensure that those actions are carried out.

4. The person fulfilling the internal function shall be accountable only to the supervisory board of the insurance or reinsurance undertaking. The internal audit function shall be objective and independent from the operational functions.

Article 30. Outsourcing

1. An insurance or reinsurance undertaking cannot outsource essential or key functions or activities to any third party where this leads to any of the following:

1) materially impairing the quality of the system of governance of the undertaking concerned;

2) unduly increasing the operational risk;

3) impairing the ability of the supervisory authority to carry out supervision of the insurance or reinsurance undertaking;

4) infringement of the interests of the policyholders, the insured persons, and beneficiaries.

2. An insurance or reinsurance undertaking must ensure that the involved third persons cooperated with the supervisory authority of the insurance or reinsurance undertaking and that the supervisory authority had effective access to the business premises of such persons and the outsourcing contract provided the right of the insurance or reinsurance undertaking, the auditors and the supervisory authority thereof to obtain all necessary information in relation to the activities carried out by them under the outsourcing contract from the involved third parties. Prior to concluding or amending an outsourcing contract, an insurance or reinsurance undertaking shall notify the contracting authority.

3. An insurance or reinsurance undertaking shall be liable for any breaches of the legal acts governing the activities of the insurance or reinsurance undertaking despite the concluded contracts transferring performance of any essential or important function or activities.

4. The supervisory authority shall be entitled to request that the supervisory authority of another European Economic Area Member State inspected the person of the other European Economic Area Member State involved by the insurance or reinsurance undertaking. Having notified the supervisory authority of another Member State of the European Economic Area, the supervisory authority shall be entitled to carry out such inspection by itself. The supervisory authority shall be entitled to apply to the European Insurance and Occupational Pensions Authority (EIOPA) for assistance in accordance with Article 19 of Regulation (EU) No 1094/2010 of the European Parliament and of the Council of 24 November 2010 establishing a European Supervisory Authority (European Insurance and Occupational Pensions Authority), amending Decision No 716/2009/EC and repealing Commission Decision 2009/79/EC (OJ 2010 L 331/48) (hereinafter referred to as the “Regulation (EU) No 1094/2010”) where the supervisory authority is not allowed to exercise the right to carry out an inspection.

Amendments to the paragraph of this Article:

No XII-1603, 9 April 2015, published in the Register of Legal Acts (TAR), 17 April 2015, ID code 2015-05897

5. Having notified the supervisory authority, the supervisory authority of another Member State of the European Economic Area shall be entitled to carry out an inspection of the person involved by the person involved by the insurance or reinsurance undertaking of another Member State of the European Economic Area in the Republic of Lithuania by itself or through the involved person.

6. Having received a request to inspect the person involved by the insurance or reinsurance undertaking of the Member State of the European Economic Area from the supervisory of another Member State of the European Economic Area shall carry out an inspection by itself or involve another person for carrying out such inspection.

Article 31. Restrictions of the Conflict of Interests

1. The manager of an insurance or reinsurance undertaking may not perform the functions of a member of the supervisory board and the functions assigned to the employees or structural units of the insurance or reinsurance undertaking hereunder or be a member of the supervisory board, the board of another insurance or reinsurance undertaking or work in the administration of another insurance or reinsurance undertaking. The manager of an insurance or reinsurance undertaking shall have the right to be a member of the supervisory board and a member of the board of an insurance or reinsurance undertaking of the same group of insurance undertakings.

2. The person fulfilling the internal audit function in the insurance or reinsurance undertaking may not be a member of the supervisory board or a member of the board of the insurance or reinsurance undertaking. A member of the board of the parent undertaking may be a member of the supervisory board of the insurance of reinsurance undertaking.

3. An audit firm with which the insurance or reinsurance undertaking has concluded an audit contract may not fulfil the internal audit function in the insurance or reinsurance undertaking.

4. The members of the bodies of an insurance or reinsurance undertaking shall also be subject to restrictions of the conflict of interests set out in other laws of the Republic of Lithuania to the extent this Law does not provide otherwise.

SECTION THREE

FINANCES OF INSURANCE AND REINSURANCE UNDERTAKINGS

Article 32. Organisational Fund

1. The founders, a legal person (persons) which is being reorganised into an insurance or reinsurance undertaking or which is changing its activities into the activities of an insurance undertaking must form an organisational fund of financial resources intended for covering the expenses of founding, reorganisation into an insurance undertaking or changing of type of activities,.

2. The organisational fund must amount to the minimum of EUR 300,000.

3. The organisational fund must be formed of financial resources only.

4. The organisational fund may not be formed of borrowed financial resources and financial resources of illegal origin.

5. After incorporation of the insurance or reinsurance undertaking and registration of the amendments in relation to changes in the type of activities, the balance of the organisational fund shall be attributed to the mandatory reserve.

Article 33. Authorised Capital

1. The authorised capital of an insurance or reinsurance undertaking may not be less than EUR 1,000,000.

2. The articles of association which are amended due to the increase or decrease of the authorised capital must be coordinated, following the procedure prescribed by the supervisory authority, with the supervisory authority before the insurance or reinsurance undertaking communicates information about the amendments to the Register of Legal Entities. The supervisory authority shall adopt a decision on the coordination of the amendments to the articles of association within 20 days of submission of all the duly executed documents. The increase of the authorised capital may be registered, according to the procedure prescribed by law, only when the shares have been fully paid-up.

3. An insurance or reinsurance undertaking may have only registered shares. The shares of an insurance or reinsurance undertaking must be paid-up only in cash.

4. The shares of an insurance or reinsurance undertaking may not be paid-up in borrowed cash nor in cash of illegal origin.

Article 34. Equity and Loan Capital

1. The composition of equity capital of an insurance or reinsurance undertaking shall be regulated by the Law on Companies; however, upon registration of the insurance undertaking as well as amendments related to the change of the type of activity in the Register of Legal Entities, the balance of the organisational fund shall be attributed to the mandatory reserve.

2. The loan capital of an insurance or reinsurance undertaking shall be composed of:

1) technical provisions;

2) reinsurers’ deposits;

3) other commitments;

4) accumulated expenses and receivables.

Article 35. Valuation of assets and liabilities

Unless otherwise provided for in this Law and other legal acts, insurance and reinsurance undertakings shall value assets and liabilities for the purposes of establishing solvency in accordance with the following rules:

1) assets shall be valued at the amount for which they could be exchanged between unrelated knowledgeable willing parties in a transaction;

2) liabilities shall be valued at the amount for which they could be transferred, or settled, between unrelated, knowledgeable willing parties in a transaction. For the purposes set out in this paragraph, the financial standing of the insurance or reinsurance undertaking shall not be taken into account in valuation of the liabilities.

Article 36. Own Funds

1. For the purposes of establishing the solvency of the undertaking, own funds of the insurance or reinsurance undertaking shall comprise basic own funds and ancillary own funds.

2. An insurance or reinsurance undertaking shall be entitled to include ancillary funds only after obtaining a prior consent of the supervisory authority.

3. The elements of own funds shall be divided into three levels.

4. The composition of own fund of an insurance or reinsurance undertaking, peculiarities of classification according to levels, eligibility of own funds to cover the solvency capital requirement and minimum capital requirement and other requirements for own funds of an insurance or reinsurance undertaking shall be established by the supervisory authority.

Article 37. Solvency Capital Requirement

1. Insurance and reinsurance undertakings must hold eligible own funds covering the solvency capital requirement. The solvency capital requirement shall be calculated, either in accordance with the standard formula in Article 38 of this Law or using an internal model, as set out in Article 39.

2. The solvency capital requirement shall be calculated taking into account the principle of business as a going concern.

3. The solvency capital requirement shall be calibrated so as to ensure that all quantifiable risks to which an insurance or reinsurance undertaking is exposed are taken into account. The solvency capital requirement shall cover existing business (taking into account only unexpected losses), as well as the new business expected to be written over the following 12 months.

4. The solvency capital requirement shall correspond to the value-at-risk of the basic own funds of an insurance or reinsurance undertaking subject to a confidence level of 99.5% over a one-year period.

5. Calculation of the solvency capital requirement shall cover at least the following risks:

1) non-life underwriting risk;

2) life underwriting risk;

3) health underwriting risk;

4) market risk;

5) credit risk;

6) operational risk.

6. Operational risk as referred to in subparagraph 6 of paragraph 5 of this Article shall include legal risks. Risks arising from strategic decisions, as well as reputation risks shall be excluded.

7. When calculating the solvency capital requirement, insurance and reinsurance undertakings shall take account of the effect of risk-mitigation techniques only if credit risk and other risks arising from the use of such techniques are properly reflected in the solvency capital requirement.

8. An insurance or reinsurance undertaking shall be obliged to calculate the solvency capital requirement at least once a year, permanently monitor and ensure covering of the solvency capital requirement with eligible own funds and notify the supervisory authority of the calculated solvency capital requirement and coverage thereof.

9. Life assurance undertakings engaged in the accumulation of occupational pensions shall calculate the solvency capital requirements in accordance with the procedure prescribed by the supervisory authority.

Article 38. Use of the Standard Formula

1. The standard formula for calculation of the solvency capital requirement shall be and the procedure for use thereof shall be established by the supervisory authority.

2. Subject to a reasoned request of an insurance or reinsurance undertaking, the supervisory authority shall be entitled to allow the insurance or reinsurance undertaking, within the design of the standard formula, to replace the or life assurance, non-life insurance and health insurance risks by parameters specific to the undertaking concerned which must be calibrated according to the internal data of the respective undertaking or data specific to the activities of the undertaking using standardised methods. When granting approval, supervisory authorities shall verify the completeness, accuracy and appropriateness of the data used in the insurance or reinsurance undertaking.

3. If the risk profile of an insurance or reinsurance undertaking deviates significantly from the assumptions underlying calculations of the standard formula and use of the standard formula is inappropriate for calculation of the solvency capital requirement of the insurance or reinsurance undertaking, the supervisory authority shall be entitled to obliged the insurance or reinsurance undertaking to use a partial or full internal model or oblige to replace the parameters of life assurance, non-life insurance and health insurance risks by the parameters specific to the undertaking by executing a reasoned decision without prejudice to the provisions of paragraphs 3 and 4 of Article 37 of this Law.

Article 39. Use of the Internal Model

1. An insurance or reinsurance undertaking shall be entitled to furnish the supervisory authority with a request to allow use of partial or full internal model for calculation of the solvency capital requirement.

2. The board of the insurance or reinsurance undertaking must approve the request to allow use of partial or full internal model for calculation of the solvency capital requirement filed to the supervisory authority and ensure that the system allowing proper and continuous application of the internal model was in place in the insurance or reinsurance undertaking.

3. Authorisations to use or change partial or full internal model shall be issued in accordance with the legal acts of the supervisory authority. Authorisations to use partial or full internal model shall be issued within 6 months from the date of proper submission of the request and all requested documents.

4. The supervisory authority shall issue the authorisation only if the internal model meets the requirements set by the supervisory authority.

5. Even in case where the supervisory authority allowed using the internal model, at a reasoned request of the supervisory authority, the insurance or reinsurance undertaking must provide data of calculation of the solvency capital requirement according to the standard formula.

6. After issue of the authorisation to use internal models by the supervisory authority, insurance and reinsurance undertakings shall not be entitled to revert to partial or full use of the standard formula for calculation of the solvency capital requirement, except for the cases where the supervisory authority, taking into account the reasoned request of the insurance or reinsurance undertaking, allows reverting to use of the standard formula.

7. If the internal model used by the insurance undertaking or reinsurance undertaking ceases to comply the requirements applicable to it, the insurance or reinsurance undertaking shall, without delay, but not later than within 7 working days from the date of noticing non-compliance either present to the supervisory authorities a plan to restore compliance, or demonstrate that the effect of non-compliance is immaterial. In the event that insurance and reinsurance undertakings fail to implement the presented plan, the supervisory authorities may require insurance and reinsurance undertakings to revert to calculating the solvency capital requirement in accordance with the standard formula.

Article 40. Minimum Capital Requirement

1. Insurance and reinsurance undertakings hold eligible basic own funds to cover the minimum capital requirement. The minimum capital requirement shall be calculated in accordance with the following principles:

1) it shall be calculated in a clear and simple manner, and in such a way as to ensure that the calculation can be audited;

2) the minimum capital requirement shall correspond to an amount of eligible basic own funds which policy holders, the insured persons and beneficiaries are exposed to an unacceptable level of risk if such amount of funds was lower and the insurance and reinsurance undertaking was allowed to continue their operations.

2. The minimum capital requirement shall be calculated using the linear function of the technical provisions, written premiums, capital-at-risk, deferred tax or administrative expenses or a sub-set of the afore-mentioned variables. The afore-mentioned variables used shall be measured net of reinsurance. The linear function shall be calibrated to the value-at-risk of the basic own funds of an insurance or reinsurance undertaking subject to a confidence level of 85% over a one-year period.

Amendments to the paragraph of this Article:

No XII-1603, 9 April 2015, published in the Register of Legal Acts (TAR), 17 April 2015, ID code 2015-05897

3. The minimum capital requirement shall neither fall below 25% nor exceed 45% of the solvency capital requirement of the insurance or reinsurance undertaking, calculated in accordance with the procedure established in this Law (for the purposes set out in this Article, the solvency capital amount shall be increased by the amount of the capital add-on calculated in accordance with the procedure prescribed in Article 48 of this Law). Where either of the limits referred to in this paragraph determines an undertaking’s minimum capital requirement, the insurance or reinsurance undertaking shall provide to the supervisory authority information allowing a proper understanding of the reasons therefor.

4. The minimum capital requirement calculated according to this Article must be not lower than the absolute floor which shall be equal to the following amounts:

1) EUR 2,500,000 for non-life insurance undertakings, including captive insurance undertakings;

2) EUR 3,700,000 for life assurance undertakings, including captive insurance undertakings;

3) EU 3,700,000 for insurance undertakings engaged in at least one of the activity of insurance risks in the insurance classes specified in subparagraphs 10–15 of paragraph 3 of Article 7 of this Law.

4) EUR 3,600,000 for reinsurance undertakings, except in the case of captive reinsurance undertakings, in which case the minimum capital shall be no less than EUR 1,000,000;

5) the sum of the amounts set out in subparagraphs 1 and 2 of this paragraph (or subparagraphs 2 and 3 of this paragraph) for insurance undertakings as referred to in Article 221 of this Law.

Amendments to the paragraph of this Article:

No XII-1603, 9 April 2015, published in the Register of Legal Acts (TAR), 17 April 2015, ID code 2015-05897

5. Insurance and reinsurance undertakings shall calculate the minimum capital requirement at least quarterly, monitor and ensure coverage of the minimum capital requirement by eligible basic own funds on an ongoing basis and notify the supervisory authority of the calculated minimum capital requirement and coverage thereof. If an insurance or reinsurance undertaking calculates the minimum capital requirement according to the provisions of paragraph 3 of this Article, it shall not be obliged to calculate the solvency capital requirement quarterly, but it shall be calculated at least at the frequency set in paragraph 8 of Article 37 of this Law.

Amendments to the paragraph of this Article:

No XII-1603, 9 April 2015, published in the Register of Legal Acts (TAR), 17 April 2015, ID code 2015-05897

Article 41. Technical Provisions

Amendments to the paragraph of this Article:

No XII-1603, 9 April 2015, published in the Register of Legal Acts (TAR), 17 April 2015, ID code 2015-05897

1. An insurance or reinsurance undertaking must calculate technical provisions with regard to all its obligations under insurance and reinsurance contracts.

Amendments to the paragraph of this Article:

No XII-1603, 9 April 2015, published in the Register of Legal Acts (TAR), 17 April 2015, ID code 2015-05897

2. The value of technical provisions shall correspond to the amount the insurance and reinsurance undertakings would have to pay if they were to transfer their rights and duties under insurance and reinsurance contracts immediately to another insurance or reinsurance undertaking.

3. Technical provisions shall be calculated in a prudent, reliable and objective manner and taking into account information provided by financial markets as well as generally available data on insurance risks.

4. An insurance or reinsurance undertaking shall establish have internal processes and procedures in place to ensure the appropriateness, completeness and accuracy of the data used in the calculation of technical provisions in the insurance or reinsurance undertaking.

5. Upon request from the supervisory authority, insurance and reinsurance undertakings shall furnish the supervisory authority with information on the appropriateness of the level of their technical provisions, as well as the applicability and relevance of the methods applied, and the adequacy of the underlying statistical data used.

6. To the extent that the calculation of technical provisions of insurance and reinsurance undertakings does not comply with the requirements of legal acts, the supervisory authorities may require insurance and reinsurance undertakings to increase the amount of technical provisions so that they correspond to the level determined pursuant to the requirements of the legal acts.

7. An insurance or reinsurance undertaking shall calculate technical provisions for the purposes of establishing solvency in accordance with the procedure established by the supervisory authority.

8. Life assurance undertakings engaged in the accumulation of occupational pensions shall calculate the technical provision for accumulation of occupational pensions in accordance with the procedure prescribed by the supervisory authority.

Article 42. Investments of an Insurance or Reinsurance Undertaking

1. An insurance and reinsurance undertaking shall invest all its assets in accordance with the prudent person principle, as specified in paragraphs 2–10 of this Article.

Amendments to the paragraph of this Article:

No XII-1603, 9 April 2015, published in the Register of Legal Acts (TAR), 17 April 2015, ID code 2015-05897

2. With respect to the whole assets, insurance and reinsurance undertakings shall only invest in investment targets whose risks the undertaking concerned can properly identify, measure, monitor, manage, control and report, and appropriately take into account in the assessment of its risks and solvency needs in accordance with the requirements set out in subparagraph 1 of paragraph 14 of Article 26 of this Law.

Amendments to the paragraph of this Article:

No XII-1603, 9 April 2015, published in the Register of Legal Acts (TAR), 17 April 2015, ID code 2015-05897

3. All assets, in particular those covering the minimum capital requirement and the solvency capital requirement, shall be invested by an insurance or reinsurance undertaking in such a manner as to ensure the security, quality, liquidity, profitability and availability of the portfolio as a whole.

4. Assets held to cover the technical provisions shall also be invested by an insurance ore reinsurance undertaking in a manner appropriate to the nature and duration of the insurance and reinsurance liabilities.

5. The assets shall be invested by an insurance or reinsurance undertaking in the best interest of all policyholders, the insured persons and beneficiaries.

6. In the case of a conflict of interest, insurance or reinsurance undertakings, or the entity which manages their asset portfolio, shall ensure that the investment is made in the best interest of policyholders, the insured persons and beneficiaries.

7. An insurance or reinsurance undertaking shall be entitled to use derivative instruments with a view to reducing the investment risks or facilitating efficient investment portfolio management.

8. An insurance or reinsurance undertaking shall ensure that investment and assets which are not admitted to trading on a regulated financial market shall be kept to prudent levels.

9. Assets shall be properly diversified by an insurance or reinsurance undertaking in such a way as to avoid excessive reliance on any particular asset, issuer or group of undertakings, or geographical area and excessive accumulation of risk in the portfolio as a whole.

10. An insurance or reinsurance undertaking shall ensure that investments in assets issued by the same issuer, or by issuers belonging to the same group, shall not expose the insurance undertakings to excessive risk concentration.

11. The assets to cover obligations under life-assurance contracts in relation to investment funds shall be invested in accordance with the prudent person principle and the rules set forth in the legal acts of the supervisory authority.

Amendments to the paragraph of this Article:

No XII-1603, 9 April 2015, published in the Register of Legal Acts (TAR), 17 April 2015, ID code 2015-05897

12. An insurance undertaking must keep a list of assets covering technical provisions following the procedure set out by the supervisory authority. The court, applying interim protection measures, or other state institutions, applying sanctions related to the assets specified in this list, must obtain an opinion of the supervisory authority on the potential consequences of the interim protection measures or sanctions for the financial standing of the insurance undertaking as well the interests of the policyholders, the insured persons, beneficiaries and injured third parties. The supervisory authority must furnish its opinion to the court within 24 hours.

Article 43. Identification and notification of deteriorating financial conditions by the insurance undertaking

Insurance and reinsurance undertakings shall have procedures in place to identify deteriorating financial conditions. Having determined that its financial condition has deteriorated, an insurance or reinsurance undertaking shall immediately notify the supervisory authority when such deterioration occurs.

Article 44. Non-Compliance with the Requirements for Calculation of Technical Provisions

1. Where an insurance or reinsurance undertaking does not comply with the requirements for calculation of technical provisions, the supervisory authority shall be entitled to seize the assets of the insurance or reinsurance undertaking after having communicated its intentions to the supervisory authority of another European Economic Area Member State where the risk is situated or the European Economic Area Member State of the commitment. The notice of the supervisory authority to the supervisory authority of another European Economic Area Member State must specify the assets to be seized.

2. Exercise of the right referred to in paragraph 1 of this Article by the supervisory authority shall not preclude the supervisory authority from application of other sanctions provided for by this Law.

Article 45. Non-Compliance with the Solvency Capital Requirement

1. Insurance and reinsurance undertakings shall immediately inform the supervisory authority as soon as they observe that the solvency capital requirement is no longer complied with, or where there is a risk of non-compliance in the following three months.

2. Within two months from the observation of non-compliance with the solvency capital requirement the insurance or reinsurance undertaking concerned shall submit a well-grounded plan for restoration of the financial standing drawn up in accordance with the requirements established by the supervisory authority and coordinate it with the supervisory authority.

Amendments to the paragraph of this Article:

No XII-1603, 9 April 2015, published in the Register of Legal Acts (TAR), 17 April 2015, ID code 2015-05897

3. The supervisory authority shall require the insurance or reinsurance undertaking concerned to take the necessary measures to achieve, within six months from the observation of non-compliance with the solvency capital requirement, covering of the solvency capital requirement by eligible own funds of or the reduction of its risk profile of the insurance or reinsurance undertaking to ensure compliance with the solvency capital requirement. The supervisory authority may, if appropriate, extend that period by three months.

4. In case of exceptional adverse situations published by the European Insurance and Occupational Pensions Authority, the supervisory authority, taking into account all relevant factors including the average duration of the technical provisions, the supervisory authority shall be entitled to extend the time limit of 3 months referred to in paragraph 3 of this Article applicable to the undertaking effected by such adverse circumstance which alone or together with other affected undertakings represent a significant share of the market or the undertaking (alone or with other undertakings) a significant part of insurance or reinsurance classes of which are significantly affected up to 7 years. The supervisory authority shall be entitled to address the European Insurance and Occupational Pensions Authority with the request to publish exceptional adverse situations if it is likely that the insurance or reinsurance undertaking (undertakings) that represent a significant share of the market or the insurance or reinsurance undertaking (undertakings) a significant part of insurance or reinsurance classes of which are significantly affected may fail to comply with any of the requirements set out in paragraph 3 of this Article. Exceptional adverse situations exist in cases of a fall in financial markets which is unforeseen, sharp and steep, a persistent low interest rate environment or a high-impact catastrophic event that have a serious adverse effect on the financial standing of the insurance or reinsurance undertaking (undertakings). The European Insurance and Occupational Pensions Authority, in cooperation with the supervisory authority, shall regularly assess and declare when an exceptional adverse situation has ceased to exist. The insurance or reinsurance undertaking concerned shall, every three months, submit a progress report to its supervisory authority setting out the measures taken and the progress made to cover the solvency capital requirement by eligible own funds or to reduce the risk profile to ensure compliance with the solvency capital requirement.

Amendments to the paragraph of this Article:

No XII-1603, 9 April 2015, published in the Register of Legal Acts (TAR), 17 April 2015, ID code 2015-05897

5. The extension referred to in paragraph 4 of this Article shall be withdrawn where no significant progress in achieving the covering of the solvency capital requirement between the date of the observation of non-compliance of the solvency capital requirement and the date of the submission of the progress report.

Amendments to the paragraph of this Article:

No XII-1603, 9 April 2015, published in the Register of Legal Acts (TAR), 17 April 2015, ID code 2015-05897

6. In exceptional circumstances, where the supervisory authority is of the opinion that the financial situation of the insurance or reinsurance undertaking concerned will deteriorate further, the supervisory authority, upon a prior notification to the supervisory authority of another European Economic Area Member State within which the insurance risk is situation or the European Economic Area Member State of the commitment, shall have the right to seize the assets of the insurance or reinsurance undertaking request that the supervisory authority of the other European Economic Area Member State imposed analogous restrictions on the assets of the insurance or reinsurance undertaking specified by the supervisory authority.

7. Exercise of the right referred to in paragraph 6 of this Article by the supervisory authority shall not preclude the supervisory authority from application of other sanctions provided for by this Law.

Article 46. Non-Compliance with the Minimum Capital Requirement

1. Insurance and reinsurance undertakings shall inform the supervisory authority immediately where they observe that the minimum capital requirement is no longer complied with or where there is a risk of non-compliance in the following three months.

2. Within one month from the observation of non-compliance with the minimum capital requirement, the insurance or reinsurance undertaking concerned shall submit a short-term plan for restoration of the financial plan of the form prescribed by the supervisory authority and drawn up in accordance with the requirements established by the supervisory authority so that within three months of observation of non-compliance with the minimum capital requirement, the minimum capital requirement was covered by eligible own funds of the insurance or reinsurance undertaking or its risk profile was reduced with a view to ensuring compliance with the minimum capital requirement. The short-term plan for restoration of the financial standing shall be negotiated with the supervisory authority.

Amendments to the paragraph of this Article:

No XII-1603, 9 April 2015, published in the Register of Legal Acts (TAR), 17 April 2015, ID code 2015-05897

3. Having received the information provided for in paragraph 1 of this Article, the supervisory authority, upon a prior notification to the supervisory authority of another European Economic Area Member State within which the insurance risk is situation or the European Economic Area Member State of the commitment, shall have the right to seize the assets of the insurance or reinsurance undertaking request that the supervisory authority of the other European Economic Area Member State imposed analogous restrictions on the assets of the insurance or reinsurance undertaking specified by the supervisory authority.

4. Exercise of the right referred to in paragraph 3 of this Article by the supervisory authority shall not preclude the supervisory authority from application of other sanctions provided for by this Law.

Article 47. Rights of the Supervisory Authority in Respect of Insurance Undertakings or Reinsurance Undertakings of Other Member States of the European Economic Area

Upon the request of the supervisory authority of another Member State of the European Economic Area, the supervisory authority shall be entitled to seize the assets of the insurance or reinsurance undertaking of another European Economic Area Member State specified by the supervisory authority of another European Economic Area Member State and located in the Republic of Lithuania.

Article 48. Capital Add-on

1. In exceptional circumstances, the supervisory authority may oblige an insurance or reinsurance undertaking to have a capital add-on, i.e. if the supervisory authority fulfilling its functions establishes that:

1) the risk profile of the insurance or reinsurance undertaking deviates significantly from the assumptions underlying the solvency capital requirement, as calculated using the standard formula and the requirement to use an internal model (under paragraph 3 of Article 38 of this Law) is inappropriate or has been ineffective; or a partial or full internal model is being developed;

2) the risk profile of the insurance or reinsurance undertaking deviates significantly from the assumptions underlying the solvency capital requirement as calculated using an internal model or partial internal model because certain quantifiable risks are captured insufficiently and the adaptation of the model to better reflect the given risk profile has failed within an appropriate timeframe;

3) the system of governance of an insurance or reinsurance undertaking deviates significantly from the requirements set forth in the legal acts and that those deviations prevent it from being able to properly identify, measure, monitor, manage and report the risks that it is or could be exposed to and that the application of other measures is in itself unlikely to improve the deficiencies sufficiently within an appropriate timeframe;

4) the risk profile of the insurance or reinsurance undertaking deviates significantly from the assumptions underlying the adjustment correction, the variation correction or the measure of the transitional period for risk-free interests rates or technical provisions where the insurance or reinsurance undertaking applies such corrections or transitional measures in accordance with the procedure established by the supervisory authority.

Amendments to the paragraph of this Article:

No XII-1603, 9 April 2015, published in the Register of Legal Acts (TAR), 17 April 2015, ID code 2015-05897

2. In case of the circumstances set out in paragraphs 1 and 2 of this Article, the amount of the required capital add-on shall be calculated so as to ensure that the insurance or reinsurance undertaking complied with the requirements set out in paragraphs 3 and 4 of Article 37 of this Law.

3. In the circumstances set out in subparagraphs 3 and 4 of paragraph 1 of this Article, the required capital add-on shall be proportionate to the material risks arising from the deficiencies which gave rise to the decision of the supervisory authority to set the add-on.

Amendments to the paragraph of this Article:

No XII-1603, 9 April 2015, published in the Register of Legal Acts (TAR), 17 April 2015, ID code 2015-05897

4. In the cases set out in subparagraphs 2 and 3 of paragraph 1 of this Article, the supervisory authority shall ensure that the insurance or reinsurance undertaking makes every effort to remedy the deficiencies that led to the imposition of the capital add-on.

5. The capital add-on shall be reviewed at least once a year by the supervisory authority and be removed when the insurance or reinsurance undertaking has remedied the deficiencies which led to its imposition.

6. The solvency capital requirement including the capital add-on imposed shall replace the inadequate solvency capital requirement.

7. Repealed on 18 April 2015.

Amendments to the paragraph of this Article:

No XII-1603, 9 April 2015, published in the Register of Legal Acts (TAR), 17 April 2015, ID code 2015-05897

Article 49. Transfer of Rights and Duties under Insurance or Reinsurance Contracts

1. On the basis of a written agreement and upon obtaining an authorisation from the supervisory authority, an insurance or reinsurance undertaking shall have the right to transfer its rights and duties under insurance or reinsurance contracts (all contracts or any part thereof) to another insurance or reinsurance undertaking, an insurance or reinsurance undertaking of another European Economic Area Member State or a branch of a third country insurance or reinsurance undertaking established in the Republic of Lithuania or another European Economic Area Member State. Prior to issue of the authorisation, the supervisory authority shall apply to the respective supervisory authorities of other Member States of the European Economic Area in order to obtain the information provided for in paragraphs 2, 3 and 4 of this Article.

2. An insurance or reinsurance undertaking shall have the right to transfer its rights and duties under insurance or reinsurance contracts to an insurance or reinsurance undertaking of another European Economic Area Member State only where a supervisory authority of this state confirms that after the transfer of the rights and duties, the accepting undertaking complies with the solvency capital requirements.

3. If it is intended to transfer rights and duties under the insurance contracts of a branch of an insurance undertaking in the European Economic Area Member State concluded when exercising the right of establishment or the right to provide services, the supervisory authority must obtain an opinion from a competent authority of the other European Economic Area Member State in which the branch is located about the transfer of the rights and duties.

4. An authorisation to transfer rights and duties under insurance contracts may be issued provided that the supervisory authority of another European Economic Area Member State within which the insurance risk is situated or the supervisory authority of another European Economic Area Member State of the commitment does not object thereto.

5. If information specified in paragraphs 2, 3 and 4 of this Article is not received within three months from the application of the supervisory authority it shall be considered that the supervisory authority of another European Economic Area Member State does not object to the transfer of rights and duties under insurance contracts.

6. A written agreement on the transfer of rights and duties must have a clause that the transfer of rights and duties shall be deemed to have taken place not earlier than from the moment of publication of the authorisation for the transfer rights and duties by the supervisory authority on the website of the supervisory authority.

7. The provisions of paragraphs 2, 3 and 4 of this Article shall also be applicable in case where the rights and duties under insurance contracts are transferred through reorganisation of the insurance undertaking.

8. If the rights and duties are transferred under insurance contracts in the case referred to in paragraph 1 of this Article, the policyholder’s consent shall not be required. Such consent is also not necessary in cases where the rights and duties under insurance contracts subject to the law of the Republic of Lithuania are transferred by the insurance undertaking of another Member State of the European Economic Area within which the insurance risk is situated or the Member State of the European Economic Area of the commitment.

9. The provisions of this Article shall not be applicable where the insurance undertaking transfers its rights and duties according to individual insurance contracts in accordance with the procedure prescribed in such contracts and following the provisions of legal acts concerning debt transfer or assignment of the claim.

10. In case of transfer of the rights and duties under insurance contracts, the obligations of the reinsurers shall be transferred in accordance with the procedure prescribed in the reinsurance contracts.

11. The mandatory transfer of the rights and duties under insurance contracts shall be regulated in Articles 152 and 206 of this Law.

Article 50. Issuance of an Authorisation to Transfer Rights and Duties under Insurance or Reinsurance Contracts

1. An insurance undertaking must announce about its intention to transfer rights and duties under insurance contracts in at least two national newspapers and satisfy the announcement requirements established in the Member State of the European Economic Area within which the insurance risk is situated or the Member State of the European Economic Area of the commitment. The announcement about the intention to transfer the rights and duties under insurance contracts must 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 duties under insurance and reinsurance contracts. The provisions of this paragraph shall also be applicable in case where the rights and duties under insurance contracts are transferred by an insurance undertaking of another Member State of the European Economic Area and the Republic of Lithuania is the Member State of the European Economic Area in which the insurance risk is situated or the Member State of the European Economic Area of the commitment.

2. Where the insurance undertaking has failed to properly fulfil the requirement specified in paragraph 1 of this Article, the supervisory authority shall have the right to request the insurance undertaking to announce about its intention to transfer rights and duties under insurance contracts once again or additionally inform each policyholder in writing in accordance with the procedure established by itself.

3. Upon the expiry of the time limit set in paragraph 1 of this Article, the insurance undertaking which intends to transfer its rights and duties under insurance contracts must apply to the supervisory authority seeking an authorisation for the transfer of the rights and duties under insurance contracts.

4. The authorisation to transfer the rights and duties under insurance or reinsurance contracts shall be issued following the procedure set by the supervisory authority within three months from the application if:

1) all the documents and information specified in the description of the procedure for issuing authorisations for the transfer of rights and duties under insurance or reinsurance contracts established by the supervisory authority have been submitted;

2) the accepting undertaking assumes all the rights and duties arising from insurance or reinsurance contracts;

3) after the transfer of the rights and duties under insurance or reinsurance contracts, the accepting undertaking shall comply with the solvency capital requirements;

4) the transfer of the rights and duties under insurance contracts does not have a negative impact on the property interests of the policyholders, insured persons, beneficiaries and injured third parties of the insurance undertaking which transfers its rights and duties under insurance contracts;

5) there is no objection from the supervisory authorities of other European Economic Area Member State indicated in paragraph 4 of Article 49 of this Law to the transfer of the rights and duties under insurance contracts.

5. When issuing an authorisation for the transfer of rights and duties, the supervisory authority must set a time limit within which the rights and duties have to be transferred. The authorisation for the transfer of the rights and duties under insurance contracts shall be published on the website of the supervisory authority.

6. If the policyholder objects to the transfer of the rights and duties under insurance contracts in accordance within the procedure prescribed in the contract applicable in case of termination of the insurance contract if the policyholder does not agree with the change of the insurer as a result of the transfer of rights and duties within one month from the transfer of the rights and duties.

7. The rights and duties under insurance contracts shall be transferred together with the assets covering technical provisions or, in case of the plan for recovery of such assets, an approval of the supervisory authority must be obtained in accordance with the procedure established by the supervisory authority.

8. The public announcement referred to in paragraph 1 of this Law must indicate the conditions following the date of fulfilment of which the rights and duties under insurance contracts shall be deemed to be transferred. The afore-mentioned announcement shall be deemed to be proper notification of the policyholders, the insured persons, beneficiaries and injured third parties of transfer of the rights and duties according to Article 6.109 of the Civil Code.

Article 51. Provisions Applicable to Reinsurance

1. In pursuance of reduction of losses due to the assumed insurance risk, reduction of the capital requirement, more efficient use of capital held or extension of possibilities to assume other insurance risks, an insurance or reinsurance undertaking shall be entitled to transfer the assumed risk by concluding reinsurance or retrocession contracts with the persons set out in Article 4 of this Law.

2. An insurance or reinsurance undertaking shall be entitled to transfer the assumed risk to a special purpose vehicle. An authorisation to establish a special purpose vehicle in the Republic of Lithuania shall be issued by the supervisory authority.

3. Having regard to the assumed insurance risks, an insurance undertaking must, at any time, have sufficient ceded reinsurance.

4. The mere fact that the reinsurance contract or retrocession contract is concluded with an insurance or reinsurance undertaking of another Member State of the European Economic Area the financial standing of which is not stable and sound cannot constitute grounds for declaring such reinsurance or retrocession contract inappropriate.

5. An insurance and reinsurance undertaking which concludes finite reinsurance contracts or pursue finite reinsurance activities must ensure proper identification, measurement, monitoring, management, control and reporting if the risks arising from those contracts or activities.

6. The reinsurance contracts concluded with the undertakings the head offices of which are in the third countries the solvency regime of which is equivalent to the solvency regime established in this Law and the list of which is published on the website of the he European Insurance and Occupational Pensions Authority shall be considered as reinsurance contracts concluded with the undertakings issued with a licence under this Law.

Amendments to the paragraph of this Article:

No XII-1603, 9 April 2015, published in the Register of Legal Acts (TAR), 17 April 2015, ID code 2015-05897

Article 52. Accounting and Financial Statements

1. Insurance or reinsurance undertakings must keep financial accounting and draw up a set of interim financial statements and a set of annual financial statements pursuant to the laws of the Republic of Lithuania, resolutions of the supervisory authority and other legal acts and in accordance with the accounting policy chosen by the insurance or reinsurance undertaking.

Amendments to the paragraph of this Article:

No XII-1883, 25 June 2015, published in the Register of Legal Acts (TAR), 7 July 2015, ID code 2015-11083

2. The accounting system of activities of an insurance or reinsurance undertaking must be organised in such way that:

1) financial statements would show the real financial standing of the insurance undertaking and its performance results;

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 an audit firm, the person fulfilling the internal audit function or institutions authorised by law to inspect and evaluate the activities of the supervisory and management bodies of the undertaking and its other employees having powers to make decisions from which obligations of the insurance undertaking to other persons arise, and the financial standing of the undertaking.

3. An insurance or reinsurance undertaking shall be obliged to submit to the supervisory authority a set of annual financial statements approved by the general meeting of shareholders of the supervisory authority, a decision of profit allocation and the auditor’s report within four months from the end of the financial year.

4. The general meeting of shareholders of the insurance or reinsurance undertaking cannot consider and approve the set of annual financial statements and make a decision on profit allocation if the set of annual financial statements is not audited.

5. The accuracy of information provided in the set of annual financial statements shall fall within the responsibility of the manager or the members of the board or the supervisory board of the insurance or reinsurance undertaking under the established procedure taking into account the competence assigned to the manager, the board or the supervisory board by the law.

6. The frequency of drawing up of the set of interim financial statements of the insurance or reinsurance undertaking, the procedure for submission and publication of sets of interim and annual financial statements shall be established by the supervisory authority.

Amendments to the paragraph of this Article:

No XII-q, 25 June 2015, published in the Register of Legal Acts (TAR), 7 July 2015, ID code 2015-11083

Article 53. Audit

1. The set of annual financial statements of the insurance or reinsurance undertaking must be audited by the audit firm the auditors of which have experience of auditing insurance undertakings, reinsurance undertakings or financial institutions.

2. Within ten days from choosing an audit firm, following the procedure determined by the supervisory authority, the insurance or reinsurance undertaking must inform the supervisory authority about the audit firm it has chosen and the auditors chosen thereby. If auditors of the audit firm lack experience in auditing of insurance undertakings, reinsurance undertakings or financial institutions or there exist grounds for doubt about independence of the audit firm from the insurance undertaking or reinsurance undertaking being audited, at the request of the supervisory authority, the insurance or reinsurance undertaking must find another audit firm or appoint auditors. The same auditor (auditor who was involved in an audit of the insurance or reinsurance undertaking or signed the auditor’s report) may perform an audit at the same insurance or reinsurance undertaking for not more than five years in succession. After the expiry of the above period, the auditor may not perform an audit of this insurance or reinsurance undertaking for two years.

3. An audit firm shall have the following duties when auditing sets of financial statements of an insurance or reinsurance undertaking:

1) an audit firm must inform the supervisory authority without delay about the major violations of this Law and other legal acts regulating financial activity of insurance or reinsurance undertakings, failure to comply with the solvency capital requirement or the minimum capital requirements, also the circumstances indicating that the insurance undertaking no longer meets the requirements necessary for the issuance of a licence to engage in activities as well as the circumstances that cause or may cause a threat to solvency and financial stability and continuity of activity of the insurance undertaking or the interests of the policyholders, insured persons, beneficiaries and injured third parties;

2) an audit firm must inform the supervisory authority in writing and without delay about any circumstances due to which it is refused to state the auditor’s opinion in the audit report, the submitted auditor’s opinion is negative or qualified

4. At the request of the supervisory authority, an audit firm must present explanations regarding its opinions about financial statements and other information indicated in the auditor’s opinion.

5. The audit firm which performs an audit of an insurance or reinsurance holding company or a company controlled by an insurance or reinsurance undertaking must forthwith inform the supervisory authority about any circumstances indicated in paragraph 3 of this Article that transpire during the audit,

6. Fair disclosure of information by an audit firm to the supervisory authority 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 of non-disclosure of information and shall not incur nor may incur any form of liability.part_2033f148495546e1bcb013b965860122

Article 54. Disclosure of Information to the Public and the Supervisory Authority

1. In fulfilment of the public disclosure requirements an insurance or reinsurance undertaking shall draw up a report on solvency and financial standing and publish it in accordance with the requirements of the legal acts of the supervisory authority.

2. The supervisory authority shall set the requirements concerning the nature, scope, form of information that must be provided for fulfilment of the supervisory functions and the period for provision of such information.

SECTION FOUR

SUPERVISION OF A GROUP OF INSURANCE AND/OR REINSURANCE UNDERTAKINGS

Article 55. Cases of Application of Group Supervision

1. The provisions of this Section shall apply to the insurance undertakings, reinsurance undertakings and other undertakings set out in this Section. The undertakings subject to the group supervision requirements shall also be subject to other requirements for the activities of insurance undertakings and reinsurance undertakings and supervision thereof, except for the cases set out in this Law and the legal acts of the supervisory authority.

2. The supervisory authority shall be subject to the provisions concerning the supervisory authority of a group of insurance and/or reinsurance undertakings (hereinafter referred to as the “group supervisor”) when the supervisory authority appoints a group supervisor in accordance with the procedure prescribed in Article 63 of this Law. If the supervisory authority is not appointed as the group supervisor, the requirement for group supervision shall be applicable as to the respective supervisory authority involved in the activities of the college of insurance supervisory authorities (hereinafter referred to as the “college of the supervisory authorities).

3. Supervision at the level of the group shall apply as follows:

1) to insurance or reinsurance undertakings, which are a participating undertaking in at least one insurance undertaking, reinsurance undertaking, third country insurance undertaking or third country reinsurance undertaking;

2) to insurance or reinsurance undertakings, the parent undertaking of which is an insurance holding company or mixed-activity financial holding company which has its head office in a Member State of the European Economic Area;

3) taking into account the provisions of subparagraph 3 of paragraph 6 of Article 56 of this Law, to insurance or reinsurance undertakings, the parent undertaking of which is a mixed-activity insurance holding company, an insurance holding company or a mixed-activity financial holding company having its head office outside the European Economic Area or a third country insurance or reinsurance undertaking.

4. In the cases referred to in subparagraphs 1 and 2 of paragraph 3 of this Article, where the participating insurance or reinsurance undertaking, the insurance holding company or mixed-activity financial holding company which has its head office in a Member State of the European Economic Area, is a related undertaking of an undertaking subject to supervision or a mixed-activity holding company subject to supplementary supervision according to the Law on the Supplementary Supervision of Entities in a Financial Conglomerate, the group supervisor may, after consulting the other supervisory authorities concerned, decide not to carry out at the level of that participating insurance or reinsurance undertaking or that insurance holding company the supervision of risk concentration and/or the supervision of intra-group transactions (hereinafter referred to as the “intra-group transaction”) referred to in Article 61 of this Law.

5. If a mixed-activity financial holding company is subject to equivalent provisions under this Law and the Law on the Supplementary Supervision of Entities in a Financial Conglomerate, the group supervisor may, after consulting other supervisory authorities concerned, decide to apply only the respective provisions of the Law on the Supplementary Supervision of Entities in a Financial Conglomerate to such mixed-activity financial holding company.

6. If a mixed-activity financial holding company is subject to equivalent provisions under this Law and other legal acts of the Republic of Lithuania governing the activities of financial institutions, the group supervisor may, after consulting the respective consolidating supervisory authorities, decide to apply only the provisions applicable to the main financial sector established according to the Law on the Supplementary Supervision of Entities in a Financial Conglomerate to such mixed-activity financial holding company.

7. The group supervisor shall notify the European Banking Authority and the European Insurance and Occupational Pensions Authority of the decisions taken according to paragraphs 5 and 6 of this Article.

Article 56. Scope of Group Supervision

1. Exercise of supervision by the supervisory authorities in accordance with Article 55 of this Law shall not imply that the supervisory authorities are required to play a supervisory role in relation to the third country insurance undertaking, the third country reinsurance undertaking, the insurance holding company, the mixed-activity insurance holding company or the mixed-activity insurance holding company taken individually; nevertheless, the supervisory authorities shall have the respective rights and duties set forth in this Section. The above provision shall not deprive the supervisory authority of the right to request that the members of the management and supervisory bodies and the persons holding other management positions of the insurance holding companies or mixed-activity financial holding companies were of good repute and their qualification was appropriate for ensuring sound and prudent management.

2. The group supervisor may decide not to include an undertaking in the group supervision where:

1) there are legal impediments to the transfer of the necessary information in a third country;

2) the undertaking is of negligible interest with respect to the objectives of group supervision;

3) the inclusion of the undertaking would be inappropriate or misleading with respect to the objectives of the group supervision.

3. Subparagraph 2 of paragraph 2 of this Law shall be excluded where, taken individually, several undertakings of the same group are negligible, but where, collectively, they are of non-negligible interest.

4. Where the group supervisor determines that an insurance or reinsurance undertaking should not be included in the group supervision under subparagraphs 2 and 3 of paragraph 2 of this Article, it shall consult the other supervisory authorities concerned before taking a decision.

5. Where the group supervisor does not include an insurance or reinsurance undertaking in the group supervision under subparagraph 2 or 3 of paragraph 2 of this Article, the supervisory authorities of the Member State of the European Economic Area in which that insurance or reinsurance undertaking is situated may ask the undertaking which is at the head of the group for any information which may facilitate their supervision of the insurance or reinsurance undertaking concerned.

6. The peculiarities of application of the requirements provided for in this Section in the cases below shall be established by the legal acts of the supervisory authority where:

1) the participating insurance or reinsurance undertaking insurance holding or mixed-activity financial holding company referred to in subparagraphs 1 and 2 of paragraph 3 of Article 55 of this Law is a subsidiary of the insurance or reinsurance undertaking, insurance holding company or mixed-activity financial holding company with the head office in a Member State of the European Economic Area;

2) the participating undertaking or insurance undertaking referred to in subparagraphs 1 and 2 of paragraph 3 of Article 55 of this Law or the insurance holding company or mixed-activity financial holding company with the head office in a Member State of the European Economic Area does not have its head office in the same Member State of the European Economic Area as the parent undertaking referred to in subparagraph 1 of this paragraph;

3) if the parent undertaking of the insurance or reinsurance undertaking is not an insurance undertaking, reinsurance undertaking or mixed-activity financial holding company of the European Economic Area and if the parent undertaking is a mixed-activity insurance holding company.

Article 57. Supervision of Group Solvency

1. The participating insurance or reinsurance undertakings referred to in subparagraph 1 of paragraph 3 of Article 55 of this Law must ensure that the group’s solvency capital requirement was calculated and covered by eligible own funds of the group in accordance with the requirements established by the supervisory authority.

2. The insurance or reinsurance undertakings referred to in subparagraph 2 of paragraph 3 of Article 55 of this Law must ensure that the group’s solvency capital requirement was calculated and covered by eligible own funds of the group in accordance with the requirements established by the supervisory authority

3. Compliance with the requirements set forth in paragraphs 1 and 2 of this shall be subject to supervisory review by the group supervisor in accordance with the provisions of Article 63 of this Law. Supervision of group solvency shall mutatis mutandis be subject to the provisions of Article 43 and paragraphs 1–5 of Article 45 of this Law.

4. Having consulted with other supervisory authorities concerned and the group itself, a participating insurance or reinsurance undertaking, insurance holding company, mixed-activity financial holding company or undertaking belonging to the group specified by the group supervisor shall be obliged to calculate the solvency capital requirement of the group at least once a year, monitor and ensure coverage of the group solvency capital requirement by eligible own funds on an ongoing basis and notify the supervisory authority of the calculated group solvency capital requirement and coverage thereof.

5. As soon as the group supervisor receives information that the group solvency capital requirement is no longer complied with or that there is a risk of non-compliance in the following three months, the group supervisor shall inform the other supervisory authorities within the college of supervisors, which shall analyse the financial situation of the group.

Article 58. Group Internal Model

1. An insurance or reinsurance undertaking and its related undertakings or undertakings related to the insurance holding company or mixed-activity financial holding company shall be entitled to jointly file an application for permission to calculate the consolidated group solvency capital requirement as well as the solvency capital requirement of insurance and reinsurance undertakings on the basis of an internal model.

2. Where the supervisory authority concerned considers that the risk profile of an insurance or reinsurance undertaking under its supervision deviates significantly from the assumptions underlying the internal model approved at group level, it shall be entitled to request that the insurance or reinsurance undertaking properly addressed the concerns of the supervisory authority within the time limit set by the supervisory authority, following Article 48 of this Law, the supervisory authority shall be entitled to impose a capital add-on whereby the solvency capital requirement calculated by the insurance or reinsurance undertaking on the basis of an internal model shall be increased. In exceptional circumstances, where such capital add-on would not be appropriate, the supervisory authority may require the insurance or reinsurance undertaking concerned to calculate its solvency capital requirement on the basis of the standard formula. The supervisory authority may impose a capital add-on to the solvency capital requirement of that insurance or reinsurance undertaking resulting from the application of the standard formula in accordance with the requirements set forth in subparagraphs 1 and 3 of paragraph 1 of Article 48 of this Law. The supervisory authority shall explain any decision referred to in this paragraph to both the insurance or reinsurance undertaking and the group supervisor.

3. The supervisory authority shall established detailed procedure for implementation of the provisions of this Law and other requirement s for application of the group’s internal model in its legal acts.

Article 59. Group Capital Add-On

1. In determining whether the consolidated group solvency capital requirement appropriately reflects the risk profile of the group, the group supervisor shall pay particular attention to:

1) whether the circumstances referred to in paragraph 1 of Article 48 of this Law exist;

Amendments to the paragraph of this Article:

No XII-1603, 9 April 2015, published in the Register of Legal Acts (TAR) 17 April 2015, ID code 2015-05897

2) a specific risk existing at group level would not be sufficiently covered by the standard formula or the internal model used, because it is difficult to quantify;

3) a capital add-on to the solvency capital requirement of the related insurance or reinsurance undertakings is imposed by the supervisory authorities concerned, in accordance with Article 48 and paragraph 2 of Article 58 of this Law.

2. The group supervisor shall be entitled to impose a capital add-on to the consolidated group solvency capital requirement where the risk profile of the group is not adequately reflected.

3. Article 48 of this Law shall mutatis mutandis apply to imposition of capital add-on of the group.

Article 60. Supervision of group solvency for groups with centralised risk management

1. Supervision of group solvency for groups with centralised risk management shall apply to any insurance or reinsurance undertaking which is the subsidiary of an insurance or reinsurance undertaking where all of the following requirements are satisfied:

1) the supervisory has not been included by the group supervisor in the group of undertakings not subject to the group supervision requirements according to the provisions of paragraph 2 of Article 56 of this Law, but has included it in the group of undertakings subject to the group supervision requirements at the level of the parent undertaking;

2) the risk-management processes and internal control processes of the parent undertaking cover the subsidiary and the parent undertaking satisfies the supervisory authorities concerned regarding the sound and prudent management of the subsidiary;

3) the parent undertaking has been granted the agreement referred to in paragraph 3 of Article 62 of this Law;

4) the parent undertaking has received the agreement to publish only a report on solvency and financial condition at the level of the group.

5) an application for permission has been submitted to the supervisory authority by the parent undertaking and a favourable decision has been made on application of the supervision of group solvency for the groups with centralised risk management in respective of the subsidiary or reinsurance undertaking.

2. The supervisory authority shall lay down detailed procedure for implementation of the provisions of this Law and other requirements for supervision of the solvency for group with centralised risk management.

Article 61. Supervision of Risk Concentration and Intra-Group Transactions

1. Supervision of the risk concentration at group level and intra-group transactions shall be exercised by the group supervisor. Supervision of the risk concentration at group level and intra-group transactions shall be exercised in accordance with the provisions of this Law and Articles 62–67 of this Law.

2. The insurance or reinsurance undertakings, insurance holding company, mixed-activity financial holding company or the undertaking belonging to the group specified by the group supervisor after consulting the other supervisory authorities concerned and the group itself shall notify the group supervisor of any significant risk concentration at the group level and the intra-group transactions indicated by the group supervisor.

3. The supervisory authority shall lay down detailed procedure for implementation of the provisions of this Article and other requirements for supervision of risk concentration and intra-group transactions in its legal acts.

Article 62. Supervision of the System of Governance

1. The requirements set out in Section Two of this Chapter shall apply mutatis mutandis at the level of the group.

2. Without prejudice to paragraph 1 of this Article, the risk management and internal control systems and reporting procedures shall be implemented consistently in all the undertakings included in the scope of group supervision pursuant to subparagraphs 1 and 2 of paragraph 3 of Article 55 of this Law so that those systems and reporting procedures can be controlled at the level of the group.

3. The group supervisor shall be entitled to allow that the participating insurance or reinsurance undertaking, the insurance holding company or the mixed-activity financial holding company undertook any assessments of its risk and solvency at the group level and at the level of any subsidiary in the group at the same time, and produced a single document covering all the assessments.

Amendments to the paragraph of this Article:

No XII-1603, 9 April 2015, published in the Register of Legal Acts (TAR) 17 April 2015, ID code 2015-05897

4. The supervisory authority shall lay down detailed procedure for implementation of the provisions of this Article and other requirements for supervision of the governance system in its legal acts.

Article 63. Group Supervisor

1. A group supervisor, responsible for coordination and exercise of group supervision shall be designated from among the supervisory authorities of the European Economic Area Member States concerned.

2. Where the same supervisory authority is competent for all insurance and reinsurance undertakings in a group, the task of group supervisor shall be exercised by that supervisory authority.

3. In all other cases (except for the case referred to in paragraph 4 of this Article), the tasks of group supervisor shall be exercised by the supervisory authority which has authorised an insurance or reinsurance undertaking where a group is headed by such undertaking, or where a group is not headed by an insurance or reinsurance undertaking, by the following supervisory authority:

1) which has issued a licence to engage in activities to the insurance or reinsurance undertaking the parent undertaking of which is an insurance holding company or mixed-activity financial holding company;

2) which has issued a licence to engage in activities to the insurance or reinsurance undertaking the parent undertaking of which is an insurance holding company or mixed-activity financial holding company and which is located in the same Member State of the European Economic Area as the head office of the insurance holding company or mixed-activity financial holding company with parent insurance or reinsurance undertakings in more than one Member State of the European Economic Area;

3) which carries out supervision of the insurance or reinsurance undertaking with the largest balance sheet total if the group is headed by more than one insurance holding company or mixed-activity financial holding company which have their head offices and subsidiary insurance or reinsurance undertakings in different Member States of the European Economic Area;

4) which has issued a licence to engage in activities to the insurance or reinsurance undertaking with the largest balance sheet total, where more than one insurance or reinsurance undertaking which have their head offices in the European Economic Area Member States have as their parent the same insurance holding company or mixed-activity financial holding company and none of those insurance or reinsurance undertakings has its head office in the Member State of the European Economic Area in which the insurance holding company or mixed-activity financial holding company has its head office;

5) which issued a licence to engage in activities to the insurance or reinsurance undertaking with the largest balance sheet total where the group is a group without a parent undertaking, or in any circumstances not referred to in subparagraphs 1–4 of this paragraph.

4. By a joint decision taken by the supervisory authorities not later than within three months from opening the discussion which shall be initiated by the supervisory authorities and which may be initiated not more than once per year and taking into account the opinion of the group, the supervisory authority other than provided for in paragraph 3 of this Article may be designated if application of the provisions of paragraph 3 would be inappropriate, taking into account the structure of the group and the relative importance of the insurance and reinsurance undertakings’ activities in different countries. The designated group supervisor shall notify the insurance or reinsurance undertaking which heads the group and the undertaking within the group determined according to the criteria set out in paragraph 3 of this Article of the joint decision of the supervisory authorities and the reasons thereof.

Amendments to the paragraph of this Article:

No XII-1603, 9 April 2015, published in the Register of Legal Acts (TAR) 17 April 2015, ID code 2015-05897

5. In the course of the discussion, prior to taking the joint decision of the supervisory authorities or before expiry of the three-month period referred to in paragraph 4 of this Article which shall be deemed to be the conciliation period according to Article 19(2) of Regulation (EU) No 1094/2010, the supervisory authority shall be entitled to apply to the European Insurance and Occupational Pensions Authority for the latter to approve the decision. The supervisory authority shall also notify other supervisory authorities of such application. In such case, the supervisory authorities may take a joint decision only after the decision of the European Insurance and Occupational Pensions Authority which shall be binding upon them. The designated group supervisor shall notify the insurance or reinsurance undertaking which heads the group or the undertaking within the group designated according to the criteria laid down in paragraph 3 of this Article and the college of supervisory authorities of the joint decision of the supervisory authorities and reasons thereof.

Amendments to the paragraph of this Article:

No XII-1603, 9 April 2015, published in the Register of Legal Acts (TAR) 17 April 2015, ID code 2015-05897

6. In the absence of a joint decision of the supervisory authorities, the task of group supervisor shall be exercised by the supervisory authority identified in accordance with the criteria laid down in paragraph 3 of this Article.

Amendments to the paragraph of this Article:

No XII-1603, 9 April 2015, published in the Register of Legal Acts (TAR) 17 April 2015, ID code 2015-05897

7. The duties assigned to the group supervisor shall be as follows:

1) coordination of the gathering and dissemination of relevant or essential information for going concern and emergency situations, including the dissemination of information which is of importance for the supervisory task of a supervisory authority;

2) supervisory review and assessment of the financial situation of the group;

3) assessment of compliance of the group with the rules on solvency and of risk concentration and intra-group transactions;

4) assessment of conformity of the system of governance of the group to the requirements set out in Article 62 of this Law and of whether the members of the management or supervisory body of the group and the persons holding other management positions in the group fulfil the requirements set out in paragraph 5 of Article 22 of this Law;

5) planning and coordination, through regular meetings held at least annually or through other appropriate means, of the activities of the group carried out by the supervisory authorities in going-concern as well as in emergency situations, in cooperation with the supervisory authorities concerned and taking into account the nature, scale and complexity of the risks inherent in the business of all undertakings that are part of the group;

6) other tasks assigned to the group supervisor in the legal acts.

8. The supervisory authority shall participate in the work of the college of supervisory authorities chaired by the group supervisor.

9. The college of supervisory authorities shall ensure that cooperation, exchange of information and consultation processes among the supervisory authorities that are members of the college of supervisory authorities and the institutions exercising supervision of credit institutions and broker-dealers are effectively applied.

10. The supervisory authority shall lay down detailed procedure for implementation of the provisions of this Article and other requirements for cooperation and exchange of information among supervisory authorities system in its legal acts.

Article 64. Access to Information

1. All natural and legal persons included within the scope of group supervision and their related undertakings and participating undertakings, shall be entitled to exchange any information which could be relevant for the purposes of group supervision. Exercise of the afore-mentioned right shall not be deemed to constitute a breach of the confidentiality and data protection requirements set out in the transactions, legal acts and internal documents of the undertakings.

2. The supervisory authority shall be entitled to request that any natural or legal person provided information which could be relevant for the purposes of group supervision.

3. The supervisory authority willing to obtain information which could be relevant for the purposes of group supervision shall be entitled to apply directly to the undertakings within the group only if such information is not provided by the insurance or reinsurance undertaking subject to the group supervision requirements within a reasonable time limit.

4. Insurance and reinsurance undertakings, insurance holding companies and mixed-activity insurance holding companies, following Commission Delegated Regulation (EU) 2015/35 of 10 October 2014 supplementing Directive 2009/138/EC of the European Parliament and of the Council on the taking-up and pursuit of the business of insurance and reinsurance (Solvency II) (OJ 2015 L 12, p. 1), make the management and organisational structure of the group including all subsidiaries, related undertakings and major branches belonging to the group public on an annual basis.

Amendments to the paragraph of this Article:

No XII-1603, 9 April 2015, published in the Register of Legal Acts (TAR) 17 April 2015, ID code 2015-05897

Article 65. Verification of Information

1. The supervisory authority may carry out, either directly or through the intermediary of persons whom they appoint for that purpose, on-site verification of the information referred to in Article 64 on the premises of any of the following:

1) the insurance or reinsurance undertaking subject to group supervision;

2) related undertakings of the insurance or reinsurance undertaking referred to in subparagraph 1 of this paragraph;

3) parent undertakings of the insurance or reinsurance undertaking provided for in subparagraph 1 of this paragraph;

4) related undertakings of a parent undertaking of the insurance or reinsurance undertaking referred to in subparagraph 3 of this paragraph.

2. If the supervisory authority needs information disposed of by the undertaking supervised or not supervised in the Member State of the European Economic Area, the supervisory authority shall be entitled to request that the supervisory authority of the other Member State of the European Economic Area carried out an inspection. The supervisory authority shall be entitled to participate in the inspection or, upon consent of the supervisory authority of the other Member State of the European Economic Area, carry out such inspection by itself. The supervisory authority shall be entitled to apply to the apply to the European Insurance and Occupational Pensions Authority for assistance according to Article 19 of Regulation (EU) No 1094/2010 if, upon request of the supervisory authority, the supervisory authority of the other Member State of the European Economic Area fails to carry out an inspection within 2 weeks from the date of receipt of the application or if the supervisory authority is prevented from exercising the right to carry out an inspection and participate in the inspection.

Amendments to the paragraph of this Article:

No XII-1603, 9 April 2015, published in the Register of Legal Acts (TAR) 17 April 2015, ID code 2015-05897

3. Having received a request to carry out a verification of the undertakings referred to in paragraph 1 of this Article from the supervisory authority of the European Economic Area Member State and having notified the group supervisor, the supervisory authority shall carry out a verification by itself, grant the right to carry out a verification to audit firms or experts or allow the authority which made the request to carry it out by itself or participation of the supervisory authority in the verification.

4. The European Insurance and Occupational Pensions Authority shall be entitled to exercise the right to participation in the verification when it is carried out by two or more supervisory authorities.

Amendments to the paragraph of this Article:

No XII-1603, 9 April 2015, published in the Register of Legal Acts (TAR) 17 April 2015, ID code 2015-05897

Article 66. Group Solvency and Financial Condition Report

1. Participating insurance or reinsurance undertakings, insurance holding companies and mixed-activity financial holding companies shall disclose publicly, on an annual basis, a report on solvency and financial condition at the level of the group in accordance with the legal acts of the supervisory authority.

2. A participating insurance or reinsurance undertaking, an insurance holding company or a mixed-activity financial holding company may, subject to the agreement of the group supervisor, provide a single report on its solvency and financial condition which shall comprise the information at the level of the group and the information for any of the insurance or reinsurance undertaking within the group to be disclosed in accordance with the legal acts of the supervisory authority. Before granting the agreement, the group supervisor shall consult and duly take into account any views and reservations of the members of the college of supervisory authorities.

3. The supervisory authority shall establish the requirements for the group solvency and financial condition report.

Article 67. Sanctions

1. Where the insurance or reinsurance undertakings in a group do not comply with the requirements provided for in in this Section or where the requirements are met but solvency may nevertheless be jeopardised or where the intra-group transactions or the risk concentrations are a threat to the financial position of the insurance or reinsurance undertakings:

1) the measures necessary to rectify the situation as soon as possible shall be adopted by the group supervisor;

2the measures necessary to rectify the situation as soon as possible in respect of insurance or reinsurance undertakings shall be adopted by the supervisory authority.

2. If in the cases referred to in subparagraphs 1 and 2 of paragraph 1 of this Article the group supervisor is not the supervisory institution of the European Economic Area Member State in which the head office of the insurance holding company, the mixed-activity financial holding company or the insurance or reinsurance company is situated, the group supervisor shall notify the supervisory authority of the European Economic Area Member State in which the head office of the insurance holding company, the mixed-activity financial holding company or the insurance or reinsurance company is situated that it could assume necessary measures. The supervisory authority and, if necessary, the group supervisor shall coordinate the imposed sanctions with the respective supervisory authorities.

3. The supervisory authority shall be entitled to impose sanctions on the insurance holding companies, mixed-activity holding companies and the persons in control of such companies in accordance with the procedure prescribed by this Law. The supervisory authority shall closely cooperate with the respective supervisory authorities with a view to ensuring the effectiveness of the sanctions, in particular, if the administration or the main establishment of the insurance holding company or mixed-activity financial holding company is not in its head office.

SECTION FIVE

ACTIVITIES OF INSURANCE OR REINSURANCE UNDERTAKINGS IN

OTHER EUROPEAN ECONOMIC AREA MEMBER STATES AND THIRD COUNTRIES

Article 68. Right of Insurance Undertakings to Provide Services in Another European Economic Area Member State

1. An insurance undertaking which intends to provide services in another European Economic Area Member State must notify the supervisory authority, indicating the risks intended to be covered by insurance contracts and in case where the insurance undertaking intends to engage in the activities of insurance class provided for in subparagraph 10 of paragraph 3 of Article 7 of this Law (except for insurance against civil liability of carriers), submit documents referred to in subparagraph 4 of paragraph 2 of this Article. Information and documents must be submitted in Lithuanian and English and the state language or one of the state languages of another European Economic Area Member State, where under the legal acts of another European Economic Area Member State all documents submitted to the supervisory authority of that Member State must be in the state language or one of the state languages of that Member State.

2. 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 authority must forward to the supervisory authority of the European Economic Area Member State in which the insurance undertaking intends to provide services, notifying the insurance undertaking of it on the same day, the following information:

1) proof that the insurance undertaking meets the solvency capital and minimum capital requirements set out in the legal acts of the Republic of Lithuania;

2) a list of insurance classes in which the insurance undertaking has the right to engage in;

3) information on insurance risks submitted by the insurance undertaking which are intended to be covered or the type of other obligations to be assumed;

4) where the insurance undertaking intends to engage in the activity of insurance class referred to in subparagraph 10 of paragraph 3 of Article 7 of this Law (except for insurance against civil liability of carriers), documents certifying that the insurance undertaking is a member of the National Insurers’ Bureau and the guarantee reserve of that European Economic Area 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.

3. The supervisory authority shall have the right, within one month after receiving all the information specified in paragraph 1 of this Article, refuse to forward the information referred to in paragraph 2 of this Article, notifying the insurance undertaking thereof in writing, only where the insurance undertaking fails to comply with the requirements stipulated in the legal acts of the Republic of Lithuania and/or the financial standing of the insurance undertaking is not stable and sound according to the requirements set out in the legal acts of the Republic of Lithuania.

4. Upon receiving information referred to in paragraph 2 of this Article from the supervisory authority and having fulfilled other conditions laid down in the legal acts of another European Economic Area Member State, an insurance undertaking shall have the right to start providing services in another European Economic Area Member State.

5. An insurance undertaking must notify, not later than one month in advance, about any changes it plans to make in the information submitted pursuant to the provisions of paragraph 1 of this Article. Provisions of paragraphs 1–5 5 of this Article shall apply to submission of information by an insurance undertaking, forwarding of the submitted information to the supervisory authority of another European Economic Area Member State and refusal to forward the information. Refusal of the supervisory authority to forward information shall deprive the insurance undertaking of the right to make the planned changes.

Article 69. Establishment of a Branch of an Insurance Undertaking in Another European Economic Area Member State

1. An insurance undertaking which intends to establish a branch in another European Economic Area Member State must submit to the supervisory authority the following information and documents:

1) the name of another European Economic Area Member State in which it intends to establish a branch;

2) a business plan of a form and content determined by the supervisory authority;

3) the address of the registered office of the branch where correspondence may be sent and received and a confirmation that any correspondence addressed to the head of the branch of the insurance undertaking may be sent to the indicated address;

4) documents attesting that the insurance undertaking has appointed a person of good repute, having adequate professional qualifications and experience in the field of insurance to act as the head of the branch, who is duly empowered to establish rights and duties of the insurance undertaking which has established its branch in another European Economic Area Member State in respect of third parties, to represent the insurance undertaking in court and at other government and administration institutions of that European Economic Area Member State;

5) where an insurance undertaking intends to carry out, through a branch established in another European Economic Area Member State, insurance activity falling within the insurance class referred to in subparagraph 10 of paragraph 3 of Article 7 of this Law (except for insurance against civil liability of carriers), documents certifying that the insurance undertaking is a member of the National Insurers’ Bureau and the guarantee fund of that European Economic Area Member State.

2. Documents specified in paragraph 1 of this Article must be submitted in Lithuanian and English or in the state language or one of the state languages of another European Economic Area Member State, where under the legal acts of another European Economic Area Member State all documents submitted to the competent authority of that Member State must be submitted in the state language or one of the state languages of that Member State.

3. Within three months after receiving the documents and information specified in paragraph 1 of this Article and in the absence of the conditions referred to in paragraph 4 of this Article, the supervisory authority must forward the documents and information received, notifying the insurance undertaking thereof in writing on the same day, to the competent authority of another European Economic Area Member State in which the insurance undertaking intends to establish a branch, together with a proof that the insurance undertaking meets the solvency margin requirements set out in the legal acts of the Republic of Lithuania.

4. The supervisory authority may, within three months after receiving all the documents and information specified in paragraph 1 of this Article, refuse, notifying the insurance undertaking thereof and the supervisory authority of another European Economic Area Member State in writing, to forward the documents and information referred to in paragraph 1 of this Article only where:

1) the structure of the bodies and the system of governance of the insurance undertaking does not meet the requirements stipulated in the legal acts of the Republic of Lithuania and/or is not adequate for an efficient management of the insurance undertaking;

2) the insurance undertaking fails to comply with the requirements stipulated in the legal acts of the Republic of Lithuania and/or the financial standing of the insurance undertaking is not stable and sound according to the requirements stipulated in the legal acts of the Republic of Lithuania;

3) members of the supervisory and management bodies, persons holding other management positions and persons responsible for the risk management, actuarial, compliance assessment and internal audit functions of the insurance undertaking or the appointed manager of the established branch do not meet the criteria set out in the legal acts of the Republic of Lithuania;

4) it may be assumed from the submitted business plan that the interests of the policyholders, the insured persons, beneficiaries, and any injured third parties are not properly protected or there are reasonable grounds to believe that the obligations of the insurance undertaking arising from insurance contracts will not be fulfilled on a continuous basis.

5. The supervisory authority shall furnish the insurance undertaking with information on the conditions applicable to the activities of the branches of the insurance undertakings of other European Economic Area Member States received from the supervisory authority of another European Economic Area Member State without breaching the public order. An insurance undertaking may establish a branch and launch its activities upon receiving from the supervisory authority of another European Economic Area Member State information on the conditions of activity without breaching the public order and where such information is not received within two months from the receipt of the information referred to in paragraph 3 of this Law from the supervisory authority, upon the expiry of a two-month time limit.

6. The supervisory authority and the competent authority of another European Economic Area Member State where a branch has been established must be notified at least one month in advance of any planned changes in the information and documents referred to in subparagraphs 2, 3 and 4 of paragraph 1 of this Article. Submission of information by the insurance undertaking, forwarding of the submitted information to the competent authority of another European Economic Area Member State and refusal to forward information shall be subject to provisions of paragraphs 1–5 of this Article; however, the three-month time limit provided for in paragraphs 3 and 4 of this Article shall be replaced by a time limit of one month. Refusal of the supervisory authority to forward information shall deprive the insurance undertaking of the right to make the planned changes.

Article 69¹. Statistical Information on the Activity of Insurance Undertakings in Other Member States of the European Economic Area

1. An insurance undertaking shall separately provide the supervisory authority with information on the activities carried out in other Member States of the European Economic Area by exercising the right of establishment and on activity carried out by exercising the right to provide services. The afore-mentioned information shall include the amounts of premiums, benefits and commissions under each kind of insurance or reinsurance before deduction of the reinsurers’ share by separate Member States of the European Economic Area.

2. When providing information on the activity falling within the insurance class referred to in subparagraph 10 of paragraph 3 of Article 7 of this Law (except for insurance against civil liability of carriers) the insurance undertaking shall also notify of the frequency of insurance benefits and the average costs attributable to such insurance benefits.

Amendments to the paragraph of this Article:

No XII-1603, 9 April 2015, published in the Register of Legal Acts (TAR), 17 April 2015, ID code 2015-05897

Article 70. Branches of Insurance or Reinsurance Undertakings in Third Countries

1. Branches of insurance undertakings engaged in non-life assurance activity in the Confederation of Switzerland shall be established and shall operate under the rules applicable to the establishment of branches and activity in other European Economic Area Member States to the extent the Agreement between the European Economic Community and the Confederation of Switzerland on Direct Insurance Other than Life Assurance does not provide otherwise.

2. Branches of an insurance or reinsurance undertaking in third countries shall be established in accordance with the procedure established by the supervisory authority after obtaining an authorisation to establish a branch.

Article 71. Activity of Reinsurance Undertakings in Other Member States of the European Economic Area

Having provided the information requested by the supervisory authority, reinsurance undertakings shall be entitled to provide services and establish branches in other Member States of the European Economic Area.

CHAPTER III

ACTIVITIES OF INSURANCE AND REINSURANCE UNDERTAKINGS OF OTHER EUROPEAN ECONOMIC AREA MEMBER STATES IN THE REPUBLIC OF LITHUANIA

Article 72. Right to Carry out Activity in the Republic of Lithuania

Insurance or reinsurance undertakings of other European Economic Area Member States shall have the right to establish subsidiaries, provide services or establish a branch in the Republic of Lithuania.

Article 73. Right of Insurance Undertakings of Other European Economic Area Member States to Provide Services in the Republic of Lithuania

1. An insurance undertaking of another European Economic Area Member State shall have the right to start providing services in the Republic of Lithuania only upon the receipt by the supervisory authority from the competent authority of the Member State of documents which must be submitted by this authority to the supervisory authority in accordance with the legal acts of that European Economic Area Member State upon meeting other conditions stipulated in this Article.

2. Where an insurance undertaking of another European Economic Area Member State intends to provide insurance falling within the group referred to in subparagraph 10 of paragraph 3 of Article 7 of this Law, except for insurance against civil liability of carriers, it must additionally provide to the supervisory authority:

1) documents evidencing that the insurance undertaking of the other Member State of the European Economic Area is a member of the Motor Insurers’ Bureau of the Republic of Lithuania and participates in the guarantee fund of the Bureau;

2) documents evidencing that the insurance undertaking of the other Member State of the European Economic Area has assigned a representative for settlement of claims in the Republic of Lithuania who is empowered to represent the undertaking in the court and other state and administration institutions of the Republic of Lithuania as well as in dealings with natural and legal persons, and indicate the name, surname and the address of the representative;

3) documents evidencing that the assigned representative has been granted the right to administer insured events, pay insurance benefits, verify on behalf of the insurance undertaking of another European Economic Area Member State the fact of conclusion and coming into effect compulsory insurance contracts;

4) the address of the representative referred to in subparagraph 3 of this paragraph in the Republic of Lithuania.

3. Assignment of a representative provided for in this Article and the presence of a representative in the Republic of Lithuania shall not be considered a branch or agency and office of an insurance undertaking of another European Economic Area Member State in the Republic of Lithuania within the meaning of Article 6 of this Law; however, only a branch of the insurance undertaking of another Member State of the European Economic Area (the same as the represented undertaking or other than represented undertaking) established in the Republic of Lithuania may be assigned as a representative.

4. In any other case not provided for in this Article the possibility for insurance undertakings of other European Economic Area Member States to provide services in the Republic of Lithuania shall not give the right to an insurance undertaking of another European Economic Area Member State to assign a person subordinate to instructions and control of the represented undertaking who will in the Republic of Lithuania permanently or for a long period of time, who has been empowered to establish the rights and obligations for an insurance undertaking of another European Economic Area Member State with regard to third parties.

Article 74. Branches of Insurance Undertakings of Other European Economic Area Member States

1. Upon being informed by the supervisory authority of another European Economic Area Member State about the intention of an insurance undertaking of the Member State to establish a branch in the Republic of Lithuania and upon receiving from that authority information and documents of the insurance undertaking of another Member State which the authority must provide to the supervisory authority in accordance with the legal acts of that Member State, the supervisory authority must inform, within two months after the receipt of this information, the supervisory authority of that European Economic Area Member State about conditions applicable to the activities of branches of insurance undertakings of other Member States in the Republic of Lithuania precluding breaches of public order. Where the supervisory authority fails to provide such information within the set time period an insurance undertaking of another European Economic Area Member State shall have the right to establish a branch and commence its activities in the Republic of Lithuania.

2. An insurance undertaking of another Member State of the European Economic Area which, when planning to establish a branch in the Republic of Lithuania submitted to the supervisory authority of the European Economic Area Member State information and documents in accordance with the requirements of the legal acts of the Member State must, not later than one month in advance, notify the supervisory authority about any planned changes in the information and documents filed.

3. An insurance undertaking of another European Economic Area Member State shall have the right to engage in the activity falling within the group referred to in subparagraph 10 of paragraph 3 of Article 7 of this Law, except for insurance against civil liability of carriers, through a branch established in the Republic of Lithuania, only upon becoming a member of the Motor Insurers’ Bureau of the Republic of Lithuania and taking part in the guarantee fund of the Bureau.

4. The authorised representative of Lloyd’s insurers association must have the powers to represent the respective members of the association in judicial and other disputes arising out of the insurance contract or in relation thereto and before the public authorities and by his actions cause the establishment of rights and obligations for the insurers of the association. The policyholders, the insured persons, beneficiaries and the injured third parties shall have the same rights in respect of the representative as in disputes with any other insurance undertaking.

Article 75. Branches of Insurance Undertakings of the Confederation of Switzerland Engaged in Non-life Insurance Activity

Unless otherwise provided by the supervisory authority, the provisions applied to setting up and pursuit of activity for branches of insurance undertakings of other European Economic Member State shall also apply to setting up and pursuit of activity in the Republic of Lithuania for branches of insurance undertakings of the Confederation of Switzerland engaged in non-life insurance activity.

Article 76. Language

All documents filed with the supervisory authority shall be in the Lithuanian language, and where documents are filed by a supervisory authority or insurance undertaking of another European Economic Area Member State – also/or in the English language.

CHAPTER IV

ACTIVITY OF INSURANCE OR REINSURANCE UNDERTAKINGS OF THIRD COUNTRIES IN THE REPUBLIC OF LITHUANIA

Article 77. Right to Engage in Insurance or Reinsurance Activity

1. Foreign insurance or reinsurance undertakings shall have the right to engage in insurance activity only through a branch established in the Republic of Lithuania, except for the cases set out in subparagraph 4 of paragraph 1 of Article 3 of this Law.

2. Activity and supervision of branches of insurance or reinsurance undertakings of third countries shall be subject to the same requirements as insurance undertakings of the Republic of Lithuania, taking account of exceptions and characteristics of the legal status and activity of a branch provided for in this Chapter and resolutions of the supervisory authority.

Article 78. Authorisation for Insurance or Reinsurance Activities of a Branch

1. A branch of an insurance or reinsurance undertaking of a third country shall have the right to carry out insurance or reinsurance activity in the Republic of Lithuania subject to an authorisation to engage in insurance or reinsurance activity (hereinafter referred to as the “authorisation for the activity of a branch”) obtained from the supervisory authority for the activity of the branch and subsequent registration of the branch in the Register of Legal Entities. The manager of the Register of Legal Entities must notify the supervisory authority of the fact of registration of a branch of the insurance or reinsurance undertaking of a third country within five working days.

2. An authorisation for insurance activity of a branch shall be issued for all the insurance activities of the whole insurance class or a number of insurance classes falling within life or non-life insurance branches, except the cases when the applicant wishes to engage in the insurance of only a part of risks covered by the insurance class/classes.

3. An authorisation for the reinsurance of a branch shall be issued for the activity of reinsurance of the insurance contracts for insurance classes of life assurance and/or non-life insurance branches.

4. An authorisation for the activity of a branch shall be granted for an indefinite period of time and shall be valid only in the territory of the Republic of Lithuania.

5. An authorisation for the activity of a branch shall be issued only to the particular insurance or reinsurance undertaking of a third country and may not be transferred or pass to another person.

6. An authorisation shall be issued for insurance or reinsurance activity of only one branch. Structural units of the branch shall be established and operate in the Republic of Lithuania in the manner stipulated by the supervisory authority.

7. The procedure of granting authorisations and the form of the authorisation for the insurance activity of a branch of an insurance or reinsurance undertaking of a third country shall be determined by the supervisory authority.

Article 79. Application for Authorisation for Activity of a Branch

1. An insurance or reinsurance undertaking of a third country must file with the supervisory authority an application for an authorisation for the activity of a branch in the Republic of Lithuania.

2. An application for authorisation for the activity of a branch in the Republic of Lithuania an insurance or reinsurance undertaking of a third country must be accompanied by the following documents:

1) a written confirmation of the supervisory authority of a third country that the insurance or reinsurance undertaking of that country has the right to engage in insurance or reinsurance activity in the third country in which it is registered;

2) an authorisation issued by a supervisory authority of the third country to establish a branch in the Republic of Lithuania or a proof that the supervisory authority of the third country does not object to the establishment of a branch in the Republic of Lithuania;

3) confirmation of the supervisory authority of the third country that the insurance or reinsurance undertaking of that country has met for the last three years the requirements for activities of insurance or reinsurance undertakings provided for in the legal acts of the third country and information on the insurance classes in the activities of which the insurance undertaking of the third country has the right to engage and the insurance branches in the reinsurance activity of which the reinsurance undertaking of the third country has the right to engage. Where the insurance or reinsurance undertaking of a third country has been operating for less than three years, the supervisory authority of the third country must provide proof about the entire period of the activities of the insurance or reinsurance undertaking;

4) written commitment of the insurance or reinsurance undertaking of a third country to satisfy the solvency capital requirement and the minimum capital requirement set for the branch;

5) a decision of the body of the insurance or reinsurance undertaking of a third country to establish a branch in the Republic of Lithuania, to approve the articles of association of the branch, and to appoint the head of the branch, as well as a written commitment of the body to keep financial statements and other documents related to the activities of the established branch at the office of the branch;

6) documents certifying that the insurance or reinsurance undertaking of a third country has appointed a person of good repute, adequate professional qualifications and experience to act as the head of the who has been empowered to establish rights and obligations for the insurance or reinsurance undertaking, to represent the insurance or reinsurance undertaking before the court of the Republic of Lithuania and other state and administration institutions;

7) documents certifying that the insurance or reinsurance undertaking of a third country has appointed persons of good repute, adequate professional qualifications and experience to act as the persons responsible for the risk management, actuarial, compliance assessment and internal audit functions;

8) documents evidencing that the system of governance of the insurance or reinsurance undertaking of a third country meets the requirements set forth in Section two of Chapter II of this Law and other legal acts;

9) the articles of association of the branch;

10) outsourcing contracts (if any);

11) information in a form set by the supervisory commission about shareholders, other controlling persons, participating undertakings and persons and the members of the supervisory and management bodies of the insurance or reinsurance undertaking of a third country;

12) a scheme of operations in a form set by the supervisory authority together with financial statements of the insurance or reinsurance undertaking of a third country for the last three years audited by an audit firm. Where the insurance or reinsurance undertaking of a third country has been operating for less than three years, it shall be subject to a requirement to provide financial statements for each completed financial year audited by an audit firm;

13) documents attesting that the insurance or reinsurance undertaking of a third country has concluded a bank deposit contract as specified in paragraph 1 of Article 87 of this Law, and documents attesting that the insurance or reinsurance undertaking of a third country has assets the amount of which is not lower than a half of the minimum capital referred to in paragraph 4 of Article 40 of this Law taking into account the activities to be carried out in the Republic of Lithuania. Furthermore, it shall be obligatory to provide information about the sources of all such funds;

14) for the activity of the insurance class provided for in subparagraph 10 of paragraph 3 of Article 7 of this Law, with the exception of insurance against civil liability of carriers, documents evidencing that the insurance undertaking has assigned in each European Economic Area Member State a representative empowered to deal with issues of insurance benefits, also to indicate the name, surname (business name) and address of the representative.

Article 80. Granting of Authorisation for the Activity of a Branch

1. The supervisory authority shall, within six months after filing of an application for an authorisation for the activity of a branch, adopt a decision on granting of an authorisation and notify the applicant in writing thereof.

2. The supervisory authority shall refuse to issue authorisation for insurance or reinsurance activity of a branch where:

1) documents stipulated in this Law or requested following the procedure set out in this Law have not been filed or where documents filed do not meet the requirements of this Law and the legal acts of the supervisory authority;

2) an insurance or reinsurance undertaking of a third country in the Republic of Lithuania where it has been registered does not own assets equivalent in Euro to at least 1/2 of the amount referred to in paragraph 4 of Article 40 of this Law, taking account of the activity in which it intends to be engaged;

3) members of the supervisory board, the board of the insurance or reinsurance undertaking of a third country (or members of the bodies equivalent to them), the manager, and the head of the branch to be established, the persons responsible for the risk management, actuarial, compliance assessment and internal audit functions are not of good repute, adequate professional qualifications and experience;

4) shareholders (member share holders etc.) and controlling persons of an insurance or reinsurance undertaking of a third country are not of good repute, their financial situation and/or the financial situation of the insurance or reinsurance undertaking of a third country is not stable and sound;

5) the submitted business plan suggests that the interests of the policyholders, insured persons, beneficiaries and any injured third parties of the insurance undertaking of a third country will not be properly protected or there is a good reason to believe that the commitments of the branch of the foreign insurance or reinsurance undertaking arising from insurance or reinsurance contracts will not be met on a continuous basis;

6) the sources of the deposit of the insurance or reinsurance undertaking of a third country and the minimum capital of its branch is not legal;

7) the head of the branch of the insurance or reinsurance undertaking of a third country also holds a position which may give rise to a conflict of interests;

8) the supervisory authority has not entered into a co-operation agreement with the insurance or reinsurance supervisory authority of the third country on the exchange of information or the supervisory authority of the third country has not assumed, in accordance with form of obligation determined by the supervisory authority, a unilateral obligation to provide information to the supervisory authority;

9) legal acts of the third country do not provide conditions for an ongoing and efficient supervision of the insurance or reinsurance undertaking of that country, protection of the interests of the policyholders, insured persons, beneficiary, and any injured party, or the supervisory authority of that country does not perform efficient supervision of that insurance or reinsurance undertaking and does not protect the interests of the policyholders, insured persons, beneficiaries, and any the injured party.

3. When issuing an authorisation for the insurance or reinsurance activities of a branch of a third country insurance or reinsurance undertaking the supervisory authority shall have the right to set conditions which must be fulfilled by the branch of the said undertaking before starting its activity and/or conditions or restrictions on insurance or reinsurance activity of certain risks which must be complied with by the branch of a third country insurance or reinsurance undertaking in its activities.

4. A branch of a third country insurance or reinsurance undertaking in the Republic of Lithuania may engage only in the insurance or reinsurance activity of those insurance classes which it is authorised to carry out by its licence (authorisation etc.) for insurance or reinsurance activity and/or legal acts of the third country. Where a third country insurance undertaking has the right to engage in life assurance and non-life insurance branches at the same time, a branch of a third country insurance undertaking established in the Republic of Lithuania shall have the right to engage only in the activity of insurance classes falling within non-life insurance branch.

5. When there is a suspicion that the deposit of a third country insurance or reinsurance undertaking or the minimum capital of its branch may have been paid from financial resources of illegal origin, the supervisory authority must apply the State Security Department or other supervisory authorities seeking its conclusion about the sources of the said funds. In such a case the time period specified in paragraph 1 of this Article shall be suspended and shall be resumed upon receipt of the conclusion from the State Security Department or other competent authorities.

Article 81. Information about Changes

A branch of a third country insurance or reinsurance undertaking established in the Republic of Lithuania must notify the supervisory authority, following the procedure prescribed by it, about any changes in the information given in the documents submitted to the supervisory authority for obtaining an authorisation for activities of the branch.

Article 82. Suspension and Withdrawal of Authorisation for the Activity of a Branch

1. The supervisory authority shall have the right to suspend the authorisation for the activity of a branch on the grounds specified in paragraph 1 of Article 205 of this Law.

2. The supervisory authority shall have the right to withdraw the authorisation for the activity of a branch where:

1) a third country insurance undertaking or its branch in the Republic of Lithuania breached the insurance or reinsurance activity conditions;

2) a branch of a third country insurance or reinsurance undertaking has breached the legal acts regulating its activity;

3) at the request of a third county insurance or reinsurance undertaking;

4) the branch of a third country insurance or reinsurance undertaking has not commenced insurance or reinsurance activities within 12 months after the issuance of the authorisation for the activity of a branch;

5) the branch of a third country insurance or reinsurance undertaking has not been engaged in insurance or reinsurance or related activity for more than six months;

6) the third country insurance or reinsurance undertaking is in liquidation or bankruptcy proceedings have been instituted against it;

7) the time period for the operation of the branch se in the articles of association of the branch has expired;

8) the supervisory authority of a third country prohibits to the third country insurance or reinsurance undertaking to carry out its activity in the Republic of Lithuania;

9) in the case specified in paragraph 9 of Article 89 of this Law;

10) the court hands down a decision to terminate the activity of the branch for a violation of the laws of the Republic of Lithuania.

3. The supervisory authority shall also withdraw an authorisation for the activity of a branch if the branch of the third country insurance or reinsurance undertaking has failed to comply with the minimum capital requirement and the supervisory authority believes that the short-term plan for restoration of the financial standing provided according to Article 46 of this Law is inappropriate or the branch of the third country insurance or reinsurance undertaking has failed to implement the approved short-term plan for restoration of the financial standing within three months from the date of noticing that the minimum capital requirement is not complied with.

4. The supervisory authority shall notify the supervisory authority of the third country in question of its decision to withdraw the authorisation for the activity of the branch.

5. The decision on the withdrawal of the authorisation for the activity of a branch must be thoroughly substantiated. The supervisory authority must notify the third country insurance or reinsurance undertaking about its decision and the reasons for it.

6. Having withdrawn the authorisation for the activity of a branch, the supervisory authority shall assume the measures set out in this Law in order to protect the interest of the policyholders, insured persons, beneficiaries and injured third parties and shall be entitled to seize the assets of the third country insurance or reinsurance undertaking assigned to the branch.

7. The supervisory authority shall cooperate and coordinate its actions with the institutions of other European Economic Area Member States in which the branches of the third country insurance undertaking are established.

Article 83. Peculiarities of Management of a Branch

1. Before the appointment of the head of a branch, the third country insurance or reinsurance undertaking must provide to the supervisory authority information in the form determined by the supervisory authority and obtain approval of the supervisory authority for the candidate applying for the position of the head of the branch. The supervisory authority shall adopt a decision on the approval of the candidate within 30 working days from the date of receipt of information of the prescribed form.

2. The head of a branch of a third country insurance or reinsurance undertaking may not perform the duties of a member of other management bodies, hold other management positions or be the person responsible for the risk management, actuarial, internal audit and compliance assessment functions in the branch, be a member of the supervisory board or the board or a manager of another insurance undertaking or be employed in the administration of another insurance undertaking.

Article 84. Business Plan

The activities of a branch of a third country insurance or reinsurance undertaking must be based on a business plan.

Article 85. Specific Features of Reinsurance Activity of a Branch

A branch of a third country insurance or reinsurance undertaking established in the Republic of Lithuania shall have the right to engage in reinsurance of the risks of the insurance class in which it carries out its activities in accordance with the procedure stipulated in the laws of the Republic of Lithuania, and only in the cases where the third country insurance undertaking has the right to engage in reinsurance of the risks of an analogous insurance class.

Article 86. Finances of a Branch

1. For the purposes of calculation of the technical provisions of the insurance or reinsurance undertaking of a third country, only the activities carried out by the branch shall be taken into account.

2. For the purposes of calculation of the solvency capital requirement and the minimum capital requirement of a branch of the insurance or reinsurance undertaking of a third country providing life assurance and non-life insurance services, only the activities carried out by the branch shall be taken into account.

3. At least a half of the amount referred to in paragraph 4 of Article 40 of this Article (depending on the activities to be carried out or already carried out) must be covered by eligible own funds of the insurance or reinsurance undertaking of a third country attributed to the branch in accordance with the requirements established by the supervisory authority. Assigned own funds for the purposes set out in this paragraph shall include the funds of the deposit referred to in Article 87 of this Law.

4. The eligible own funds meeting the minimum capital requirement to cover the solvency capital requirement must be held or invested in the Republic of Lithuania and the difference must be held or invested in other Member States of the European Economic Area.

Article 87. Deposit

1. A third country insurance or reinsurance undertaking which has established a branch in the Republic of Lithuania must, for the entire period of activity of the branch, enter into a demand deposit contract with a credit institution or established in the Republic of Lithuania or a branch of a credit institution for an amount of money not lower than 1/4 of the amount referred to in paragraph 4 of Article 40 of this Law, having regard to the activity in which the established branch intends to engage.

2. Funds referred to in paragraph 1 of this Article may be used only in accordance with the procedure determined by the supervisory authority in order to discharge the obligations of the branch arising from insurance or reinsurance contracts.

3. The bank deposit contract specified in paragraph 1 of this Article must have a clause providing that the branch of the third country insurance or reinsurance undertaking or a branch thereof shall have the right to dispose of the deposit funds only upon submitting to the bank a written consent of the supervisory authority.

Article 88. Transfer of Rights and Duties under Insurance or Reinsurance Contracts of a Branch

1. A branch of a third country insurance or reinsurance undertaking shall have the right to transfer rights and duties under all insurance or reinsurance contracts or part of them to an insurance or reinsurance undertaking or a branch of a third country insurance or reinsurance undertaking established in the Republic of Lithuania where the information available to the supervisory authority or the information held by the supervisory authority of the chosen European Economic Area Member State, provided according to the procedure set out in Article 89 of this Law, allows to assume that after the transfer of the rights and duties, the entity taking over the rights and duties complies with the solvency capital requirements.

2. A branch of a third country insurance or reinsurance undertaking shall have the right to transfer rights and duties under all insurance or reinsurance contracts or part of them to an insurance or reinsurance undertaking of another European Economic Area Member State where a supervisory authority of this Member State confirms that after the transfer of the rights and duties, the solvency capital requirement shall be complied with by the entity taking over the rights and duties.

3. A branch of a third country insurance or reinsurance undertaking shall also have the right to transfer rights and duties under all insurance or reinsurance contracts or part of them to a branch of a third country insurance or reinsurance undertaking established in another European Economic Area Member State, where the supervisory authority of that Member State or the chosen supervisory authority of the European Economic Area Member State specified in accordance with the procedure established in Article 89 of this Law certifies that after the transfer of the rights and duties, the solvency capital requirement shall be complied with by the entity taking over the rights and duties, that the legal acts of that Member State permit such transfers of rights and duties, and that the Member State in question does not object to the transfer of rights and duties.

4. In cases specified in paragraphs 1, 2 and 3 of this Article, the supervisory authority shall issue an authorisation for the transfer of rights and duties under insurance or reinsurance contracts only where the conditions referred to in subparagraphs 1–4 of paragraph 4 of Article 50 of this Law are met and a consent has been obtained from the supervisory authority of another European Economic Area Member State in which the insurance risk is situated or another European Economic Area Member State of the commitment.

5. Where a consent or approval stipulated in this Article is not received within three months after the submission of information to the supervisory authority of another European Economic Area Member State, it shall be deemed that the supervisory authority of the Member State in question does not object to the transfer of rights and duties.

6. Transfer of rights and duties shall also be subject to other requirements set out in Articles 49 and 50 of this Law to the extent this Law does not provide otherwise.

7. The mandatory transfer of the rights and duties under insurance contracts shall be regulated in Articles 153 and 206 of this Law.

Article 89. Advantages in Establishing or upon Establishment of Branches in Several European Economic Area Member States

1. A third country insurance or reinsurance undertaking which intends to obtain or has already obtained authorisations for activity of a branch in more than one European Economic Area Member State shall have the right to apply to the supervisory authority for the general application of the following advantages:

1) the solvency capital requirement may be calculated having regard to the activity of branches of the insurance or reinsurance undertaking carried out in the Republic of Lithuania and other European Economic Area Member States (taking into account only the activities carried out by all branches of insurance or reinsurance undertakings of a third country established in the European Economic Area Member States;

2) a deposit of the insurance or reinsurance undertaking of a third country may be kept in only one European Economic Area Member State in which the activities are carried out;

3) the assets representing the minimum capital requirement to cover the solvency capital requirement may be in one of the Member States of the European Economic Area in which the activities are carried out.

2. The application shall be accompanied by documents certifying that an analogous application has been or is being filed with the supervisory authorities of all other European Economic Area Member States in which the third country insurance or reinsurance undertaking intends to carry out or is already carrying out activity through the established branches. The application must indicate the chosen supervisory authority of the European Economic Area Member State which in the future will supervise solvency determined by the activities carried out in the European Economic Area Member States also specifying the reasons for choosing this particular supervisory authority. The deposit referred to in Article 87 of this Law must be held in the chosen Member State of the European Economic Area.

3. Advantages may be applied only where all the supervisory authorities of the European Economic Area Member States to which an application for advantages must be submitted agree to apply the advantages.

4. Advantages shall come into effect when the chosen supervisory authority informs the supervisory authority and the supervisory authorities of the other European Economic Area Member States that it will supervise solvency determined by the insurance activity carried out by the branches in the Republic of Lithuania and the other European Economic Area Member States or, where the supervisory authority has been chosen as the supervisory authority, when it informs the appropriate supervisory authorities of the other European Economic Area Member States.

5. The supervisory authority must provide information necessary for the supervision of solvency to the supervisory authority of another European Economic Area Member State chosen by a third country insurance or reinsurance undertaking.

6. Having regard to the advantages revoked by other supervisory authorities, the supervisory authority shall revoke the application of advantages where at least one supervisory authority requests that.

7. Sets of financial statements and other reports of branches of third country insurance or reinsurance undertakings shall be submitted to the chosen insurance authority of the European Economic Area Member State following the procedure set out in the legal acts of that Member State.

8. After withdrawal of an authorisation for activity of a branch of a third country insurance or reinsurance undertaking enjoying an advantage, the supervisory authority which is the chosen supervisory authority must notify the supervisory authorities of the other European Economic Area Member States in which the third country insurance or reinsurance undertaking has branches.

9. Upon receiving information that the supervisory authority of another Member State has adopted a decision to withdraw the authorisation for activity of a branch of a third country insurance or reinsurance undertaking enjoying an advantage, the supervisory authority shall have the right to resort to sanctions also to the branch of the third country insurance or reinsurance undertaking established in the Republic of Lithuania. Where the chosen supervisory authority of another European Economic Area Member State has adopted a decision to withdraw the authorisation for activity due to not complied with solvency requirements calculated by including all the branches of the third country insurance or reinsurance undertaking in the European Economic Area Member States, the supervisory authority shall withdraw the authorisation for activity of the branch.

10. In carrying out supervision of solvency of the branch of a third country insurance or reinsurance undertaking in the Republic of Lithuania, the chosen supervisory authority of another European Economic Area Member State referred to in paragraph 2 of this Article shall have the same rights to have access to information as the supervisory authority.

CHAPTER V

INSURANCE CONTRACT AND CO-INSURANCE

SECTION ONE

GENERAL PROVISIONS

Article 90. Application of Provisions of this Chapter

1. Pre-contractual relations between the parties, the terms and conditions of the insurance contract and the relations arising from and related to the insurance contract shall be subject to provisions of the Civil Code and this Chapter.

2. Provisions of this Chapter shall apply to reinsurance only where this is expressly provided for in this Chapter.

3. The provisions of Section One of this Chapter shall apply to all insurance contracts, unless the provisions of other sections of this Law or this section provide otherwise.

4. The provisions of Sections One, Two and Three of this Chapter regulating contractual relations of insurance contracts, except for the provision of Article 111 of this Law the non-application of which may not be agreed, shall apply to insurance contracts covering large risks to the extent the parties to the contract have not agreed otherwise.

Article 91. Classification of Insurance Contracts

1. According to the branches of insurance, insurance contracts may be classified into life and non-life insurance contracts. Non-life insurance contracts shall comprise property, civil liability and health insurance contracts.

2. According to the nature of insurance benefits, insurance contracts shall be classified into indemnity and sum insurance contracts.

3. Sum insurance contracts shall be life assurance contracts and health insurance contracts under which the insurer commits to pay out, upon occurrence of an insured event, a benefit equal to the sum insured or part thereof.

4. Indemnity insurance contracts shall be property, civil liability and health insurance contracts under which the insurer commits to pay out, upon occurrence of an insured event, a benefit equal to the amount of the loss incurred.

Article 92. Insurance Policy Conditions

1. Insurance policy conditions must specify the following:

1) cases where insurance contracts are concluded upon a written application of the policyholder;

2) insured events;

3) non-insured events where the insurer is not under an obligation to pay insurance benefits;

4) the subject covered;

5) procedure for calculation of sums insured (where they are established), calculation of rates of premiums, procedure for payment of premiums as well as consequences for the breaches of the procedure;

6) conditions for double insurance, partial insurance and supplementary insurance in case of an indemnity insurance contract;

7) rights and duties of the insurer, policyholder, beneficiary and the injured third party;

8) loss evaluation procedure;

9) procedure for calculation of benefits and time periods for their payment;

10) revision and termination of the terms and conditions of an insurance contract, including the procedure for termination of an insurance contract where the policyholder objects to the insurer’s intention to transfer rights and duties under the insurance contract to another insurer(s);

11) the procedure for settlement between the parties to the contract after the termination of the insurance contract, including settlement with the policyholder who, objecting to the insurer’s intention to transfer rights and duties under the insurance contract to another insurer(s) has terminated the insurance contract;

12) the procedure for transfer of the insurer’s rights and duties under the insurance contract to another insurer;

13) the procedure for resolution of disputes between the policyholder and the insurer;

14) the procedure for providing information to the other party to the contract.

2. Insurance policy conditions must be published on the website of the insurance undertaking.

3. At the request of the supervisory authority, the insurer must amend insurance policy conditions which contradict the provisions of legal acts or violate consumer rights and interests. At the request of the supervisory authority, the insurer must in the future conclude insurance contracts according to the amended insurance policy conditions.

4. Before commencing compulsory insurance, at the request of the supervisory authority, the insurer must submit compulsory insurance policy conditions to the supervisory authority, except for the cases where compulsory insurance conditions are provided for in legal acts. The supervisory authority shall verify whether the submitted compulsory insurance conditions are in compliance with legislative requirements, are not in breach of the interests of policyholders, insured persons, beneficiaries and the injured third parties, including consumers.

Article 93. Information for the Policyholder

1. An insurance or reinsurance undertaking, an insurance or reinsurance undertaking of another European Economic Area Member State or a branch of the insurance or reinsurance undertaking of a third country shall be entitled to advertise its services by all available means of communication in accordance with the rules regulating the form and content of advertising approved by the supervisory authority aimed at ensuring the interests of the policyholders, insured persons, beneficiaries and injured third parties.

2. Before concluding a non-life insurance contract, the insurer or a person authorised by him must provide to the policyholder who is a natural person:

1) information specified in paragraph 8 of Article 6.993 of the Civil Code;

2) information about the law applicable to the insurance contract. If the contractual parties are free to choose the applicable law – the law proposed by the insurer.

3. During the period of validity of the contract, the insurer must inform, without delay, the policyholder of a non-life insurance contract, who is a natural person, about any changes in the information specified in paragraph 1 of this Article.

4. Upon conclusion of an insurance contract, an insurance policy must be issued to the policyholder, and where an individual insurance contract has been concluded – a copy of the individual insurance contract.

5. Where upon conclusion of an insurance contract, the policyholder applies to the insurer with a request to be provided with copies of the insurance policy conditions or the individual insurance contract, the insurance policy, the policyholder’s written application for the conclusion of an insurance contract and any other documents in attestation of the conclusion of the insurance contract, the insurer must issue the policyholder with copies of the documents requested after the latter pays the agreed fee which is not in excess of the costs of issuing of copies of documents (where such a fee is provided for in the insurance contract).

6. Where this Chapter provides for individual negotiation of the terms and conditions of the insurance contract, the insurer must inform the policyholder about the proposed condition of the insurance contract as well as its consequences. This condition of individual agreement shall be valid only where the policyholder confirms in writing that he has familiarised himself with it and expresses his written consent to include it in the insurance contract.

7. In cases where this Chapter sets forth for provision of information in writing, this requirements shall be deemed to be complied with if, upon individual agreement and consideration in advance, information shall be deemed to be provided by e-mail, fax and other telecommunication terminal equipment enabling proving the fact of provision of information.

Article 94. Insurable Interest

A lawful interest of the policyholder or the insured person which may be expressed in money shall be an obligatory condition of an indemnity insurance contract.

Article 95. Insurance Risk and Processing of Personal Data

1. Before conclusion of an insurance contract, the insurer shall have the right to assess insurance risk in accordance with the procedure set out in Article 6.994 of the Civil Code.

2. In assessing the insurance risk the insurer shall not be entitled to take into account the insured person’s gender as a factor influencing calculation of the insurance premiums and benefits.

3. In calculating insurance premiums and insurance benefits, the insurer shall not be entitled to take into account the factors related to pregnancy and maternity as factors influencing insurance risk.

4. When concluding and performing a contract the insurer and insurance intermediary shall be entitled to process personal data of the insured person, beneficiary and the payer of insurance premiums without their consent, except for exceptional personal data.

Article 96. Failure to Pay the Premium

1. If the policyholder fails to pay the premium or its part within the time period provided for in the insurance contract (except in the cases where coming into effect of the contract is conditional on the payment of the premium or its part), the insurer must inform the policyholder thereof in writing, and state that unless the premium or its part is paid within 30 days from the date of sending the notification to the policyholder, insurance cover under the insurance assurance contract shall be suspended and renewed only after the policyholder pays the premium or its part and, in case of a non-life insurance contract, the insurance cover shall expire (except for the cases where suspicion of the insurance cover is agreed in the insurance contract). If the contract does not provide for any other way of notification, it shall be presumed that the policyholder has received the notice sent by the insurer by post after a reasonable period of time after it has been sent. The insurance contract may provide for time periods longer than those specified in this paragraph.

2. If an insured event occurred during the suspension of the insurance cover, the insurer shall not be under an obligation to pay the insurance benefit. If, in case of provision of the services of insurance against civil liability, the insurance contract provides that an insured event is considered to be a submission of the claim for compensation of the damage, the performance of any acts that resulted in the damage during the suspension of the insurance cover shall grant the insurer the right to refuse to pay the benefit even if the claim for compensation of the damage has been submitted after the suspension of the insurance cover.

3. If the suspension of insurance cover under the life assurance contract due to failure to pay the insurance premium lasts for more than six months, the insurer shall have the right to terminate the insurance contract unilaterally.

Article 97. Right to the Insurance Benefit

The right to request payment of the insurance benefit shall belong to the policyholder and, in cases provided for in this Law and/or the insurance contract, also to the beneficiary or the injured third party. If the beneficiary or the injured third party requests payment of the insurance benefit, the insurer shall have the right to use all the pleadings he has against the policyholder.

Article 98. Payment of the Insurance Benefit

1. The policyholder, beneficiary and/or any injured third party must provide to the insurer submit all the documents and information available to him about the circumstances and consequences of the insured event which are essential when determining the amount of the benefit. At the request of the insurer, the persons mentioned in this paragraph must also provide documents about the circumstances and consequences of the insured event essential when determining the amount of the benefit which he is entitled to obtain following the procedure established by laws and other legal acts. The insurance contract must indicate what documents are to be provided to the insurer.

2. The insurer must investigate the circumstances necessary to establish the fact and consequences of the insured event and determine the insurance benefit, by making a reasonable effort. The insurance benefit must be paid not later than within 30 days from the day of receipt of all the information important for establishing the fact, circumstances and consequences of the insured event as well as determining the amount of the insurance benefit. If the insurance contract provides for payment of periodic insurance benefits, the provision of this paragraph that insurance benefit must be paid not later than within 30 days from the day of receipt of all relevant information applicable to the first periodic insurance benefit. If an event is a non-insured, the insurance undertaking must refuse payment of an insurance benefit within 30 days from the date of receipt of all information relevant to establishing the fact of the event, the circumstances and consequences thereof. In case of provision of life assurance in relation to capital accumulation where the insurance benefit is paid upon expiry of the time limit set in the insurance contract, the insurance benefit must be paid not later than within seven working days from the expiry of the afore-mentioned time limit or, where the insurance contracts provides for that in order to pay out the insurance benefit, a written application of the policyholder or beneficiary must be submitted or the terms and conditions of the insurance contract must be complied with, not later than within seven working days from the date of submission of the application or fulfilment of other terms and conditions provided for in the insurance contract. In the event where an application is filed before expiry of the time limit set in the insurance contract, the insurance benefit must be paid out not later than within seven working days from the expiry of the time limit set in the insurance contract.

3. The insurer shall not have the right to:

1) pay the insurance benefit or refuse to pay it unless he is convinced of the occurrence of the insured event;

2) refuse to pay the insurance benefit unless he has verified all the information available to him.

4. At the request of the insurer, natural and legal persons must provide him with all the information available to them about the circumstances and consequences of the insured event and of the event that may be recognised as an insured event. If the circumstances of the insured event or the event that may be recognised as an insured event are investigated by state institutions, at the request of the insurer, these institutions must provide, free of charge, information in writing about the facts established during the investigation and its findings.

5. When investigating the circumstances of the insured event and the event which may be recognised as an insured event according to the life assurance, health insurance or civil liability insurance contracts the insurer shall be entitled to receive and further process data on the health condition of the insured person and the injured third party, provided medical treatment services, diagnosed diseases, suffered traumas and reasons of the death available to personal healthcare institutions or data processed in other state or municipal institutions and in registers, information systems or other data files.

6. If the event is an insured event and the insurer and the policyholder disagree on the amount of the insurance benefit, at the request of the policyholder, the insurer must pay out the amount of the benefit undisputed by the parties, where determining an exact amount of damage takes more than three months.

7. The insurer must prove the circumstances which release him from payment of the insurance benefit or give him the right to reduce the benefit.

8. When the insurer refuses to pay the benefit or reduces it due to violation of the insurance contract conditions by the policyholder, he must take account of the policyholder’s fault, the gravity of breach of the insurance contract conditions, its causal relationship with the insured event and the amount of damage resulting from the breach. When the insurer refuses to pay the insurance benefit or reduces it, he must provide a detailed and reasoned explanation of the reasons for such a decision to the policyholder, beneficiary or the injured third party.

9. Where the insurance benefit has not been paid within 30 days from the report about the insured event, the insurer must provide to the policyholder (beneficiary or injured third party) a detailed account in writing about the progress of the investigation of the insured event, except for the cases of lack of data or information only from the policyholder (beneficiary or injured third party) and the policyholder (beneficiary or injured third party) has already been notified of documents or information that must be provided by this person for the purposes of investigation of an insured event.

10. In pursuance of compliance with the data protection requirements and the requirements of other legal acts, when paying out a benefit the insurer must notify the beneficiary and, at the request of the policyholder, the policyholder in writing.

Article 99. Automatic Extension of the Period of Validity of an Insurance Contract

1. Upon expiry of the period of validity of an insurance contract, in the cases provided for in the insurance contract the period of validity of the contract may be extended automatically but for not longer than one year, unless a party to the insurance contract expresses disagreement as to the extension of the contract.

2. In the case specified in paragraph 1 of this Article, the disagreement must be stated by a party to the contract in writing at least one month before the expiry of the period of validity of the insurance contract and where the period of validity of the contract is shorter than three months – before any other reasonable term agreed between the parties.

3. The number of automatic extensions of the insurance contracts shall be unlimited. Conditions for an automatic extension of the period of validity of the insurance contract must be negotiated individually at the moment of conclusion of the insurance contract.

Article 100. Settlement of the Insurer with the Policyholder after Termination of the Insurance Contract

When determining conditions for the settlement between the insurer and the policyholder after termination of the insurance contract, account must be taken of the fault of a party for breach of the contract conditions, the insurer’s administrative costs related to conclusion and implementation of the contract, the amounts of insurance premiums paid for the period during which insurance cover was not provided, the unpaid amounts of insurance premiums for the provided insurance cover and other important circumstances.

Article 101. Duties of the Beneficiary, Insured Person and Injured Third Party

1. An insurance contract may establish the duties of the beneficiary and the injured third party, which must be performed by them when exercising the right to the insurance benefit, as well as the duties of the insured person.

2. In exercising his rights, the insurer shall have no right to invoke non-compliance of the beneficiary, insured person and injured third party with their duties under the insurance contract if they are unaware of conclusion of the contract and their duties under the insurance contract, or if they do not have a possibility to perform such duties.

3. In exercising his rights, the insurer shall have the right to invoke the fact that the policyholder failed to perform his duty to duly inform the beneficiary, insured person or the injured third party about the concluded contract and their duties.

Article 102. Settlement of Disputes between the Customers and the Insurer

Any disputes between the customers and the insurer shall be resolved in accordance with the procedure prescribed in the Republic of Lithuania Law on the Bank of Lithuania.

SECTION TWO

SPECIFIC FEATURES OF PROPERTY INSURANCE

Article 103. Policyholder, Insured Person and Beneficiary

A policyholder may conclude a contract for insurance of his own property interests or the interests of another person who, upon conclusion of the insurance contract, becomes the insured person. In property insurance, only the person whose property interests have been insured may be the beneficiary.

Article 104. Value of Property in Property Insurance

Where the value of property is not specified in the insurance contract, it shall be considered that the value of property is its market value at the moment of conclusion of the insurance contract.

Article 105. Insurance Benefit

The amount of the insurance benefit shall be equal to the amount of damage incurred and/or other expenses (insurable interest) borne by the policyholder, insured person or beneficiary due to an insured event, unless it has been agreed between the parties that the insurer must compensate for only part of the damage (other expenses).

Article 106. Gross Negligence

An insurance contract may provide for the cases where the insurer is released from the duty to pay the insurance benefit if the insured event occurs due to gross negligence of the policyholder or the insured person. Such cases must be negotiated individually.

SECTION THREE

SPECIFIC FEATURES OF THIRD PARTY LIABILITY INSURANCE

Article 107. Insured Person

A policyholder may conclude a third party liability insurance contract for insurance of his own or another person’s property interests relating to civil liability; under the insurance contract such a person becomes the insured person.

Article 108. Insured Event

Unless the third party liability insurance contract provides otherwise, the insured event shall mean civil liability incurred by the policyholder or the insured person for the consequences of the actions (act or omission) committed by the policyholder or the insured person during the period of validity of the insurance contract even if such consequences occurred after the expiry of the contract.

Article 109. Expenses Compensated by the Insurer

1. Unless the insurance contract provides otherwise, the insurer must compensate for reasonable expenses incurred by the policyholder or the insured person borne while rebutting the claim of the injured third party for indemnity. The expenses shall be compensated even if it later transpires that the claim for compensation of the damage was unfounded.

2. The insurer shall not be under an obligation to compensate for the expenses provided for in paragraph 1 of this Article and shall have the right to require that the compensated expenses be reimbursed if the policyholder or the insured person have caused damage to the injured third party intentionally.

Article 110. Payment of the Insurance Benefit

1. The insurer shall pay the insurance benefit to the injured third party, and where the policyholder or the insured person compensated for the damage caused to the injured third party, the insurer shall pay the insurance benefit to the policyholder or the insured person.

2. Where the sum insured is less than the joint damage caused to all injured third parties, the insurance benefit shall be distributed among the injured third parties proportionately to the amount of the damage caused to them.

Article 111. Right of Direct Claim

The injured third party shall have the right to request directly that the insurer, who has covered civil liability of the person liable for the damage, pays out the benefit.

Article 112. Consequences of Payment of an Insurance Benefit

When the insurer pays the benefit for the damage in the amount equal to the sum insured, the insurer’s obligation shall remain in force until the expiry of the period of validity of the insurance contract for the total sum insured without deductions of benefits paid, except for the cases where the insurance contract provides that the insurer’s obligation remains in force only for the remaining amount of the sum insured.

Article 113. Insurer’s Right to Reclaim the Amounts Paid from the Policyholder or Insured Person

1. Where an insured event occurs as specified in paragraph 3 of Article 6.1014 of the Civil Code due to the policyholder’s (or the insured person’s) intent, the insurer, upon payment of the benefit, shall have the right to reclaim the amount paid from the policyholder or the insured person.

2. In the cases specified in the third party liability insurance contract, where the insured event occurs due to a gross negligence of the policyholder or the insured person, the insurer, upon payment of the benefit, shall have the right to reclaim the amount paid or its part from the policyholder or the insured person. This term of the insurance contract must be negotiated individually.

Article 114. Transfer of an Object

1. Where a third party liability insurance contract has been concluded on insurance of civil liability which may arise when managing, using or disposing of an object with individual features, such an insurance contract shall expire when the owner of the object changes, unless the contract provides otherwise.

2. Where the third party liability insurance contract specifies several objects with individual features, upon the change of the owner of one of these objects, insurance cover of property interests relating to that object shall expire.

SECTION FOUR

SPECIFIC FEATURES OF LIFE ASSURANCE

Article 115. Conclusion of an Insurance Contract

1. The policyholder may conclude a life assurance contract regarding his own or any other person’s property interests.

2. A life assurance contract shall be considered concluded for the benefit of the person whose life is covered by insurance (the insured person) unless the contract provides for another beneficiary.

3. A life assurance contract may be concluded for the benefit of the person who is not the insured person only subject to a written consent of the insured person. Where the insured person is under 18 years of age, he has been recognised legally incapable or of limited legal capacity, the insurance contract may be concluded only for the benefit of the insured person, except for the cases where there are all of the following conditions:

1) the insured person is under 18 years of age;

2) the beneficiary named is a close relative of the insured person;

3) the beneficiary is appointed in the event that the insured person survives until the expiry of the time period provided for in the contract.

4. Transfer of the commitment of the annuity payer provided for in paragraph 1 of Article 6.448 of the Civil Code shall be possible where the annuity payer concludes an insurance contract with the insurer and pays the premium equal to the amount of the annuity.

5. When concluding an insurance contract specified in paragraph 2 of Article 6.289 of the Civil Code, the legal person under liquidation shall pay the agreed premium to the insurer while the insurer shall commit to pay periodical insurance benefits to the beneficiary – the person in respect of whom the legal person under liquidation has an obligation to compensate for the damage incurred as a result of injury or loss of life of the natural person.

Article 116. Information to the Policyholder of a Life Assurance Contract

1. Prior to conclusion of a life assurance contract, the insurer or his authorised representative must provide to the policyholder in writing information specified in paragraph 2 of Article 93 of this Law and, in addition, inform the policyholder in writing about:

1) possible conditions of the insurance contract concerning the sums insured and benefits which the policyholder is free to choose when concluding the insurance contract, the amounts of premiums for each chosen variant of the sum assured and benefit;

2) possible terms of the assurance contract;

3) conditions and ways of termination of the insurance contract, including the policyholder’s right to terminate the life assurance contract according to the procedure specified in Article 124 of this Law on concessionary terms;

4) forms of, procedure for and duration of payment of insurance premiums;

5) the procedure for and forms of determining the amount of insurance benefits and the procedure for their payment;

6) the interest rate, the principles and ways of calculation of the insurer’s profit share belonging to the policyholders and methods of distribution of that profit share, the procedure for determining the surrender value and approximate amounts of the surrender value, if the insurance contract concluded is related to capital accumulation;

7) where an assurance contract is concluded under which the policyholder bears investment risk – the objects into which investment may be made, their nature, income from investments during the last three years;

8) essential information about taxation procedures applicable to insurance contracts;

9) a reference to the report on the insurer’s solvency and financial standing providing unhindered access to such information for the policyholder.

2. During the period of validity of the insurance contract, the insurer must promptly notify the policyholder of the life assurance contract in writing about:

1) any changes in the insurer’s name, legal status or the address of the registered office and, where the insurance contract has been concluded by a branch of the insurer – about changes in the particulars relating to the branch;

2) any changes in the information specified in paragraph 1 of this Article, where policy conditions or the law applicable to the insurance contract are amended.

3. Each year the insurer, within the time periods specified in the insurance contract, must inform the policyholder in writing about the insurer’s profit share belonging to the policyholder, the amount of the surrender value, where the contract concluded is related to capital accumulation.

4. The information provided must be clear and readily understood.

5. The information shall be provided in the Lithuanian language or, at the request of the policyholder and upon agreement with the insurer, in any other language.

6. The supervisory authority shall establish other requirements for provision of information to the policyholders under life assurance contracts.

Article 117. Insurance Risk

1. In assessing insurance risk, the insurer shall have the right to take account of the insured person’s age, health condition, profession and other objective criteria influencing insurance risk, also ensuring that equal conditions of calculating insurance premiums and benefits would apply to a group of persons of the same risk level.

2. The insurer shall be prohibited from requesting in any form that the policyholder, insured person and other persons provide to him data of genetic testing.

3. In executing the rights provided to him under law or the life assurance contract, the insurer shall not invoke the following:

1) the policyholder has not fulfilled the obligation under Article 6.993 of the Civil Code due to negligence, where more than 10 years have passed since the conclusion of the life assurance contract;

2) the policyholder has not fulfilled the obligation under Article 6.1010 of the Civil Code due to negligence, where more than 10 years have passed since the increase of the insurance risk.

4. The terms specified in paragraph 3 of this Article shall also apply where additional health insurance risk is included in the life assurance contract.

5. In exercising the rights granted to him by the life assurance contract, during the period of validity of the insurance contract the insurer shall have no right to unilaterally increase the insurance premium where the insurance risk increases due to the policyholder’s or the insured person’s age and/or sickness, with the exception of cases where the policyholder or the insured person causes his sickness deliberately.

6. In the cases specified in insurance contracts, which must be negotiated individually, the insurer shall have the right to unilaterally change the amount of the specified insurance premium only where this change relates to:

1) the change of the interest rate on domestic and international markets;

2) changed statistical data about insured events and insurance benefits.

7. It shall be permitted to unilaterally change the amount of insurance premium on the grounds specified in paragraph 6 of this Article only where this change is not essential. In determining whether the change is essential, it must be taken into account, whether, due to the essential change, the policyholder (beneficiary) is not deprived of the possibility to receive what he expected from the insurance contract.

8. Prior to a change of the insurance premium, the policyholder must be given detailed information in writing about the change, specifying the reasons for the change of the premium and providing conditions for termination of the insurance contract.

Article 118. Benefit Due to Death of the Insured Person

Where the policyholder or the insured person in the cases specified in the life assurance contract has not appointed the beneficiary, the benefits payable due to the insured person’s death shall be inherited according to the procedure set forth by laws.

Article 119. Appointment and Replacement of the Beneficiary

1. . The policyholder shall have the right to appoint one or several beneficiaries who, upon the occurrence of the insured event, shall acquire the right to the insurance benefit or its part. The policyholder shall notify the insurer about the appointed beneficiary in writing.

2. The policyholder shall have the right to appoint an irrevocable beneficiary. The policyholder must inform the person in writing about his appointment as the irrevocable beneficiary.

3. Where the policyholder has appointed several beneficiaries without specifying the individual amounts of benefit due to each beneficiary, upon occurrence of the insured event, the beneficiaries shall have equal rights to the benefit.

4. The policyholder shall have the right to replace or revoke the beneficiary by notifying the insurer thereof in writing.

5. When appointing replacing the beneficiary with another beneficiary who is not the insured person, a written consent of the insured person is obligatory, except for the cases where there are all of the following conditions:

1) the insured person is under 18 years of age;

2) the beneficiary to be appointed is a close relative of the insured person;

3) the beneficiary is appointed in the event that the insured person survives until the expiry of the time period provided for in the contract.

6. The irrevocable beneficiary may be replaced or revoked only subject to his written consent.

7. The beneficiary shall be considered appointed, replaced or revoked if, prior to occurrence of an insured event, the insurer has received from the policyholder a written notification of the appointment, replacement or revocation of the beneficiary and the conditions specified in paragraphs 4, 5 and 6 of this Article have been fulfilled.

8. The policyholder shall be entitled to appoint, replace or revoke a beneficiary by succession. Such appointment, replacement or revocation of a beneficiary shall be deemed to be appropriate if the insurer has been informed thereof in writing by the policyholder or, upon his death, by his inheritors (before and after the death of the policyholder) and the consents referred to in paragraphs 5 and 6 of this Article has been obtained (if necessary).

9. In the cases and according to the procedure specified in the life assurance contract, the right to appoint, replace and revoke the beneficiary shall also be vested in the insured person. In such a case, the appointment, replacement or revocation of the beneficiary shall mutatis mutandis be subject to the provisions of this Article.

10. Where the beneficiary has been appointed, replaced or revoked disregarding the provisions of this Article, the appointment, replacement or revocation of the beneficiary shall be void, except for the case of revocation of the beneficiary who is not an irrevocable beneficiary as provided for in paragraph 4 of Article 6.191 of the Civil Code.

11. Upon the occurrence of the insured event, the right to insurance benefit shall be acquired by the beneficiary appointed only according to the procedure specified in this Article.

Article 120. Exemptions from Application of the Provisions of the Civil Code

The provisions of the Civil Code on insurance in excess of the value of insurance (Article 6.1001), insurance against various risks (Article 6.1002) and on assignment of the rights of the insured to compensation of the damage onto the insurer (Article 6.1015) shall not apply to the assurance contract.

Article 121. Insurance Benefit

1. The insurance benefit under an insurance contract shall be paid with no regard to the policyholder’s or beneficiary’s income received from other sources.

2. The insurer shall have the right to reduce the benefit by the amount of the premiums not paid for the period of suspension of insurance cover and the amount of income which would have been received from investment of such premiums.

Article 122. Policyholder’s Right to Refuse Payment of Premiums

1. Where during the period of validity of a life assurance contract related to capital accumulation the minimum amount, if specified in the insurance contract, is accumulated, the policyholder shall have the right not to pay the premium. In this case the life assurance contract shall stay in force for the remaining period of validity of the contract and benefits under the life assurance contract shall be adjusted following the procedure specified in the contract, taking into account the accumulated minimum amount.

2. The policyholder’s right provided for in paragraph 1 of this Article shall be exercised according to the procedure specified in the life assurance contract.

Article 123. Insurer’s Right to Terminate the Insurance Contract

The insurer shall have the right to unilaterally terminate the life assurance contract only in the event of a material breach of the terms and conditions of the contract and in the case specified in paragraph 1 of Article 6.1009 of the Civil Code.

Article 124. Termination of Insurance Contract on Concessionary Terms

1. The policyholder who is a natural person unilaterally shall have the right to unilaterally terminate a life assurance contract the term of which is not less than six months by notifying the insurer thereof in writing within 30 days from the moment he was informed about the concluded contract.

2. In the case specified in paragraph 1 of this Article, upon termination of the life assurance contract, the insurer must reimburse the total insurance premium which has been paid by the policyholder, with the exception of the case specified in paragraph 3 of this Article.

3. Upon termination by the policyholder of a life assurance contract related to investment funds in the case specified in paragraph 1 of this Article, the insurer shall have the right to reimburse the amount of insurance premiums paid by the policyholder, recalculated based on the investment performance which occurred during the period of validity of the insurance contract. This term of the insurance contract must be negotiated individually

4. In the cases provided for in this Article, upon termination of a life assurance contract by the policyholder no obligations related to the insurance contract may arise for the policyholder and the insurer.

Article 125. Payment of Premium after Cancelation of the Insurance Contract

The insurance contract may specify the cases and procedure, where a life assurance contract related to capital accumulation terminated by the insurer because the policyholder has not paid the premium shall be renewed where the policyholder, within six months from the termination of the life assurance contract, reimburses the surrender value paid by the insurer.

Article 126. Payment of Surrender Value

1. Where a life assurance contract related to capital accumulation is terminated or otherwise expires before the term, or where the insurer exercises the right granted by laws or under the insurance contract to refuse payment of the benefit or to reduce it, the amount paid to the policyholder must not be less than the surrender value.

2. Where, upon recognition of a life assurance contract as invalid, restitution is due for the benefit of the policyholder, the insurer must reimburse surrender value to the policyholder if it is higher than the premiums paid by the policyholder.

3. The procedure for the calculation and payment of the surrender value as well as approximate amounts of the surrender value must be specified in the life assurance contract.

Article 127. Transfer of Property Rights Arising From Insurance Contracts

1. According to the procedure specified in a life assurance contract, the policyholder and the beneficiary may transfer the property rights arising from the life assurance contract to another person.

2. Upon the transfer of the rights arising from the life assurance contract, appointment of the beneficiary, except for the irrevocable beneficiary, shall become void.

Article 128. Pledge of Property Rights Arising From Insurance Contracts

1. In order to ensure the fulfilment of the obligation, the policyholder may pledge the following property rights arising from the life assurance contract related to capital accumulation: the right to the insurance benefit and the right to the surrender value. The policyholder may pledge the right to surrender value only subject to consent of the irrevocable beneficiary.

2. The beneficiary may pledge/mortgage the right to the benefit only upon occurrence of an insured event.

3. The insurer must be informed in writing about the pledge/mortgage of the property rights arising from the life assurance contract.

4. The claim of the pledgee may be satisfied from the insurance benefit only upon the occurrence of an insured event. The insurer must satisfy the claim of the pledgee/mortgagee from the insurance benefit only upon expiry of the time limit specified in paragraph 2 of Article 98 of this Law.

5. The pledgee/mortgagee shall have priority against the beneficiary for the satisfaction of his claim, save for the case where the beneficiary is irrevocable. Where the irrevocable beneficiary has been appointed after the pledgee of the property rights arising from the insurance contract, the pledgee/mortgagee shall have priority against the irrevocable beneficiary for the satisfaction of his claim.

6. After the insurer has satisfied the pledgee’s claim, the surrender value or the insurance benefit shall be reduced by the amount equal to the amount of the pledgee’s/mortgagee’s claims satisfied by the insurer.

SECTION FIVE

SPECIFIC FEATURES OF HEALTH INSURANCE

Article 129. Insured Person

1. The policyholder may conclude a health insurance contract for the coverage of the property interests related to his health or the property interests of another person who, upon conclusion of the contract becomes the insured person.

2. Where health insurance is insurance against loss, only the insured person may be the beneficiary, and in the event of his death – the appointed beneficiary.

Article 130. Application of Other Provisions of this Law

1. Provisions of paragraphs 1 and 2 of Article 117 and Articles 118, 119 and 123 of this Law shall mutatis mutandis apply to a health insurance contract

2. Where a health insurance contract is a sum insurance contract, provisions of Article 115, 120 and 121 of this Law shall mutatis mutandis also apply, however the provisions of the Civil Code concerning partial insurance (Article 6.999) and supplementary insurance (Article 6.1000) shall not apply.

Article 131. Insurance Risk

1. In executing the rights granted by law or under the health insurance contract, the insurer may not invoke the facts that:

1) the policyholder has not fulfilled the obligation specified in Article 6.993 of the Civil Code due to negligence, if more than five years have passed since conclusion of the insurance contract;

2) the policyholder has not fulfilled the obligation specified in Article 6.1010 of the Civil Code due to negligence, if more than five years have passed since the risk increase.

2. In exercising the rights granted to him by the life assurance contract, during the period of validity of the insurance contract the insurer shall not have the right to unilaterally increase the insurance premium where the insurance risk increases due to the policyholder’s or the insured person’s age and sickness, with the exception of cases where the policyholder or the insured person causes his sickness deliberately.

SECTION SIX

CO-INSURANCE

Article 132. Participation in Co-insurance

1. Mutual rights and duties of the insurers participating in co-insurance shall be established in the contract. The following data must be indicated therein:

1) the insurer who is appointed leading insurer;

2) the fee of the leading insurer for the administration of co-insurance contracts, unless otherwise agreed;

3) the share of insurance risk in percentage assumed by each insurer;

4) the procedure for distribution of insurance premiums received under the co-insurance contract;

5) the procedure for communicating information relating to the co-insurance contract by the leading insurer to the other insurers;

6) one of the ways for paying the insurance benefit as specified in paragraph 5 of this Article;

7) the procedure for settlement by the insurers with the leading insurer, where the way for paying the insurance benefit specified in subparagraph 1 of paragraph 5 of this Article is applied;

8) the procedure and conditions for the insurer’s withdrawal from co-insurance.

2. The leading insurer shall exercise all the rights and fulfil all the duties of the insurer, unless this Law provides otherwise.

3. An insurance contract shall be concluded according to the terms and conditions prepared by the leading insurer.

4. The insurance policy issued by the principal insurer, in addition to the insurance policy particulars prescribed by paragraph 1 of Article 6.991 of the Civil Code, must contain the following information:

1) the name and address of the registered office of the leading insurer;

2) the names and addresses of registered office of other insurers participating in c-insurance;

3) the share of insurance risk in percentage assumed by each insurer;

4) one of the ways for paying the insurance benefit as specified in paragraph 5 of this Article;

5) signatures and seals of all the insurers, if their mutual contract provides that the insurance policy shall be signed not only by the leading insurer but also by all the other insurers and seals where the duty to have a seal is provided for in the insurer’s documents of incorporation.

Amendments to the paragraph of this Article:

No XII-718, 19 December 2013, Official Gazette Valstybės žinios, 2013, No 140-7079 (30 December 2013), ID code 2013-00004

5. The insurance benefit under the co-insurance contract shall be paid in one of the following ways, which must be specified in the insurance contract:

1) the leading insurer shall pay the insurance benefit on his own behalf and on behalf of other insurers participating in co-insurance;

2) each insurer participating in co-insurance shall pay the amount of insurance benefit in proportion to the share of insurance risk assumed.

6. If it is established in the insurance contract that the leading insurer pays the insurance benefit on its own behalf and on behalf of other insurers participating in co-insurance, the policyholder, beneficiary or any injured third party must apply to the leading insurer for the payment of the insurance benefit.

7. If it is established in the insurance contract that each insurer participating in co-insurance pays the amount of the insurance benefit in proportion to the assumed share of insurance risk, after the leading insurer has stated the fact of the insured event and the amount of the insurance benefit and decided upon the payment thereof, the policyholder, beneficiary or any injured party must apply to each insurer participating in co-insurance for the payment of insurance benefit taking into account the share of insurance risk assumed by them. In the event of a dispute between the policyholder, beneficiary or injured third party and one of the insurers regarding the payment of a share of the insurance benefit, the said insurer shall be the defendant in court.

8. The leading insurer’s decision concerning the establishment of the fact of an insured event or non-existence of the insured event, the amount of the insurance benefit and decision to pay the insurance benefit shall be binding on the insurers participating in co-insurance.

Article 133. Co-insurance in the European Economic Area Member States

1. The co-insurance of insurance undertakings and insurance undertaking of other Member States of the European Economic Area in the Member States of the European Economic Area shall be subject to the provisions of this Article and shall not be subject to the provisions of Article 132 of this Law where the co-insurance in the Member States of the European Economic Area satisfies all of the following criteria:

1) a co-insurance contract is concluded for covering the risks of insurance classes referred to in subparagraphs 3–16 of paragraph 3 of Article 7 of this Law;

2) a co-insurance contract is concluded only for covering large insurance risks which, by reason of their nature or size, call for the participation of several insurers for their coverage;

3) insurance risk is covered by a single insurance contract for the period specified in the contract at an overall premium provided for in the contract and by two or more insurers, each of whom assumes a share of insurance risk and one of whom is the leading insurer;

4) insurance risk is situated within a European Economic Area Member State or Member States;

5) the leading insurer complies with the requirements set in this Article and, according to the status defined in the contract concluded between the insurers, in contractual relations the leading insurer is considered to be the insurer covering the whole insurance risk;

6) the registered office or branch of at least one of the insurers is located in the European Economic Area Member State other than that of the leading insurer;

7) the leading insurer fully assumes the rights and duties of the leading insurer and has the right to determine the terms and conditions of the insurance contract and the amount of the insurance premium.

2. The requirements provided for in Articles 68 or 73 of this Law shall be applied only to the leading insurer.

3. The calculation of technical provisions of insurance undertakings of the Republic of Lithuania and branches of third country insurance undertakings established in the Republic of Lithuania, which participate in co-insurance in the European Economic Area Member States, the coverage of technical provisions by assets, prudential regime, communication of statistical data and other information to the supervisory authority shall be subject to provisions of the legal acts of the Republic of Lithuania. The insurance undertakings participating in the co-insurance in the Member States of the European Economic Area must record statistical data on the scope of the co-insurance operations in which they participate and the respective Member States.

4. Assessment of the contracts of co-insurance in the European Economic Area Member States by means of liquidation procedures shall be subject to the provisions of Article 13 of this Law.

5. The supervisory authority shall exchange information and co-operate with the Commission of the European Union (hereinafter referred to as the “Commission”) and the supervisory authorities of other European Economic Area Member States for the purpose of examining any difficulties which might arise in implementing the provisions of this Article, compliance with the provisions of this Article and in observing any misuse of these provisions either in that the leading insurer does not assume all the rights and duties of the leading insurer or the insurance risks do not require the participation of two or more insurers for their coverage.

SECTION SEVEN

Law Applicable to Compulsory Insurance Contracts

Article 134. Law Applicable to Compulsory Insurance Contracts

1. A compulsory insurance contract shall be subject to the law of the European Economic Area Member State which provides for the obligation to conclude the insurance contract.

2. Where the laws of the Republic of Lithuania provide for the obligation to conclude an insurance contract, this obligation shall not be deemed properly discharged where the concluded insurance contract does not comply with the provisions of the legal acts of the Republic of Lithuania which are applicable to such insurance.

3. Where, in cases of provision of compulsory insurance services, the law of the European Economic Area Member State in which insurance risk is situated is contrary to the law of the Member State which provides for the obligation to conclude an insurance contract, the law of the latter state shall apply.

4. Where an insurance contract is concluded for covering insurance risks situated in more than one European Economic Area Member State and at least one of them stipulates compulsory insurance, for the purpose of paragraph 2 of this Article, the insurance contract shall be deemed to consist of several insurance contracts each of which is related to only one Member State.

5. Where a Member State provides for compulsory insurance and the insurer is obliged to notify the supervisory authorities about the expiry of insurance cover, the expiry of insurance cover shall have legal effects on the third parties only under the circumstances specified in the legal acts of that European Economic Area Member State.

CHAPTER vI

INTERVENTION MEASURES, TERMINATION, REORGANISATION AND BANKRUPTCY

section one

INTERVENtion measures

Article 135. Application of Provisions of this Section

1. This Section regulates application of intervention measures in respect of:

1) insurance undertakings of the Republic of Lithuania and their branches established in the European Economic Area Member States;

2) branches of third country insurance undertakings established in the Republic of Lithuania.

2. Measures specified in subparagraphs 1–8 of paragraph 1 of Article 2.131 of the Civil Code applied by the court shall be considered as intervention measures provided that they meet the criteria set forth in paragraph 42 of Article 2 of this Law.

3. Measures provided for in subparagraphs 5 and 10 of Article 204 of this Law applied by the supervisory authority and other measures, which are intervention measures as indicated during their application by the supervisory authority upon considering their possible effects, shall be considered as intervention measures.

Article 136. Intervention Measures

1. Only the court or the supervisory authority shall have the right to adopt a decision concerning the application of intervention measures.

2. Intervention measures shall be subject to the law of the Republic of Lithuania.

3. Application of intervention measures shall not restrict the possibility to initiate liquidation proceedings against insurance undertakings of the Republic of Lithuania.

Article 137. Information about Intervention Measures

1. The supervisory authority, upon receipt of the experts’ report and recommendations specified in paragraph 2 of Article 2.130 of the Civil Code, must submit to the court a conclusion regarding the intervention measures which the court intends to apply. Having adopted a decision to apply intervention measures, the court must forthwith notify the supervisory authority of the adopted decision and its coming into effect.

2. The supervisory authority must, without delay, inform the competent authorities of the other European Economic Area Member States about the decision of the court or the supervisory authority itself to apply intervention measures and about the coming into effect of the decision, indicating the possible effects of the measures on natural or legal persons of the other European Economic Area Member State. Where possible, the supervisory authority must inform the supervisory authorities of the other European Economic Area Member States thereof before the adoption of the decision to apply intervention measures.

3. Upon adopting a decision to impose intervention measures, the court or the supervisory authority must forthwith publish the operative part of the decision on the website of the supervisory authority.

4. The supervisory authority must forthwith publish the operative part of its own or the court’s decision to impose intervention measures in the Official Journal of the European Union.

5. Publication referred to in paragraphs 3 and 4 of this Article must specify the institution which has adopted the decision to impose intervention measures, the applicable law and the appointed temporary members of the management body of the insurance undertaking.

6. Intervention measures shall be applied and shall have legal consequences irrespective of whether or not information about them has been published in the manner set forth in paragraphs 3 and 4 of this Article.

7. The provisions of paragraphs 3, 4 and 5 of this Article relating to publication of information about intervention measures shall not apply where the intervention measures only affect the rights of shareholders of an insurance undertaking or the employees of an insurance undertaking or a branch of a third country insurance undertaking. The supervisory authority shall have the right to commit an insurance undertaking or a branch of a third country insurance undertaking to inform these persons about the intervention measures.

SECTION TWO

TERMINATION, REORGANISATION AND BANKRUPTCY OF

INSURANCE AND REINSURANCE UNDERTAKINGS AND TERMINATION OF ACTIVITIES OF BRANCHES OF THIRD COUNTRY INSURANCE OR REINSURANCE UNDERTAKINGS

Article 138. Termination, Reorganisation and Bankruptcy of Insurance or Reinsurance Undertakings

1. Reorganisation of an insurance or reinsurance undertaking by the decision of the general meeting of shareholders, restructuring thereof, transfer of the undertaking as an object of property shall be possible upon the authorisation of the supervisory authority, issued in the manner prescribed by the supervisory authority. Where the insurance or reinsurance undertaking is reorganised by the court decision, before adopting the said decision, the court must obtain the conclusion of the supervisory authority.

2. The supervisory authority shall have the right to obligate the insurance undertaking to inform the interested parties about the reorganisation, restructuring and change of the type of activity, transfer of the undertaking as an object of property and, having regard to the provisions of Article 147 of this Law, to establish the procedure for submission of such information.

Article 139. Obligations under Insurance or Reinsurance Contracts of an Insurance or Reinsurance Undertaking in Liquidation

Where an insurance or reinsurance undertaking is liquidated, obligations arising from insurance or reinsurance contracts which were concluded when exercising the right of establishment or the right to provide services shall be fulfilled in the same manner as the obligations arising from other or reinsurance insurance contracts of that insurance or reinsurance undertaking irrespective of the nationality, habitual residence or registered office of the policyholders, insured persons, beneficiaries or injured third parties.

Article 140. Voluntary Liquidation of an Insurance or Reinsurance Undertaking

1. The general meeting of shareholders of an insurance or reinsurance undertaking shall have the right to take a decision to liquidate the insurance or reinsurance undertaking only after the insurance or reinsurance undertaking has transferred its rights and duties under insurance contracts in accordance with the procedure laid down in this Law and has been granted an authorisation by the supervisory authority, in accordance with the procedure established by the latter, to liquidate the insurance or reinsurance undertaking.

2. The supervisory authority shall take a decision regarding the issuance of an authorisation to liquidate the insurance undertaking within 30 working days from the submission of all the necessary and properly executed documents

3. Before appointing a liquidator, a member or the chairman of the liquidation commission, approval of the candidate by the supervisory authority must be received in accordance with the procedure established by the supervisory authority. The supervisory authority shall take a decision regarding the approval of the candidates within 30 working days from the submission of all the necessary and properly executed documents.

4. The insurance or reinsurance undertaking must, within three working day, notify the supervisory authority in writing about the decision taken to liquidate the insurance or reinsurance undertaking and to appoint the liquidator or to set up the liquidation commission and to appoint its chairman.

Article 141. Withdrawal of the Licence to engage in activities

1. Upon revoking a licence to engage in insurance activity, the supervisory authority must obligate the insurance undertaking to transfer its rights and duties under insurance contracts and set the time limit within which the rights and duties must be transferred.

2. An insurance or reinsurance undertaking having rights and duties under insurance or reinsurance contracts shall have no right to engage in any other economic and commercial activities.

3. If an insurance undertaking fails to transfer its rights and duties under insurance contracts within the time limit set by the supervisory authority, the latter shall be entitled to apply the sanctions provided for in this Law.

4. In the event of a failure to transfer the rights and duties under insurance contracts within the time limit set by the supervisory authority, the insurance contracts shall expire on the day following the time limit set by the supervisory authority. Upon expiry of the insurance contract, the amount of the creditors’ claim of the policyholder shall be determined with regard to the provisions of paragraph 6 of Article 206. Having evaluated the financial standing of the insurance undertaking, the supervisory authority shall be entitled to determine that the insurance contracts are valid till the date of expiry thereof.

Article 142. Compulsory Liquidation

1. Before passing a decision regarding compulsory liquidation of an insurance or reinsurance undertaking on the grounds laid down in Article 2.106 of the Civil Code, the court must inform the supervisory authority thereof and receive its conclusion regarding compulsory liquidation of the insurance or reinsurance undertaking.

2. The supervisory authority shall nominate to the court the candidates for the post of a liquidator or members and the chairperson of the liquidation commission. Having passed a decision to liquidate the insurance or reinsurance undertaking, to appoint a liquidator or a liquidation commission and its chairperson, the court must notify the supervisory authority thereof in writing within three working days.

Article 143. Bankruptcy

1. Bankruptcy proceedings against the insurance or reinsurance undertaking shall be heard in accordance with the procedure laid down in the Enterprise Bankruptcy Law of the Republic of Lithuania, unless this Law provides otherwise.

2. The bankruptcy proceedings against an insurance or reinsurance undertaking shall be conducted only in court. The petition for the initiation of bankruptcy proceedings shall be filed with the court by the supervisory authority. The court shall examine the petition for the initiation of bankruptcy proceedings filed by the supervisory authority within seven days.

3. If the petition for the initiation of bankruptcy proceedings is filed by other persons according to the procedure laid down by law, before passing a decision to initiate bankruptcy proceedings, the court must receive a conclusion from the supervisory authority regarding the insolvency of the insurance or reinsurance undertaking.

4. The supervisory authority shall nominate to the court a candidate for the post of the administrator.

5. Having passed a decision to initiate bankruptcy proceedings against the insurance or reinsurance undertaking, the court must notify the supervisory authority thereof in writing within three working days.

6. No meetings of policyholders and other creditors shall be convened during the handling of an insurance or reinsurance undertaking’s bankruptcy case by the court. The interests of the said persons shall be represented by a committee of representatives of creditors formed by the supervisory authority. The committee of representatives of creditors shall consist of not more than 15 members. The committee of representatives of creditors shall consist of policyholders, insured persons, beneficiaries, injured third parties (only if the insurance undertaking is bankrupt), other creditors and representatives of the supervisory authority. The regulations of the committee shall be approved by the supervisory authority.

7. The initial meeting of the committee of representatives of creditors shall be convened by the supervisory authority or, on the instruction of the supervisory authority, by the administrator.

Article 144. Reorganisation of a Third Country Insurance Undertaking Related to a Branch Established in the Republic of Lithuania

1. Reorganisation of a third country insurance undertaking may have legal consequences relating to the rights and duties of policyholders, insured persons, beneficiaries and injured third parties of a branch of this undertaking in the Republic of Lithuania only upon obtaining an authorisation from the supervisory authority.

2. The supervisory authority shall have the right to obligate a branch of a third country insurance undertaking to inform about the reorganisation procedures and, having regard to the provisions of Article 147 of this Law, to establish the procedure for submission of such information.

Article 145. Termination of Activities of a Branch of a Third Country Insurance o Reinsurance Undertaking Established in the Republic of Lithuania

1. A third country insurance or reinsurance undertaking shall have the right to adopt a decision to terminate the activities of its branch established in the Republic of Lithuania only upon transferring, in the manner prescribed by this Law, its rights and duties under insurance contracts concluded by the branch and upon obtaining an authorisation from the supervisory authority.

2. The supervisory authority shall take a decision regarding the issuance of an authorisation within 30 working days from the receipt of all the necessary and properly executed documents.

3. Having adopted a decision to terminate the activities of a branch, the third country insurance or reinsurance undertaking must appoint a person responsible for the termination of activities of the branch. Before appointing a person responsible for the termination of activities of the branch, the third country insurance or reinsurance undertaking must obtain the supervisory authority’s approval of the candidate in the manner prescribed by the supervisory authority. The supervisory authority shall take a decision regarding the approval of the candidate specified in this paragraph within 30 working days from the receipt of all the necessary and properly executed documents.

4. A decision to terminate the activities of the branch of a third country insurance or reinsurance undertaking and to appoint a person responsible for the termination of activities of the branch must be communicated by the third country insurance or reinsurance undertaking to the supervisory authority in writing within three working days.

Article 146. Compulsory Termination of Activities of a Branch of a Third Country Insurance or Reinsurance Undertaking Established in the Republic of Lithuania

1. The activities of a branch of a third country insurance or reinsurance undertaking established in the Republic of Lithuania shall be terminated in a compulsory manner after the supervisory authority adopts a decision to revoke the authorisation for insurance activity of the branch. In this case, the supervisory authority shall nominate the person responsible for the termination of activities.

2. If, in accordance with the procedure established by law, other institutions of the Republic of Lithuania intend to adopt a decision to terminate the activities of a branch of a third country insurance or reinsurance undertaking established in the Republic of Lithuania, the supervisory authority shall nominate the person responsible for the termination of activities. Having adopted the decision to terminate the activities of the branch of a third country insurance or reinsurance undertaking and appoint a person responsible for the termination of activities, the state institution must notify the supervisory authority thereof in writing within three working days.

3. Having withdrawn the authorisation for the activity of a branch, the supervisory authority must oblige the branch of the third party insurance undertaking to transfer the rights and duties under the insurance contracts and set the time limit within which the rights and duties must be transferred, except for the cases set out in subparagraphs 1 and 2 of paragraph 3 of Article 150 of this Law.

4. Should a branch of a  third country insurance undertaking fail to transfer the rights and duties under the insurance contracts within the time limit set by the supervisory authority, the supervisory authority shall be entitled to impose the sanctions provided for in this Law.

5. If the rights and duties under insurance contracts are not transferred within the time limit set by the supervisory authority, the insurance contracts shall expire on the date following the time limit set by the supervisory authority. Upon expiry of the insurance contract, the amount of the creditors’ claim of the policyholder shall be determined with regard to the provisions of paragraph 6 of Article 206 of this Law. Having evaluated the financial standing of the branch of the third country insurance undertaking, the supervisory authority shall be entitled to determine that the insurance contracts shall be valid till the date of expiry thereof.

Article 147. Information Related to Liquidation and Bankruptcy Proceedings of an Insurance Undertaking and Termination of Activities of a Branch of a Third Country Insurance Undertaking

1. The supervisory authority must forthwith inform the supervisory authorities of other European Economic Area Member States about the adopted decision to liquidate the insurance undertaking, terminate the activities of a branch a third country insurance undertaking or to initiate bankruptcy proceedings against the insurance undertaking, indicating possible consequences of the above actions for natural or legal persons of this European Economic Area Member State.

2. Where possible, the supervisory authority must notify the supervisory authority of another European Economic Area Member State of the intention to adopt a decision to liquidate the insurance undertaking, terminate the activities of a branch of a third country insurance undertaking or institute bankruptcy proceedings against the insurance undertaking before adopting the decision to liquidate the insurance undertaking, to terminate the activities of a branch of a third country insurance undertaking or to initiate bankruptcy proceedings against the insurance undertaking.

3. The liquidator of the insurance undertaking in liquidation, the chairman of the liquidation commission, the person responsible for the termination of activities of a branch of a third country insurance undertaking or the administrator of the insurance undertaking in bankruptcy must without delay publish information about the decision to liquidate the insurance undertaking, to terminate the activities of the branch of the third country insurance undertaking or to initiate bankruptcy proceedings against the insurance undertaking on the website of the undertaking.

4. The liquidator of the insurance undertaking in liquidation, the chairman of the liquidation commission, the person responsible for the termination of activities of a branch of a third country insurance undertaking or the administrator of the insurance undertaking in bankruptcy must forthwith publish an excerpt from the adopted decision in the Official Journal of the European Union. In addition to other information, the announcement must contain the address and other contact information of the liquidator of the insurance undertaking in liquidation, the chairman of the liquidation commission, the person responsible for the termination of activities of a branch of a third country insurance undertaking or the administrator of the insurance undertaking in bankruptcy as well as the law applicable to liquidation or bankruptcy procedures.

5. The liquidator of the insurance undertaking in liquidation, the chairman of the liquidation commission, the person responsible for the termination of activities of a branch of a third country insurance undertaking or the administrator of the insurance undertaking in bankruptcy must without delay notify in writing every known creditor whose domicile or habitual residence or registered office is in another European Economic Area Member State about the decision to liquidate the insurance undertaking, to terminate the activities of the branch of a third country insurance undertaking or to initiate bankruptcy proceedings against the insurance undertaking. The information must specify the following:

1) the time limits and procedure for filing creditors’ claims and the entity with whom the claim shall be filed;

2) legal consequences of failure to file or late filing of creditors’ claims

3) sequence of satisfaction of creditors’ claims and measures securing the creditors’ claims;

4) consequences for insurance contracts of liquidation and bankruptcy of an insurance undertaking and termination of activities of a branch of a third country insurance undertaking, the moment of expiry of rights and duties related to the insurance contracts.

6. The information referred to in paragraph 5 of this Article shall be presented in the Lithuanian language and the state language or one of state languages of a European Economic Area Member State. The document must have the heading “Invitation to lodge a claim. Time limits to be observed” in all the official languages of the European Union. If the creditors’ claim arises from the insurance contract, the information shall be submitted in the state language or in one of the state languages of the European Economic Area Member State where the creditor has his domicile or habitual residence or registered office.

7. A creditor whose domicile or habitual residence or registered office is in another European Economic Area Member State, while exercising the right to file a creditors’ claim, must submit copies of documents confirming the creditors’ claim (if any), indicate the date when the creditors’ claim arose, the amount of the claim and measures whereby the claim is secured. The creditor’s information shall be submitted in the state language or one of the state languages of the European Economic Area Member State where the creditor has his domicile or habitual residence or registered office. However, the information must contain the heading “Kreditorinis Kreditorių reikalavimas” (Creditors’ claim) or “Pastabos dėl kreditorių reikalavimo” (Comments concerning the creditors’ claim) in the Lithuanian language.

8. The liquidator of the undertaking in liquidation, the chairman of the liquidation commission, the person responsible for the termination of activities of a branch of a third country insurance undertaking or the administrator of the undertaking in bankruptcy must properly and on a regular basis inform creditors about the progress of liquidation or bankruptcy procedures.

9. The liquidator of the undertaking in liquidation, the chairman of the liquidation commission, the person responsible for the termination of activities of a branch of a third country insurance undertaking or the administrator of the undertaking in bankruptcy must submit information to the supervisory authority in the manner established by the supervisory authority.

10. Upon request of the supervisory authority of another European Economic Area Member State, the supervisory authority must furnish information about liquidation of an insurance undertaking, termination of activities of a branch of a third country insurance undertaking or bankruptcy of the insurance undertaking.

Article 148. Use of Assets Covering Technical Provisions of an Insurance Undertaking in Liquidation or in Bankruptcy and a Branch of a Third Country Insurance Undertaking the Activities of Which Are Terminated

1. Assets covering technical provisions of an insurance undertaking in liquidation or in bankruptcy or a branch of a third country insurance undertaking the activities of which are terminated, which are included in the list specified in paragraph 12 of Article 42 of this Law, may only be used to satisfy creditors’ claims of the policyholders, insured persons, beneficiaries and injured third parties arising from insurance contracts, save for the exception indicated in paragraph 4 of this Article. Assets covering technical provisions and funds received following the transfer of the funds may not be used for recovery under other liabilities of an insurance undertaking or a branch of another third country insurance undertaking and according to the recourses of the Motor Insurers’ Bureau of the Republic of Lithuania concerning the benefits not paid due to insolvency of the insurance undertaking.

2. If assets covering technical provisions are not sufficient to satisfy all creditors’ claims arising under insurance contracts of the insurance undertaking in liquidation or in bankruptcy or a branch of a third country insurance undertaking whose activities are terminated, the said claims shall be satisfied in proportion to the sum which is due to each creditor.

3. Funds other than assets covering technical provisions of the insurance undertaking or a branch of a third country insurance undertaking shall be used to satisfy claims of creditors referred to in paragraph 1 of this Article, whose claims were not fully satisfied from the assets covering technical provisions, and all other creditors in the manner established by law. The balance of funds of technical provisions which remains after satisfying creditors’ claims of persons referred to in paragraph 1 of this Article shall also be used to satisfy claims of all other creditors (including the Motor Insurers’ Bureau of the Republic of Lithuania) in the manner established by law.

4. If assets other than those covering technical provisions of the insurance undertaking in bankruptcy prove insufficient to cover administrative expenses, the court, upon the proposal of the committee of representatives of creditors, having regard to the opinion of the supervisory authority, upon the administrator’s request, shall have the right to allocate up to 10% of assets covering technical provisions for administrative expenses of the insurance undertaking in bankruptcy.

Article 149. Termination of Insurance Contracts of Insurance Undertakings in Bankruptcy

1. After the court ruling to initiate bankruptcy proceedings becomes effective:

1) non-life insurance contracts, except for contracts of compulsory insurance against civil liability in respect of the use of motor vehicles, shall terminate;

2) contracts of compulsory insurance against civil liability in respect of the use of motor vehicles shall terminate after 30 days (except for the cases where contracts of compulsory insurance against civil liability in respect of the use of motor vehicles provide for an earlier date of termination of the insurance contract);

3) life assurance contracts shall terminate if the rights and duties under these contracts are not transferred within the time limit set by the supervisory authority.

2. Policyholders of the insurance contracts referred to in subparagraphs 1 and 2 of paragraph 1 of this Article shall acquire the right to creditors’ claims in respect of the share of paid insurance premiums for the period from the termination of the insurance contract on the grounds specified in paragraph 1 of this Article to the expiry of the insurance contract.

Article 150. Termination of Insurance Contracts of Branches of Third Country Insurance Undertakings

1. Upon revocation by the supervisory authority of an authorisation for the activity of a branch of a third country insurance undertaking due to the fact that the liabilities of the branch exceed the assets assigned to it:

1) non-life insurance contracts, except for contracts of compulsory insurance against civil liability in respect of the use of motor vehicles, shall terminate;

2) contracts of compulsory insurance against civil liability in respect of the use of motor vehicles shall terminate after 30 days (except for the cases where contracts of compulsory insurance against civil liability in respect of the use of motor vehicles provide for an earlier date of termination of the insurance contract);

3) life assurance contracts shall terminate if the rights and duties under these contracts are not transferred from revocation of an authorisation for the activity of the branch of a third country insurance undertaking until the time limit set by the supervisory authority.

2. Policyholders of the insurance contracts referred to in subparagraphs 1 and 2 of paragraph 1 of this Article shall acquire the right to creditors’ claims in respect of the share of paid insurance premiums for the period from the termination of the insurance contract on the grounds specified in paragraph 1 of this Article to the expiry of the insurance contract.

3. If the liabilities of a branch of a third country insurance undertaking exceed the assets assigned to it, after the revocation of an authorisation for the activity of a branch of a third country insurance undertaking, the supervisory authority shall state this fact in its resolution. In this case:

1) non-life insurance contracts, except for contracts of compulsory insurance against civil liability in respect of the use of motor vehicles, shall terminate;

2) contracts of compulsory insurance against civil liability in respect of the use of motor vehicles shall terminate after 30 days (except for the cases where contracts of compulsory insurance against civil liability in respect of the use of motor vehicles provide for an earlier date of termination of the insurance contract);

3) the supervisory authority shall set a time limit for the transfer of rights and duties under the life-assurance contracts. Life assurance contracts shall terminate if the rights and duties under these contracts are not transferred within the time limit set by the supervisory authority.

4. Policyholders of the insurance contracts referred to in subparagraphs 1 and 2 of paragraph 3 of this Article shall acquire the right to creditors’ claims in respect of the share of paid insurance premiums for the period from the termination of the insurance contract on the grounds specified in paragraph 3 of this Article to the expiry of the insurance contract.

Article 151. Policyholders’ Creditors’ claims upon Termination of Life Assurance Contracts

1. Each policyholder of life assurance contracts which have terminated on the grounds specified in Article 149 or 150 of this Law shall acquire the right of creditors’ claim against an insurance undertaking or a branch of a third country insurance undertaking.

2. Where a life assurance contract has been concluded only for covering a death risk, the policyholders shall acquire the right of creditors’ claim to the share of the paid insurance premium for the period from the termination of the insurance contract on the grounds specified in Article 149 or 150 of this Law to the expiry of the period of the insurance contract provided for in the contract.

3. The amount of the policyholder’s creditors’ claim in case of a life assurance contract related to capital accumulation shall equal the amount of technical provisions established/formed for the insurance contract of that policyholder on the day of termination of the contract.

Article 152. Characteristics of Transfer of Rights and Duties under Life Assurance Contracts

1. In case of transfer of rights and duties under the life assurance contracts of an insurance undertaking in bankruptcy or a branch of a  third country insurance undertaking the liabilities of which exceed the assets assigned to the branch, the provisions of paragraphs 3, 4, 5, 8 and 9 of Article 206 of this Law shall apply.

2. Where the assets covering the technical provisions of the insurance undertaking in bankruptcy prove insufficient to satisfy creditors’ claims arising from life assurance capital saving contracts, the insurance undertaking in bankruptcy transferring the rights and duties under life assurance contracts shall have the right to transfer a share of the duty concerning the insurance benefit and payment of surrender value. In such a case, the contract relating to the transfer of rights and duties must specify the share of the insurance benefit and surrender value that the entity taking over the rights and duties under insurance contracts must pay. From the moment of transfer of rights and duties under the insurance contracts, the policyholder shall acquire the right of creditors’ claim to the share of the surrender value calculated until the day of the transfer of rights and duties, the obligation of payment whereof has been retained by the insurance undertaking in bankruptcy.

Article 153. Characteristics of Transfer of Rights and Duties under Life Assurance Contracts of a Branch of a Third Country Insurance Undertaking the Activities of Which Are Terminated

Having regard to the provisions of Article 152 of this Law, the supervisory authority shall establish the procedure for the transfer of rights and duties under life assurance contracts of a branch of a third country insurance undertaking whose activities are terminated and the liabilities of which exceed the assets assigned to it.

Article 154. Licence of an Insurance or Reinsurance Undertaking in Liquidation or in Bankruptcy to Engage in Insurance Activity

1. If the licence to engage in activities has not been revoked before the adoption of a decision to liquidate the insurance or reinsurance undertaking or to initiate bankruptcy proceedings against it, the supervisory authority shall suspend the licence to engage in activities after the adoption of the above-mentioned decision.

2. Having suspended the licence to engage in activities, the insurance or reinsurance undertaking in liquidation or in bankruptcy shall have the right to perform only the activities relating to insurance specified in the decision of the supervisory authority regarding the suspension of the licence to engage in activities.

3. Before applying to the administrator of the Register of Legal Entities for removal of the undertaking from the Register, the liquidator of the insurance or reinsurance undertaking in liquidation or the chairman of the liquidation commission, the administrator of the insurance or reinsurance undertaking in bankruptcy must submit to the supervisory authority an application for the revocation of the licence to engage in activities.

Article 155. Authorisation to Engage in Activity Granted to a Branch of a Third Country Insurance or Reinsurance Undertaking the Activities of Which Are Terminated

1. If the authorisation to engage in activity of a branch has not been revoked before the adoption of the decision to terminate the activities of the branch of a third country insurance undertaking, the supervisory authority shall suspend the validity of such authorisation

2. Upon suspension of an authorisation to engage in activity of a branch, the branch of a third country insurance or reinsurance undertaking shall have the right to engage only in the activities specified in the said decision of the supervisory authority

3. Before applying to the administrator of the Register of Legal Entities for the removal of the branch of a third country insurance or reinsurance undertaking from the Register, the person responsible for the termination of activities of the branch must submit to the supervisory authority an application for the revocation of an authorisation to engage in activity of the branch.

Article 156. Rights of Third Parties

1. Application of intervention measures, liquidation of an insurance undertaking, termination of activities of a branch of a third country insurance undertaking or bankruptcy of an insurance undertaking shall not affect the rights in rem as regards the assets assigned to the insurance undertaking or the branch of a third country insurance undertaking, situated within the territory of another European Economic Area Member State at the moment of coming into force of the decision to apply intervention measures, to liquidate the insurance undertaking, to terminate the activities of the branch of a third country insurance undertaking or to initiate bankruptcy proceedings against the insurance undertaking. The consequences of the application of intervention measures, liquidation, termination of activities of a branch or bankruptcy for the rights and duties of participants of the regulated market shall be established by legal acts applicable to this regulated market.

2. Application of intervention measures, liquidation of the insurance undertaking, termination of activities of a branch or bankruptcy of the insurance undertaking may not affect the seller’s rights to the transferable, transferred assets or assets being transferred to the purchaser – an insurance undertaking or a branch of a third country insurance undertaking – based on the retention of title until full settlement for the assets is effected or other contractual conditions are satisfied if at the moment of coming into force of the decision to apply intervention measures, to liquidate the insurance undertaking, to terminate the activities of the branch of the third country insurance undertaking or to initiate bankruptcy proceedings against the insurance undertaking the assets were situated within another European Economic Area Member State.

3. Application of intervention measures, liquidation of the insurance undertaking, termination of activities of a branch or bankruptcy of the insurance undertaking may not constitute grounds for rescinding the purchase-sale contract concluded by the seller – an insurance undertaking or a branch of a third country insurance undertaking after the transfer of the assets to the purchaser, it also may not affect the transfer of the title to the assets to the purchaser if at the moment of coming into force of the decision to apply intervention measures, to liquidate the insurance undertaking, to terminate the activities of the branch of the third country insurance undertaking or to initiate bankruptcy proceedings against the insurance undertaking the assets were situated within another European Economic Area Member State.

4. Application of intervention measures, liquidation of the insurance undertaking, termination of activities of a branch or bankruptcy of the insurance undertaking may not affect the right of creditors to demand the set-off of their claims where such a set-off is permitted by the law applicable to the claim of the insurance undertaking or the branch of a third country insurance undertaking.

5. Provisions of paragraphs 1–4 of this Article shall not preclude actions for voidness, voidability or unenforceability of acts and other transactions violating legal acts, the rights or legitimate interests of creditors of the insurance undertaking or a branch of a third country insurance undertaking.

6. Provisions of the laws of the Republic of Lithuania in respect of voidness, voidability or unenforceability of acts and other transactions violating legal acts, the rights or legitimate interests of creditors of the insurance undertaking or a branch of a third country insurance undertaking shall not apply if it is established that:

1) these acts and other transactions are subject to the law of another European Economic Area Member State;

2) the applicable law does not provide for any means of challenging those acts and other transactions in the relevant case.

7. Where, after the coming into force of the decision to apply intervention measures, to liquidate the insurance undertaking, to terminate the activities of a branch of a third country insurance undertaking or to initiate bankruptcy proceedings against the insurance undertaking, the insurance undertaking or the branch of a third country insurance undertaking has concluded a transaction under which it has transferred the title to an immovable object, a ship or an aircraft subject to registration in a public register, or to securities the title whereto or transfer whereof presupposes, under the law of the European Economic Area Member State, entry in a register, securities account or placement in the Central Depository, the validity of that transaction shall be governed by the law of the European Economic Area Member State within whose territory the immovable object, the register, the securities account or the Central Depository is situated.

8. The effects of the application of intervention measures, liquidation of the insurance undertaking, termination of activities of a branch or bankruptcy of the insurance undertaking on a pending lawsuit concerning the assets or the rights of the insurance undertaking or of the branch of the third country insurance undertaking shall be governed by the law of the European Economic Area Member State in which the lawsuit is pending.

9. The legal consequences of effect of the decision to apply intervention measures, liquidate the insurance undertaking, terminate the activities of a branch of a third country insurance undertaking or initiate bankruptcy proceedings against the insurance undertaking shall be established as follows:

1) for employment contracts and employment relations – the law of the Member State of the European Economic Area applicable to employment contracts and employment relations;

2) for transactions concerning possession, use of an immovable asset and disposal thereof – the law of the Member State of the European Economic Area in which the immovable property is located;

3) for rights to an immovable asset, a ship or an aircraft subject to registration in a public register – the law of the Member State of the European Economic Area in which the public register is kept.

Article 157. Requirements for the Appointed Persons

1. A person appointed liquidator of the insurance or reinsurance undertaking in liquidation, chairman of the liquidation commission, a person responsible for termination of the activities of the branch of the third country insurance or reinsurance undertaking or administrator of the insurance or reinsurance undertaking in bankruptcy must be of good repute, qualified and experienced.

2. The person appointed to the positions specified in paragraph 1 of this Article shall be entitled to receive a copy of the decision on the appointment.

3. Persons specified in paragraph 1 of this Article acting in another European Economic Area Member States must comply with the requirements of legal acts of that Member State, in particular with regard to requirements for the sale of assets and provision of information to the employees. If legal acts of another European Economic Area Member State provide for the possibility to register the applied intervention measures, liquidation or bankruptcy of the insurance undertaking in the public registers of that European Economic Area Member State, the persons referred to in paragraph 1 of this Article shall have the right to do so. If registration of the applied intervention measures, liquidation or bankruptcy of the insurance undertaking in the in the public registers of the respective European Economic Area Member State is mandatory, persons specified in paragraph 1 of this Article must do so. Registration costs shall be included in the costs of application of intervention measures, liquidation of the insurance undertaking, termination of the activities of the branch or bankruptcy of the insurance undertaking.

4. Persons referred to in paragraph 1 of this Article shall be bound by the duty not to disclose information specified in Article 203 of this Law.

5. If persons specified in paragraph 1 of this Article, whose appointment is out of the court’s jurisdiction, fail to properly discharge their functions, violate legal acts or interests of the policyholders, insured persons, beneficiaries, injured third parties or other creditors, the supervisory authority shall have the right to request replacement of the person and to set the time limit for the appointment of a new person.

6. If persons specified in paragraph 1 of this Article, whose appointment is within the court’s jurisdiction, fail to properly discharge their functions, violate legal acts or interests of the policyholders, insured persons, beneficiaries, injured third parties and other creditors, the supervisory authority shall have the right to apply to the court requesting replacement of a person appointed to this position. In such a case, the supervisory authority shall nominate a new candidate for the position.

7. The persons referred to in paragraph 1 of this Article shall coordinate their actions with the persons appointed to the positions referred to in paragraph 1 of this Article by the authorities or other entities of other Member States of the European Economic Area where the insurance undertaking of third countries have branches in other Member States of the European Economic Area.

CHAPTER VII

INSURANCE AND REINSURANCE INTERMEDIARIES

SECTION ONE

GENERAL PROVISIONS

Article 158. Application of Provisions of this Chapter

The provisions of this Chapter shall not apply to persons rendering insurance mediation services, if there are all of the following conditions:

1) the insurance contract requires only the knowledge of the insurance cover that is provided by this person;

2) the insurance contract is not a life assurance contract;

3) the insurance contract does not cover any civil liability risk;

4) the principal economic commercial activity of the person providing insurance mediation services, which generated over 50 per cent of the person's income in the preceding financial year, is other than insurance mediation;

5) the offered insurance is complementary to the product or service supplied by any provider, where such insurance covers the risk of breakdown, loss or damage to goods supplied by that provider; or damage to or loss of baggage and other risks linked to the travel booked with that provider, even if the insurance covers life assurance or civil liability risks, provided that the cover is ancillary to the main cover for the risks linked to that travel;

6) the amount of the annual premium does not exceed EUR 500, and the total period of validity of the insurance contract, including any possible automatic renewals (when the period of validity of the contract is extended with no intention to refuse the provided insurance cover in future is voiced by the policyholder), does not exceed five years.

SECTION TWO

INSURANCE BROKER UNDERTAKING OF THE REPUBLIC OF LITHUANIA

Article 159. Licence to Engage in Activities of an Insurance Broker Undertaking

1. An insurance broker undertaking shall have the right to engage in insurance mediation activity only subject to a licence granted by the supervisory authority.

2. A licence to engage in activities of an insurance broker undertaking shall be issued:

1) to a public limited liability company, a private limited liability company or a European company (Societas Europaea) which is being established;

2) to a new public limited liability company, a private limited liability company or a European company (Societas Europaea) which will operate upon the reorganisation of legal persons and is intending to engage activities of an insurance broker undertaking;

3) to a public limited liability company, a private limited liability company or a European company (Societas Europaea) which is changing the type of its activities into activities of an insurance broker undertaking.

3. A licence to engage in activities of an insurance broker undertaking form shall be effective in all the other Member States of the European Economic Area, granting the right to engage in insurance and reinsurance activities through exercising the right of establishment and/or the right to provide services under the conditions specified in Article 188 of this Law

4. A licence to engage in activities of an insurance broker undertaking shall be issued for an indefinite period of time.

5. A licence to engage in activities of an insurance broker undertaking shall be issued only for a particular insurance broker undertaking and may not be transferred to another person.

6. Licensing Rules for Activities of Insurance Broker undertakings as well as the form of the licence shall be approved by the supervisory authority.

7. An insurance broker undertaking being established may be registered in the Register of Legal Entities and where a licence to engage in activities of an insurance broker undertaking is issued not to the insurance broker undertaking being established, appropriate changes in the Register of Legal Entities may be made only upon issuing of the licence to engage in activities of an insurance broker undertaking. The insurance broker undertaking must notify the supervisory authority about the fact of registration within five working days.

8. Pursuant to the procedure set out in the regulations of the Register of Legal Entities the supervisory authority must notify the Register of Legal Entities about the issuance, suspension or withdrawal of a licence to engage in activities of an insurance broker undertaking.

9. The list of insurance broker undertakings shall be announced on the website of the supervisory authority.

Article 160. Issuance of a Licence to Engage in Activities of an Insurance Broker Undertaking

1. Within four months from the submission of an application for the issuance of a licence to engage in activities of an insurance broker undertaking as well as all the documents specified in the Licensing Rules for Activities of Insurance Broker undertakings, the supervisory authority shall take a decision concerning the issuance of a licence to engage in activities of an insurance broker undertaking and shall inform the applicant thereof in writing.

2. The supervisory authority shall refuse to issue a licence to engage in an insurance broker undertaking where:

1) the documents required by the supervisory authority have not been submitted or the submitted documents do not meet the requirements set out in this Law and the legal acts of the supervisory authority;

2) persons in control of the insurance broker undertaking, firms participating therein, members of the supervisory and management bodies of the insurance broker undertaking are not of good repute while the head of the administration is not of good repute, is not qualified and experienced;

3) the insurance broker undertaking does not possess professional civil liability insurance;

4) in view of the scope of the contemplated activities (contemplated number of customers, the turnover, internal structure, territory of the activity, future branches and agencies) the insurance broker undertaking intends to employ an insufficient number of insurance brokers;

5) the presented business plan implies that interests of the policyholders, the insured persons, the beneficiaries and the injured third parties are not properly protected;

6) the authorised capital has not been fully paid-up;

7) the authorised capital is paid up in cash or assets the sources of which are not legal;

8) the insurance broker undertaking is a successor to the rights and obligations of a legal person or legal persons the implementation of which would violate the provisions of paragraph 4 of Article 161 of this Law and/or would endanger the interests of the policyholders, the insured persons, the beneficiaries and the injured third parties;

9) state fees and charges for the granting of a licence to engage in activities of an insurance broker undertaking have not been paid.

Article 161. Requirements for Insurance Broker Undertakings

1. No other legal person, except for an insurance broker undertaking and the exceptions provided for in the law, shall have the right to use in its name combinations “draudimo brokerių bendrovė” (insurance broker undertaking), “draudimo brokeris” (insurance broker”) or a combination identical to it. Taking into account the planned territory of activity, the afore-mentioned combinations may also be used in a foreign language.

2. The authorised capital of an insurance broker undertaking may not be less than EUR 15,000, and the equity may not be less than 4% of the insurance premiums income through a financial year payable to insurers and not less than EUR 15,000. The articles of association of an insurance broker undertaking, amended because of an increase or decrease of the authorised capital, must be agreed with the supervisory authority according to the procedure set out by the supervisory authority prior to the submission of the information on the amendments to the Register of Legal Entities. The supervisory authority shall take a decision on the amendments to the articles of association within 20 days of the submission of all the duly executed documents. The increase of the authorised capital may be registered according to the procedure laid down by the law, only when the shares have been fully paid-up.

3. An insurance broker undertaking must insure professional civil liability. The amount of insurance must be not less than EUR 1,000,000 per one insured event and EUR 1,500,000 for all insured events over a year. The insurance cover must be valid throughout the entire territory of the European Economic Area. An insurance broker undertaking must possess insurance cover for the entire period of its activities.

4. An insurance broker undertaking shall have no right to engage in any other economic commercial activities, except for the activities of insurance mediation, reinsurance mediation and mediation in concluding pension accumulation agreements. Moreover, an insurance broker undertaking may carry out valuation of property to be covered by insurance according to the procedure established by the Law on Basics of Property and Business Valuation.

5. An insurance broker undertaking must present statistical, financial and other information to the supervisory authority in the form established by it, where such information is required for the supervision of activities of the insurance broker undertaking.

Article 162. Management of an Insurance Broker Undertaking

Persons in control of an insurance broker undertaking, firms participating therein, members of the supervisory and management bodies of the insurance broker undertaking must be of good repute and the head of the administration must be of good repute, qualified and experienced.

Article 163. Independence of an Insurance Broker Undertaking

1. An insurance broker undertaking shall be an tied insurance intermediary having the right to engage in insurance mediation authorised by an insurer, a policyholder, an insured person, a beneficiary or an injured party.

2. An insurance broker undertaking must act in the interests of the policyholder, the insured person, the beneficiary or the injured third party. An insurance broker undertaking must indemnify the policyholder, the insured person, the beneficiary or the injured third party for the losses arising from default of this duty according to the procedures prescribed by the Civil Code.

3. In carrying out the insurance mediation activity related to conclusion of insurance contracts under the insurer’s authorisation, an insurance broker undertaking must, having regard to the needs of the policyholder, provide the policyholder with an opportunity to choose between analogous or similar services according to insurance cover provided by at least two insurers.

4. An insurance broker undertaking must disclose to policyholders, insured persons, beneficiaries and injured third parties the nature of contractual relations with the insurers upon whose authorisation they carry out mediation activity and furnish the information specified by the supervisory authority, and, prior to the conclusion of an insurance contract, furnish the information specified in Articles 93 and 116 of this Law.

5. At an insurance broker undertaking the functions related to insurance and reinsurance mediation may only be fulfilled by an insurance broker who is employed or holds an elective position at that firm.

6. An insurance broker undertaking must open a separate bank account where the funds of only the policyholders, the insured persons, the beneficiaries and the injured third parties as well as the funds of the insurers assigned for payments to the above-mentioned persons shall be transferred. Execution of claims arising under other obligations of the insurance broker undertaking may not be levied against the said funds and in the case of bankruptcy of the insurance broker undertaking the creditors’ claims only of the policyholders, the insured persons, the beneficiaries and the injured third parties may be satisfied from the funds kept in the account. The supervisory authority shall be entitled to issue binding instructions concerning the funds held in a separate bank account.

Article 164. Suspension and Withdrawal of a Licence to Engage in Activities of an Insurance Broker Undertaking

1. When there are grounds specified in paragraph 1 of Article 205 of this Law, the supervisory authority shall have the right to suspend a licence to engage in activities of an insurance broker undertaking.

2. The supervisory institution shall have the right to withdraw the licence of an insurance broker undertaking if the insurance broker undertaking:

1) breaches the conditions of insurance mediation activities;

2) violates the legal acts governing its activity;

3) refuses the licence;

4) fails to start insurance mediation activity within 12 months from the issuance of the licence to engage in activities of an insurance broker undertaking;

5) does not pursue insurance brokerage activity for a period of time exceeding six months.

3. The decision to withdraw the licence to engage in activities of an insurance broker undertaking must be thoroughly substantiated. The supervisory institution must inform in writing the insurance broker undertaking about the adopted decision and the reasons for it.

SECTION THREE

INSURANCE BROKERS AND THE CHAMBER OF INSURANCE BROKERS

Article 165. Insurance Broker

1. Only a natural person of good repute who has passed the qualifying examination of an insurance broker, has been entered in the list of insurance brokers administered by the supervisory authority and has become a member of the Chamber of Insurance Brokers may be an insurance broker.

2. The qualification examinations of insurance brokers shall be held by the supervisory authority or another person hired by the supervisory authority. The procedure for holding the qualification examinations of insurance brokers shall be established by the supervisory authority.

3. Qualification examinations of insurance brokers shall be held at least once every four months.

4. The supervisory authority shall within five days enter the insurance broker who has passed the qualifying examination on the list of insurance brokers and issue a certificate in the established form. The data of the list of insurance brokers shall be made available to the public in the website of the supervisory authority.

5. The supervisory authority shall have the right to strike an insurance broker off the list of insurance brokers:

1) at the insurance broker’s written request;

2) upon the death of the insurance broker;

3) if the insurance broker has not started professional activities within 12 months or if he has not been carrying out his activities for more than 12 months;

4) if new facts become known after the entry on the list of issuance brokers due to which the insurance broker would have been refused entry on the list;

5) where the conditions that preclude the insurance broker from being considered as of good repute arise;

6) on the recommendation of the Chamber of Insurance Brokers given with a view to the decision made at the Court of Honour of Insurance Brokers;

7) in the cases provided for in paragraph 8 of this Article.

6. The supervisory authority shall have the right to suspend the certificate of the insurance broker upon the request of the Court of Honour of Insurance Brokers provided for in paragraph 3 of Article 177 of this Law. During the period of suspension the certificate the insurance broker shall have no right to fulfil at the insurance broker undertaking any functions related to insurance mediation.

7. The insurance broker who has been removed from the list of the insurance brokers must return the document referred to in paragraph 4 of this Article to the supervisory authority. This requirement shall not apply in the case specified in subparagraph 2 of paragraph 5 of this Article. The person removed from the list of insurance brokers in the cases referred to in subparagraphs 4–7 of paragraph 5 of this Article shall have the right to become an insurance broker again not earlier that three years after his removal from the list of insurance brokers

8. The supervisory authority shall have the right to hold or instruct the hired person to hold re-evaluation of performance of an insurance broker, if complaints about the activities of the insurance broker prove to be justified or if the evaluation data put to doubt his proper qualification. If it is established that the insurance broker has lost his qualification or failed to attend his performance re-evaluation without a good reason, he shall be removed from the list of insurance brokers.

9. An insurance broker may perform the functions related to insurance and reinsurance mediation only if he is employed or holds an elective position at the insurance broker undertaking.

10. An insurance broker must adhere to the code of professional ethics.

Article 166. Chamber of Insurance Brokers

1. The Chamber of Insurance Brokers shall be an association which unites all insurance brokers and implements self-governance principles of insurance brokers.

2. The Chamber of Insurance Brokers shall have the seal with its name and the settlement account. The Chamber of Insurance Brokers shall be liable for its obligations to the extent of its assets and shall not be liable for the commitments assumed by its members, whereas the members of the Chamber of Insurance Brokers shall not be liable for the obligations of the Chamber of Insurance Brokers.

3. In its activities the Chamber of Insurance Brokers shall abide by this Law and other legal acts as well as the articles of association of the Chamber of Insurance Brokers.

Article 167. Founding and Registration of the Chamber of Insurance Brokers

1. The Chamber of Insurance Brokers shall be founded at the general statutory meeting of members of the Chamber of Insurance Brokers.

2. At the statutory meeting the articles of association of the Chamber of Insurance Brokers shall be approved. If the articles of association of the Chamber of Insurance Brokers is not approved at the statutory meeting, a repeat meeting shall be called within 30 days.

3. The Chamber of Insurance Brokers shall be deemed founded upon the registration thereof in the Register of Legal Entities.

Article 168. Articles of Association of the Chamber of Insurance Brokers

1. The articles of association of the Chamber of Insurance Brokers must indicate:

1) the name, legal form, symbols and registered office of the Chamber of Insurance Brokers;

2) objectives, functions and tasks of the activities;

3) conditions and procedure of entry, withdrawal and exclusion from membership in the Chamber of Insurance Brokers;

4) rights and duties of the members of the Chamber of Insurance Brokers;

5) the procedure for establishing and liquidating branches; their rights and relations with management bodies of the Chamber of Insurance Brokers;

6) the procedure for setting up the management bodies of the Chamber of Insurance Brokers, their competence, functions and responsibility, the procedure for calling the general meeting, recalling the elective management bodies and their members;

7) sources of assets and funding as well as control of financial activity;

8) the procedure for providing financial and other support;

9) the procedure for amending and supplementing the articles of association;

10) the procedure for reorganisation and liquidation of the Chamber of Insurance Brokers.

2. The articles of association of the Chamber of Insurance Brokers may also provide for other provisions regulating activities of the Chamber of Insurance Brokers, provided such provisions do not contradict this Law and other laws.

Articles 169. Members of the Chamber of Insurance Brokers

1. Only persons who have passed the qualifying examinations of insurance brokers, have been entered on the list of insurance brokers administered by the supervisory authority and possess a certificate of the insurance broker, have taken the oath of the insurance broker shall be entitled to membership in the Chamber of Insurance Brokers. The Chamber of Insurance Brokers shall be prohibited from refusing membership to a person meeting all the above requirements.

2. Members of the Chamber of Insurance Brokers shall have the right to:

1) take part in the activities of the Chamber of Insurance Brokers and nominate their representatives to the management bodies of the Chamber of Insurance Brokers;

2) make use of the services provided by the Chamber of Insurance Brokers;

3) make use of the information accumulated by the Chamber of Insurance Brokers;

4) obtain information about the activities of the Chamber of Insurance Brokers;

5) contest in the court the decisions of the bodies of the Chamber of Insurance Brokers.

Article 170. Exclusion of an Insurance Broker from the Chamber of Insurance Brokers

1. An insurance broker who has been removed from the list of insurance brokers must be excluded from membership of the Chamber of Insurance Brokers according to the procedure prescribed by the General Meeting of the Chamber of Insurance Brokers.

2. The Chamber of Insurance Brokers shall be prohibited from removing from membership of the Chamber of Insurance Brokers an insurance broker who has not yet been removed from the list of insurance brokers.

Article 171. Functions of the Chamber of Insurance Brokers

The Chamber of Insurance Brokers shall perform the following functions:

1) taking into account the recommendations of the supervisory authority, prepare and approve the code of professional ethics of insurance brokers and control the compliance with it;

2) draw up and supplement the articles of association of the Chamber of Insurance Brokers;

3) draw up the regulations of the Court of Honour of Insurance Brokers;

4) organise and co-ordinate internships and in-service training for insurance brokers;

5) put forward proposals to the supervisory authority concerning qualifying examinations and re-evaluation of performance of insurance brokers organised by the said authority;

6) establish the obligatory number of hours of in-service training courses to be attended by insurance brokers every year;

7) deal with the issues concerning improvement of professional activities of insurance brokers;

8) consider complaints of persons pertaining to violations of activities and professional ethics of insurance brokers;

9) taking into account the decision by the Court of Honour of Insurance Brokers, present proposals to the supervisory authority to suspend the certificate of the insurance broker for an up to one year period or remove the insurance broker from the list of insurance brokers;

10) perform other functions set out in the articles of association of the Chamber of Insurance Brokers.

Article 172. Management of the Chamber of Insurance Brokers

The bodies of the Chamber of Insurance Brokers shall be the General Meeting of the Chamber of Insurance Brokers, the Presidium and the Administration The Presidium and the Administration shall be the management bodies of the Chamber of Insurance Brokers.

Article 173. General Meeting of the Chamber of Insurance Brokers

1. Insurance brokers shall attend an annual General Meeting of the Chamber of Insurance Brokers to discuss and develop activities of insurance brokers.

2. The General Meeting of the Chamber of Insurance Brokers shall be convened and organized by the Presidium of the Chamber of Insurance Brokers.

3. The General Meeting of the Chamber of Insurance Brokers shall be the supreme body of the Chamber of Insurance Brokers.

4. The General Meeting of the Chamber of Insurance Brokers shall be convened in accordance with the procedure laid down by the articles of association of the Chamber of Insurance Brokers. An extraordinary meeting shall be convened if it is requested by no less than 1/5 of the members of the Chamber of Insurance Brokers or by the Presidium on its resolution.

5. The General Meeting of the Chamber of Insurance Brokers shall have the right to:

1) adopt, amend and supplement the articles of association of the Chamber of Insurance Brokers;

2) establish the number of members of the Presidium of the Chamber of Insurance Brokers;

3) elect and dismiss members of the Presidium of the Chamber of Insurance Brokers;

4) elect the President of the Chamber of Insurance Brokers;

5) appoint insurance brokers to members of the Court of Honour of Insurance Brokers;

6) choose an audit firm for auditing sets of financial statements of the Chamber of Insurance Broker

7) fix the amount of the membership fee to be paid by the members of the Chamber of Insurance Brokers;

8) approve the regulations of the Court of Honour of Insurance Brokers;

9) approve the code of professional ethics of insurance brokers;

10) approve the report on the use of funds of the Chamber of Insurance Brokers;

11) establish the number of employees of the Chamber of Insurance Brokers and fix the amount of their salaries;

12) address other issues provided for in the articles of association of the Chamber of Insurance Brokers.

6. The General Meeting of the Chamber of Insurance Brokers shall be valid if it is attended by no less than a half of the members. Decisions shall be taken by a simple majority vote, except for the cases specified by laws.

7. Where the General Meeting of the Chamber of Insurance Brokers does not have a quorum, a repeat meeting shall be held according to the procedure laid down in the articles of association of the Chamber of Insurance Brokers not later than after 30 days. This meeting shall have the right to take decisions on the issues which were on the agenda of the originally planned meeting, irrespective of the number of members attending the repeat meeting.

Article 174. The Presidium and the Administration of the Chamber of Insurance Brokers

1. Activities of the Chamber of Insurance Brokers between the General Meetings of the Chamber of Insurance Brokers shall be managed by the Presidium. The Presidium of the Chamber of Brokers shall be elected according to the procedure laid down in the articles of association of the Chamber of Insurance Brokers.

2. The meeting of the Presidium of the Chamber of Insurance Brokers shall be legal when attended by the President of the Chamber of Insurance Brokers or the member of the Presidium substituting him and at least one half of its members and its decisions shall be legal when they are voted in favour of by not less than one half of the attending Presidium members including the President of the Chamber of Insurance Brokers or the member of the Presidium substituting him. All members shall have equal rights. In the event of a tie, the President of the Chamber of Insurance Brokers or the member of the Presidium substituting him shall have the casting vote.

3. Activities of the Chamber of Insurance Brokers shall be organized and carried out by the Administration.

4. The Administration of the Chamber of Insurance Brokers shall be headed by the Director. The Director and the chief accountant (accountant) shall be appointed by the Presidium of the Chamber of Insurance Brokers. The duties of the chief accountant (accountant) may also be performed by the companies engaged in accounting services.

Article 175. Grounds for Bringing a Disciplinary Action against an Insurance Broker

1. On the proposal of the Presidium of the Chamber of Insurance Brokers or the supervisory authority, a disciplinary action may be taken against an insurance broker for the violation of this Law, other legal acts, professional activities or the Code of Professional Ethics of Insurance Brokers.

2. Within 30 days from the day of receipt of the proposal of the Presidium of the Chamber of Insurance Brokers or the supervisory authority to take a disciplinary action against an insurance broker, the Court of Honour of Insurance Brokers shall take a decision to take or not to take disciplinary action against the insurance broker.

Article 176. Court of Honour of Insurance Brokers

1. The Court of Honour of Insurance Brokers shall be composed in accordance with the following procedure:

1) three insurance brokers with an at least three-year record of work in insurance mediation shall be appointed by the General Meeting of the Chamber of Insurance Brokers;

2) the supervisory authority and the State Consumer Rights Protection Authority shall each appoint a member.

2. The length of powers of the Court of Honour of Insurance Brokers shall be three years. The same persons may be appointed as members of the Court of Honour of Insurance Brokers for no more than two consecutive terms of office.

3. The Court of Honour of Insurance Brokers may hear cases if the hearing is attended by not less than three members, provided that at least one of them has been appointed not by the members’ meeting of the Chamber of Insurance Brokers.

4. The Court of Honour of Insurance Brokers must take a decision within 60 days from the day of adoption of the decision to take a disciplinary action.

5. The Court of Honour of Insurance Brokers shall act in accordance with its Rules. The Rules of the Court of Honour of Insurance Brokers shall be approved by the General Meeting of the Chamber of Insurance Brokers.

Article 177. Disciplinary Penalties and other Decisions Made by the Court of Honour of Insurance Brokers

1. Penalties listed below may be imposed on the insurance broker by the Court of Honour of Insurance Brokers for the violations specified in paragraph 1 of Article 175 of this Law:

1) a warning;

2) a reprimand;

3) a publicly announced reprimand.

2. Only one disciplinary penalty shall be imposed for one breach. One year after the imposition of a disciplinary penalty the insurance broker shall be considered not having been imposed the disciplinary penalty.

3. If the auditor with the penalty being still effective repeatedly commits the breaches specified in paragraph 1 of Article 175 of this Law, the Court of Honour of Insurance Brokers may adopt one of the following decisions:

1) apply to the supervisory authority for suspension of the insurance broker’s certificate for up to one year;

2) apply to the supervisory authority with a request to strike an insurance broker off the list of insurance brokers.

4. Having adopted a decision to impose penalties specified in paragraph 1 of this Article or the decision described in paragraph 3 hereof, the Court of Honour of Insurance Brokers must submit the decision to the Chamber of Insurance Brokers within 14 days of the adoption of the relevant decision. The insurance broker shall be given a written notification of the adopted decision within three days from the day of adoption of the decision.

5. During the hearing of the case at the Court of Honour of Insurance Brokers, the insurance broker may proceed with his duties.

Article 178. Appeals against Decisions of the Court of Honour of Insurance Brokers

Decisions adopted by the Court of Honour of Insurance Brokers may be appealed within one month of serving of the relevant decision in accordance with the procedure established by legal acts.

Article 179. Sources of Funds of the Chamber of Insurance Brokers

The sources of funds of the Chamber of Insurance Brokers shall be as follows:

1) membership fees provided for in the articles of association of the Chamber of Insurance Brokers and other target contributions;

2) income from the provided teaching services;

3) property and funds transferred by natural and legal persons for no consideration;

4) target funds of the State and municipalities;

5) funds donated by organisations without legal personality, international organisations and foundations;

6) interest from the funds deposited in credit institutions;

7) assets inherited under a will;

8) borrowed funds;

9) other legitimately received funds.

Article 180. Audit of a Set of Financial Statements of the Chamber of Insurance Brokers

Sets of financial statements of the Chamber of Insurance Brokers shall be audited by the audit firm chosen at the General Meeting of the Chamber of Insurance Brokers.

Article 181. Reorganization and Winding Up of the Chamber of Insurance Brokers

The Chamber of Insurance Brokers may be reorganised and wound up according to procedure established by laws.

section four

TIED INSURANCE INTERMEDIARIES OF THE REPUBLIC OF LITHUANIA

Article 182. List of Tied Insurance Intermediaries

1. Every insurance undertaking or a branch of a third party insurance undertaking must administer a list of tied insurance intermediaries acting in its name and/or in its interests in the manner established by the supervisory authority. The list shall also contain data on the employees of the undertaking of insurance agents whose duties include insurance mediation.

2. An insurance undertaking or a branch of a third party insurance undertaking shall have the right to enter an undertaking of insurance agents into the list of tied insurance intermediaries only having verified the repute and qualification of persons working for this undertaking of insurance agents whose duties shall cover insurance mediation and in case of an insurance agent – only upon checking his reputation and qualification. These persons must be of good repute and qualified.

3. An insurance undertaking or a branch of a third party insurance undertaking, having entered a tied insurance intermediary in the list, must issue the tied insurance intermediary with a certificate confirming this fact.

Article 183. Professional Civil Liability Insurance of Tied Insurance Intermediaries

1. Tied insurance intermediaries must insure professional civil liability which might arise in case of improper insurance mediation. The amount of insurance must be not less than EUR 1,000,000 per one insured event and EUR 1,500,000 for all insured events over a year. The insurance cover must be valid throughout the entire territory of the European Economic Area. The tied insurance intermediary must have insurance cover throughout the period of mediation activities.

2. A tied insurance intermediary shall have the right not to insure professional civil liability if:

1) an insurance undertaking or a branch of a third party insurance undertaking has concluded a professional civil liability insurance contract of a tied insurance intermediary for the amount referred to in paragraph 1 of this Article, and the insurance cover under this insurance contract is valid throughout the territory of the European Economic Area for the entire period of activity of the tied insurance intermediary on behalf and in the interests of the insurance undertaking or the branch of the third party insurance undertaking;

2) an insurance undertaking or a branch of a third party insurance undertaking, when concluding a contract with the tied insurance intermediary, has assumed an obligation to fully indemnify the loss which occurred due to the failure by the tied insurance intermediary to perform his duties or due to the improper performance of such duties.

3. An insurance undertaking or a branch of a third country insurance undertaking must ensure that the tied insurance intermediaries acting on their behalf and for their interests follow the requirements set forth in paragraphs 1 or 2 of this Article. In case of failure by the insurance undertaking or a branch of a third country insurance undertaking to fulfil the above duty, it must fully indemnify the loss incurred due to the failure by the tied insurance intermediary to fulfil professional duties or improper fulfilment thereof.

4. Insurance undertakings or branches of third country insurance undertakings must organise professional training sessions for the staff of undertakings of insurance agents whose activities include insurance mediation as well as for insurance agents.

Article 184. Insurance Mediation Activity of Tied Insurance Intermediaries

1. Rights and duties of tied insurance intermediaries in conducting insurance mediation activities shall be established in a written agreement with the insurance undertaking or a branch of a third country insurance undertaking. Insurance agents must adhere to the provisions of legal acts regulating individual activities of a natural person.

2. A tied insurance intermediary shall be prohibited from concurrently carrying out insurance mediation activities on behalf and in the interests of two or more insurers relating to contracts providing identical or similar insurance cover.

3. A tied insurance intermediary must provide to policyholders, insured persons, beneficiaries and injured third parties the information specified by the supervisory authority and, prior to the conclusion of the insurance contract, also the information specified in Articles 93 and 116 of this Law.

4. Insurance premium paid to a tied insurance intermediary shall be considered as paid to the insurance undertaking or a branch of a third country insurance undertaking; however, the amounts paid by the insurance undertaking or a branch of a third country insurance undertaking to the tied insurance intermediary and intended for making payment to policyholders, insured persons, beneficiaries or injured third parties shall be deemed paid to those persons only upon their actual receipt of the said amounts.

5. An insurance undertaking or a branch of a third country insurance undertaking, having regard to the resolutions and recommendations of the supervisory authority, must provide mandatory instructions on the mediation activity to the tied insurance intermediaries acting on its behalf and in its interests.

Article 185. Mediation of Tied Insurance Intermediaries for Insurance Undertakings of any other European Economic Area Member State Engaged in Activities in the Republic of Lithuania

1. A tied insurance intermediary mediating for an insurance undertaking of any other European Economic Area Member State which provides services or has established a branch in the Republic of Lithuania, shall be subject to the same requirements as those applied in case of mediation for an insurance undertaking or a branch of a third country insurance undertaking.

2. The provisions of Articles 182–184 and Article 186 of this Law shall mutatis mutandis be applied to insurance undertakings of other Member States of the European Economic Area that have tied insurance intermediaries in the Republic of Lithuania.

3. The supervisory authority shall give recommendations to an insurance undertaking of any other European Economic Area Member State, which provides services or has established a branch in the Republic of Lithuania, regarding management of the list of tied insurance intermediaries, control of professional civil liability insurance and professional training of insurance agents and the employees of undertakings of insurance agents whose duties cover insurance mediation activities.

Article 186. Public Access to the Data of the List of Tied Insurance Intermediaries

1. Every insurance undertaking or a branch of a third country insurance undertaking must publish on its website the data of the list of its representing insurance agents, undertakings of insurance agents and their staff whose duties cover insurance mediation.

2. The website of the supervisory authority shall contain references to the data of the list of tied insurance intermediaries published on the websites of insurance undertakings, whereas the data of the list published on the insurance undertakings’ websites shall contain references to the website of the supervisory authority.

3. Should there be any changes in the list data, appropriate amendments must be within 5 working days made in the data of the lists published on the websites of the insurance undertakings or branches of third country insurance undertakings.

4. The supervisory authority shall specify what data of the list of tied insurance intermediaries should be made public.

section five

REINSURANCE INTERMEDIARIES

Article 187. Reinsurance Intermediaries

1. The entities specified in subparagraphs 1 and 3 of paragraph 1 of Article 3, subparagraphs 1 and 3 of paragraph 1 of Article 4 and subparagraph 1 of paragraph 2 of Article 5 as well as branches of third country insurance intermediaries specified in subparagraph 3 of paragraph 2 of Article 5 of this Law shall have the right to carry out reinsurance activities only after the supervisory authority enters, in accordance with the procedure laid down by it, them on the list of reinsurance intermediaries, managed by the supervisory authority. The list of reinsurance intermediaries shall be announced on the website of the supervisory authority.

2. A reinsurance intermediary may be entered on the list of reinsurance intermediaries (the list being managed by the supervisory authority), provided he:

1) is of good repute and qualified. Where a reinsurance intermediary is a legal person, the members of its supervisory and management bodies must be of good repute, while the persons responsible in undertaking for carrying-out of reinsurance mediation activities must be of good repute and qualified;

2) has professional civil liability insurance set in paragraph 1 of Article 183 of this Law, or some other method of ensuring the indemnification of the loss incurred through its activities, analogous to that established in paragraph 2 of Article 183 of this Law.

3. The supervisory authority shall have the right to strike the reinsurance intermediary off the list of reinsurance intermediaries:

1) at the written request of the reinsurance intermediary;

2) if new facts become known after the entry on the said list due to which the reinsurance intermediary would have been refused entry on the list;

3) where the conditions that preclude the reinsurance intermediary from being considered as of good repute or qualified arise;

4) if the reinsurance intermediary has no professional civil liability insurance set in paragraph 1 of Article 183 of this Law, or some other method of ensuring the indemnification of the loss incurred through its activities, analogous to that established in paragraph 2 of Article 183 of this Law;

5) if the reinsurance intermediary breaches the legal acts of the Republic of Lithuania governing its activities.

SECTION SIX

ACTIVITY OF INSURANCE AND REINSURANCE INTERMEDIARIES OF

EUROPEAN ECONOMIC AREA MEMBER STATES

Article 188. Right to Provide Services and Right of Establishment

1. An insurance intermediary which intends to provide services for the first time or establish a branch in other European Economic Area Member States must notify the supervisory authority about this.

2. Within one month after receiving this information indicated in paragraph 1 of this Article, the supervisory authority shall notify thereof the supervisory authority of another European Economic Area Member State which intends to obtain this information on the basis of the data submitted to the supervisory authority by the European Commission, at the same time informing the insurance intermediary in writing about the sending on the same day.

3. Having fulfilled the requirements laid down in the legal acts of another European Economic Area Member State, the insurance intermediary shall have the right to start operating in another European Economic Area Member State in the ways specified in paragraph 1 of this Article after the lapse of one month from the receipt from the supervisory authority of the information specified in paragraph 2 of this Article or immediately, if the supervisory authority of another European Economic Area Member State has no intentions to obtain information about future activities of insurance or reinsurance intermediary in this European Economic Area Member State

4. The supervisory authority shall exchange information with competent authorities of other European Economic Area Member States about sanctions applied to insurance intermediaries. Upon request of competent authorities of other European Economic Area Member States, the supervisory authority shall also furnish other information concerning activities of insurance and reinsurance intermediaries.

SECTION SEVEN

ACTIVITY OF INSURANCE AND REINSURANCE INTERMEDIARIES OF OTHER EUROPEAN ECONOMIC AREA MEMBER STATES IN THE REPUBLIC OF LITHUANIA

Article 189. Forms of Activities of Insurance and Reinsurance Intermediaries

Insurance and reinsurance intermediaries of other European Economic Area Member States shall have the right to establish a branch or to provide services in the Republic of Lithuania.

Article 190. Commencement of Activities of Insurance and Reinsurance Intermediaries

1. Insurance and reinsurance intermediaries of other European Economic Area Member States shall have the right to start to provide services or establish a branch in the Republic of Lithuania only upon the receipt by the supervisory authority of information from the supervisory authority of another European Economic Area Member State about the intention to start providing services or to establish a branch.

2. Tied insurance and reinsurance intermediaries of other European Economic Area Member States, while carrying out activities in the Republic of Lithuania, must possess the professional civil liability insurance established in paragraph 3 of Article 161 of this Law, whereas the tied insurance and reinsurance intermediaries must possess the professional civil liability insurance established in paragraph 1 of Article 183 or some other method of ensuring the indemnification of the loss incurred through their activities, analogous to that established in paragraph 2 of Article 183 of this Law.

Article 191. Activity of Insurance and Reinsurance Intermediaries

1. Insurance or reinsurance intermediaries of other European Economic Area Member States must provide information specified by the supervisory authority to the policyholders, insured persons, beneficiaries, injured third parties and other persons and before the conclusion of an insurance contract also furnish the information indicated in Articles 93 and 116 of this Law

2. Insurance and reinsurance intermediaries of other European Economic Area Member States, while carrying out activities in the Republic of Lithuania, must comply with the requirements set out in this Law directly for them as well as other legal acts of the Republic of Lithuania.

3. A branch of independent insurance intermediaries of another European Economic Area Member State must have on its staff insurance brokers or other persons, who, according to the requirements of legal acts of this European Economic Area Member State, may be responsible for providing services of independent insurance mediation.

4. The supervisory authority shall draw up compulsory instructions for insurance undertakings, branches of third country insurance undertakings and recommendations for an insurance undertaking of another European Economic Area Member State which provides services or has established a branch in the Republic of Lithuania, regarding administration of the list of tied intermediaries of another European Economic Area Member State, control of their professional civil liability insurance and professional training of the employees of these tied insurance intermediaries the obligations of which cover insurance mediation activities.

SECTION EIGHT

ACTIVITIES OF THIRD COUNTRY INSURANCE AND REINSURANCE INTERMEDIARIES IN THE REPUBLIC OF LITHUANIA

Article 192. Branch of an Undertaking of Insurance Intermediaries

1. An undertaking of third country insurance intermediaries shall have the right to establish a branch in the Republic of Lithuania.

2. Before registering the branch in the Register of Legal Entities, the undertaking of third country independent insurance intermediaries must be granted an authorisation by the supervisory authority to engage in the activities of a branch.

3. The procedure for granting the authorisation to engage in the activities of a branch of independent insurance intermediaries of a third country shall be established by the supervisory authority.

4. The activity of branches of undertakings of third country independent insurance intermediaries and of insurance brokers employed in these branches shall be subject to the same provisions as those applied to undertakings of insurance brokers and to insurance brokers of the Republic of Lithuania.

5. The insurance mediation activities of undertakings of tied insurance intermediaries of a third country shall be subject to the same provisions as the tied intermediaries of the Republic of Lithuania.

Article 193. Granting of an Authorisation to Engage in the Activity of a Branch

1. Within four months from the date of filing of an application for the granting of an authorisation to engage in the activity of a branch of an undertaking of a third country independent insurance intermediary as well as submission of all documents specified in the instructions on the granting of authorisations, the supervisory authority shall make a decision regarding the granting of the authorisation to the branch of the undertaking of the third country independent insurance intermediary and shall notify the applicant thereof in writing.

2. The supervisory authority shall refuse to grant the authorisation to engage in the activity of a branch of an undertaking of a third country independent insurance intermediary in the case where:

1) the documents required by the supervisory authority have not been submitted or the submitted documents do not meet the requirements laid down in this Law and the legal acts of the supervisory authority;

2) the persons in control of a branch of the undertaking of a third country independent insurance intermediary, the members of the undertakings participating therein, the supervisory and management bodies are not of good repute, and the head of the administration is not of good repute, does not have adequate professional qualifications and experience;

3) a branch of the undertaking of a third country independent insurance intermediary has no professional civil liability insurance;

4) having regard to the scope of intended activities (number of customers, turnover, internal structure of the undertaking, territory of the activity, agencies), a branch of the undertaking of a third country independent insurance intermediary is planning to employ an insufficient number of insurance brokers;

5) the submitted business plan suggests that the interests of policyholders, insured persons, beneficiaries and injured third parties will not be adequately protected;

6) the value of assets attributed to the branch is below than the amount specified in paragraph 2 of Article 161 of this Law;

7) the sources of the assets attributed to the branch and/or the financial resources for which the attributes assets were acquired is illegal.

Article 194. Suspension and Revocation of the Authorisation for Activity of a Branch

1. The supervisory authority shall have the right to suspend the authorisation for the activity of a branch of the undertaking of a third country independent insurance intermediary on the grounds specified in paragraph 1 of Article 205 of this Law.

2. The supervisory authority shall have the right to revoke the authorisation for activity of a branch of the undertaking of a third country independent insurance intermediary, when the branch:

1) has breached the insurance mediation activity conditions;

2) has violated the legal acts governing its activity;

3) refuses the authorisation;

4) does not engage in the activity of third country independent insurance intermediary for 12 months after granting of the authorisation for the activity of the branch of the undertaking of the third country independent insurance intermediary;

5) does not engage in insurance mediation activity for more than 6 months.

3. The decision to revoke the authorisation for activity of the branch of the undertaking of the third country independent insurance intermediary must be duly justified. The supervisory authority must notify the branch of the undertaking of the third country independent insurance intermediary of the decision and its reasons in writing.

Article 195. Reinsurance Intermediaries

1. Reinsurance intermediaries of third countries shall have the right to provide services in the Republic of Lithuania without establishment or to establish a branch in the Republic of Lithuania

2. Provisions of paragraphs 1, 2 and 3 of Article 187 of this Law shall mutatis mutandis apply to activities of the branches of third country reinsurance intermediaries in the Republic of Lithuania.

CHAPTER VIII

SUPERVISION OF INSURANCE, REINSURANCE AND INSURANCE AND REINSURANCE MEDIATION ACTIVITY

SECTION ONE

GENERAL PROVISIONS

Article 196. Supervisory Authority, Purpose of Supervision and Independence

1. The supervisory authority shall be an authority fulfilling functions of supervision of insurance, reinsurance, insurance and reinsurance mediation provided for in this Law.

2. The purpose of the supervision of insurance, reinsurance, insurance and reinsurance mediation activity shall be to ensure reliability, efficiency, safety, and stability of the insurance system and protection of interests and rights of the policyholders, insured persons, beneficiaries, and injured party.

3. The supervisory authority shall carry out financial supervision of insurance and reinsurance undertakings including financial supervision of the activities in which they are engaged exercising the right of establishment or the right to provide services.

4. Public authorities shall be prohibited from exerting influence to fulfilment of the functions of the supervisory authority provided for in this Law.

5. Funding of the supervision authority must ensure independence of the supervisory authority, proper fulfilment of the functions of the supervisory authority and attracting and maintenance of specialists with appropriate qualification and experience.

Article 197. General Provisions Concerning Public Supervision of Insurance, Reinsurance and Insurance and Reinsurance Mediation Activities

1. Public supervision of insurance, reinsurance, insurance and reinsurance mediation shall be based on the perspective and risk assessment based approach. The supervisory authority shall inspect if insurance and reinsurance activities are properly fulfilled, if insurance and reinsurance undertakings observe legal acts governing their activities. The afore-mentioned function of the supervisory authority shall be fulfilled on an ongoing basis.

2. Public supervision shall be carried out by analysing the information provided by the undertakings under supervision to the supervisory authority and conducting inspections in the premises of such undertakings.

3. When carrying out supervision the nature, scale and complexity of the risks inherent in the activity of the particular insurance or reinsurance undertaking shall be taken into account.

4. The supervisory authority shall exercise the rights granted by the law in a timely manner and on a proportional basis.

5. When fulfilling the assigned functions the supervisory authority shall be obliged to take into account:

1) the fact that the insurance market players are entitled to engage in activities in the European Economic Area Member States what results in the need for closer cooperation at the European Union level;

2) the need for the European Economic Area Member States to harmonise the practice of application of the legal acts of the European Union and the national legal acts adopted on the basis of such legal acts and supervisory measures.

6. In fulfilment of its functions, in the light of the available information and without prejudice to the purpose provided for in Article 196 of this Law, the supervisory authority shall be obliged to assess a possible impact of its decision, in particular, in emergency situations, on the stability of the financial system of the European Economic Area. In times of exceptional movements in the financial markets, supervisory authorities shall take into account the potential pro-cyclical effects of their actions.

Article 198. Transparency and Accountability of the Activities of the Supervisory Authority

1. The supervisory authority shall conduct its tasks in a transparent and accountable manner with due respect for the protection of confidential information.

2. Following the legal acts of the European Union, the supervisory authority must ensure that the following information was made public and periodically updated on the website of the supervisory authority:

1) legal acts, drafts thereof, recommendations governing insurance, reinsurance, insurance and reinsurance mediation activities;

2) criteria and methods of supervision of insurance and reinsurance activities;

3) aggregate statistical data on key aspects of the application of the prudential framework, statistical data of the insurance, reinsurance, insurance and reinsurance mediation market;

4) information on implementation of the provisions of Directive 2009/138/EC of the European Parliament and of the Council which are implemented at the free choice of the European Economic Area Member State;

5) the objectives of the supervision of insurance and reinsurance activities and the functions and activities of the supervisory authority in relation to supervision of such activities.

Article 199. Supervisory review process

1. The supervisory authority shall review and evaluate the strategies, processes and reporting procedures which are established by the insurance and reinsurance undertakings to comply with the provisions of this Law and other legal acts. That review and evaluation shall comprise the assessment of the qualitative requirements relating to the system of governance of insurance and reinsurance undertakings, the assessment of the risks which the undertakings concerned face or may face and the assessment of the ability of those undertakings to assess those risks taking into account the environment in which the undertakings are operating.

2. The supervisory authority shall in particular review and evaluate compliance with the following requirements set by insurance and reinsurance undertaking:

1) the system of governance;

2) calculation of the technical provisions;

3) the solvency capital requirement and the minimum capital requirement;

4) investment;

5) own funds;

6) full or partial internal model.

3. The supervisory authority shall have in place appropriate monitoring tools that enable them to identify deteriorating financial conditions in an insurance or reinsurance undertaking and to monitor how that deterioration is remedied.

4. The supervisory authority must have in place appropriate measures and methods to inspect the system of governance of an insurance or reinsurance undertaking and assess new identified risks that may have an impact on the soundness of the financial standing. The supervisory authority shall be entitled to request that an insurance ore reinsurance undertaking improved and strengthened its system of governance and ensured its conformity with the requirements of the legal acts.

5. The supervisory authorities shall assess the adequacy of the methods and practices of the insurance and reinsurance undertakings designed to identify possible events or future changes in economic conditions that could have adverse effects on the overall financial standing of the undertaking concerned and assess the ability of the undertakings to withstand those possible events or future changes in economic conditions.

6. Upon the request of the supervisory authority, the insurance and reinsurance undertakings must remedy weaknesses or deficiencies identified in the supervisory review process.

7. The reviews and assessments referred to in paragraphs 1, 2 and 5 of this Article shall be carried out by the supervisory authority on a regular basis.

8. The supervisory authority shall establish the minimum frequency and the scope of those reviews, evaluations and assessments having regard to the nature, scale and complexity of the activities of the insurance or reinsurance undertaking concerned.

SECTION TWO

competence of the supervisory authority

Article 200. Functions of the Supervisory Authority

When implementing the provisions of this Law, the supervisory authority shall perform the following functions:

1) draft, approve, amend and repeal legal acts regulating insurance, reinsurance, insurance and reinsurance mediation activities;

2) grant and revoke licences to engage in insurance activity, reinsurance activity and activities of insurance broker undertakings;

3) grant and revoke other authorisations envisaged in this Law as well as authorisations determined by other laws, the granting and revocation of which are assigned the competence of the supervisory authority;

4) observe, analyse, check and supervise in other ways activities of insurance undertakings, reinsurance undertakings, insurance brokerage undertakings, branches of third country insurance and reinsurance undertakings and branches of third country undertakings of independent insurance intermediaries established in the Republic of Lithuania, their compliance with laws and other legal acts;

5) apply sanctions provided for in this Law and other laws;

6) organise qualification examinations and performance re-evaluation of insurance brokers unless this function is assigned to the hired person in accordance with the procedure prescribed in this Law;

7) lay down the procedure of the registration and record-keeping of insurance policies;

8) co-operate with supervisory authorities, financial and capital market supervisory institutions, competition and consumer rights’ protection institutions of the Republic of Lithuania, other European Economic Area Member States and third country supervisory authorities;

9) apply to the court for institution of bankruptcy proceedings against insolvent insurance and reinsurance undertakings;

10) ensure that the public has access to the information, except for the information the furnishing of which is prohibited under this Law or other laws, about co-operation of the supervisory authority with supervisory authorities, financial and capital market supervision institutions, competition and consumers’ rights protection institutions of the Republic of Lithuania, other European Economic Area Member States and third countries as well as with other institutions of the Republic of Lithuania;

11) submit recommendations to the Chamber of Insurance Brokers, professional association of actuaries, insurance undertakings and branches of third country insurance undertakings exercising control over the activities of tied insurance intermediaries in order to ensure that the functions of the said associations and the functions of a branch of the insurance undertaking, reinsurance undertaking or the third country insurance undertaking related to the control of tied insurance intermediaries, should be disclosed to the public and be transparent;

12) provide clarifications and recommendations concerning proper implementation of this Law and other legal acts of the Republic of Lithuania governing insurance, reinsurance, insurance or reinsurance mediation activity;

13) within the remit of its competence represent the interests of the Republic of Lithuania at the institutions of the European Union and their working bodies;

14) cooperate with the European Insurance and Occupational Pensions Authority, participate in its activities and in fulfilment of its functions take into account the guidelines and recommendations drawn up by the European Insurance and Occupational Pensions Authority and, in the event of a failure to take them into account, indicate the reasons and immediately provide the European Insurance and Occupational Pensions Authority with information necessary for fulfilled of the functions under Regulation (EU) No 1094/2010;

Amendments to the paragraph of this Article:

No XII-1603, 9 April 2015, published in the Register of Legal Acts (TAR), 17 April 2015, ID code 2015-05897

15) Repealed on 18 April 2015.

Amendments to the paragraph of this Article:

No XII-1603, 9 April 2015, published in the Register of Legal Acts (TAR), 17 April 2015, ID code 2015-05897

16) perform other functions laid down by this Law and other legal acts of the Republic of Lithuania.

Article 201. Rights of the Supervisory Authority

1. When performing its functions, the supervisory authority shall have the right:

1) to receive from all natural and legal persons the information required for the fulfilment of supervision functions;

2) for performing its functions, to use the services of competent persons and grant them the required powers;

3) to establish the procedure of insurance activity of insurance classes or the risks attributable thereto, the terms of the contracts of insurance against separate insurance risks, including compulsory insurance, the requirements that the insurer must comply with when providing services to the customers using means of communications;

4) to apply to the court requesting repeal of the decisions of the bodies of an insurance undertaking, a reinsurance undertaking or an insurance broker undertaking in the cases specified in paragraph 4 of Article 2.82 of the Civil Code as well as invalidation of the contracts concluded by the insurance undertaking, the reinsurance undertaking or the insurance broker undertaking by reason of the said decisions;

5) to participate in international institutions for the supervision of insurance undertakings, reinsurance undertakings, insurance or reinsurance intermediaries and other financial institutions;

6) to bring an action for the protection of public interest and/or join the proceedings at its own initiative in order to present the finding in the case;

7) in the event of a real threat that an insurance or reinsurance undertaking will become insolvent or the assets assigned to the branch of a third country insurance or reinsurance undertaking will become lower than the obligations of the branch, to obligate the insurance undertaking, the reinsurance undertaking or the branch of the third country insurance or reinsurance undertaking, intending to execute material contracts, to receive the approval of the supervisory authority;

8) to introduce and use quantitative assessment measures allowing determining the possibility of insurance or reinsurance undertakings to act with regard to the events or a change in economic conditions that may have an adverse effect to the financial standing in the future in supervision activities and request that insurance or reinsurance undertakings carried out the respective assessments.

2. The supervisory authority shall also enjoy other rights laid down in this Law and other legal acts.

Article 202. General Provisions Regarding Decisions Adopted by the Supervisory Authority

1. If this Law and other legal acts establish that in order to pass a decision the supervisory authority must be submitted documents, the supervisory authority shall have the right to require that the applicant submits additional documents and information necessary for the passing of a decision. In this case the supervisory authority must give its request an elaborate justification, inform the applicant thereof and fix the deadline for the submission of documents and information.

2. If the supervisory authority requested to submit additional documents and information in accordance with the procedure laid down by this Law, the deadline for the adoption of the decision shall run from the day of receipt of all the documents and information necessary for passing the decision.

3. In case of a negative decision, the supervisory authority shall notify the applicants about this decision and shall indicate the clear-cut motives of the said decision.

4. The decision made by the supervisory authority or failure to adopt one within the time limit set in legal acts may be appealed against in court in accordance with the procedure laid down by the law.

Article 203. Right of the Supervisory Authority to Information

1. Upon the request of the supervisory authority, state and municipality institutions and other legal and natural persons must furnish information, including confidential information, required for the implementation of the functions and exercising of the rights of the supervisory authority. Provision of the afore-mentioned information shall not be deemed to constitute a breach of the confidentiality and data protection requirements set out in the transactions, legal acts and internal documents of the undertakings.

2. The supervisory authority shall have the right to address competent authorities, financial and capital market supervision institutions or other institutions, natural and legal persons of other European Economic Area Member States or third countries with the request to present information required for the implementation of the functions and exercising of the rights of the supervisory authority.

3. The officers, servants (both present and former) of the supervisory authority, state and municipal institutions, all other legal and natural persons that receive information from the supervisory authority in relation to supervision of the entities set out in this Law carried out by the supervisory authority must keep it confidential and not to disclose it, except for the cases provided for in the law. The supervisory authority shall approve a list of data related to the supervision of the entities set out in this Law carried out by the supervisory authority. The afore-mentioned list shall be made public.

4. The supervisory authority shall be entitled to use the received information only for fulfilment of the functions assigned to it and for the following purposes:

1) to verify compliance with the requirements of the legal acts governing insurance, reinsurance, insurance or reinsurance mediation activities;

2) impose sanctions;

3) in administrative proceedings concerning the decisions of the supervisory authority;

4) in other pending proceeding concerning legal relations regulated by this Law;

5) for other purposes set out in this Law.

5. Data in relation to supervision of the entities set out in this Law carried out by the supervisory authority shall be provided and disclosed only under the procedure prescribed in this Law.

6. Provision of information in aggregate form so that no particular person or entity may be identified shall not be considered as disclosure of data in relation to supervision of the entities set out in this Law carried out by the supervisory authority.

7. If the supervisory authority is satisfied that confidentiality of information is ensured and specifies the terms and conditions of use of such information which shall be binding to the receiving person, it shall be entitled to provide data necessary for fulfilment of the functions of the receiving persons and related to supervision of the entities set out in this Law by the supervisory authority to the following persons:

1) supervisory authorities of other Member States of the European Economic Area;

2) institutions carrying out supervision of the financial and capital market of the Member States of the European Economic Area;

3) the European Insurance and Occupational Pensions Authority as provided for in this Law and Regulation (EU) No 1094/2010;

Amendments to the paragraph of this Article:

No XII-1603, 9 April 2015, published in the Register of Legal Acts (TAR), 17 April 2015, ID code 2015-05897

4) persons of the Republic of Lithuania and another Member State of the European Economic Area responsible for control of liquidation or bankruptcy proceedings and other similar proceedings against insurance or reinsurance undertakings and public authorities responsible for supervision of such persons;

5) persons of the Republic of Lithuania and another Member State of the European Economic Area entrusted with the task of an audit of insurance or reinsurance undertakings, credit institutions, broker dealers and other financial institutions and public authorities responsible for supervision of such persons;

6) independent actuaries of the insurance of reinsurance undertakings of the republic of Lithuania and the Member States of the European Economic Area and the institutions responsible for supervision of such actuaries;

7) public institutions of the Republic of Lithuania and other Member States of the European Economic Area empowered to identify and investigate infringements of the activities of undertakings by the law;

8) central banks of the European system of the central banks including the European Central Bank and other bodies with a similar function in their capacity as monetary authorities and, in case of emergency situations, immediately to the central banks of the European system of the central banks including the European Central Bank;

Amendments to the paragraph of this Article:

No XII-1603, 9 April 2015, published in the Register of Legal Acts (TAR), 17 April 2015, ID code 2015-05897

9) public authorities of the Republic of Lithuania and another Member State of the European Economic Area responsible for supervision of payment systems;

10) institutions of the Republic of Lithuania and another Member State of the European Economic Area in charge of administration of forced liquidation proceedings or policyholder security funds;

11) institutions responsible law-making in the area of insurance, reinsurance, insurance or reinsurance mediation, financial institutions, investment services for the purposes of prudential control;

Amendments to the paragraph of this Article:

No XII-1603, 9 April 2015, published in the Register of Legal Acts (TAR), 17 April 2015, ID code 2015-05897

12) the European Systemic Risk Board established under Regulation (EU) No 1092/2010 of the European Parliament and of the Council of 24 November 2010 on European Union macro-prudential oversight of the financial system and establishing a European Systemic Risk Board (OJ 2010 L 331, p. 1), and in emergency situations, without delay.

Amendments to the paragraph of this Article:

No XII-1603, 9 April 2015, published in the Register of Legal Acts (TAR), 17 April 2015, ID code 2015-05897

8. The supervisory authority shall be entitled to enter into contracts on exchange of information necessary for fulfilment of supervision functions with the supervisory authorities, financial and capital market supervisory authorities of third countries provided that the laws of such countries ensure at least the same confidentiality of received information provided for in this Law.

9. The supervisory authority shall be entitled to disclose information necessary for fulfilment of the functions of the supervisory authority and received from natural or legal persons of another Member State of the European Economic Area in accordance with the procedure prescribed in the law only with the written consent of the supervisory authority of the other Member State of the European Economic Area and only for the purpose indicated in such consent. Authorities or institutions referred to in subparagraph 7 of paragraph 7 of this Article requesting to provide information necessary for fulfilment of their functions shall report the names, surnames and precise positions of the persons to whom such information shall be sent to the supervisory authority.

10. Information received by the supervisory authority from the institutions referred to in subparagraphs 1, 2, 4, 5 and 10 of paragraph 7 of this Article or in the course of inspection of a branch of the insurance or reinsurance undertaking or the undertaking of insurance or reinsurance intermediaries established in another Member State of the European Economic Area may be disclosed only to with the consent of the supervisory authority which provided the information or the supervisory authority of another Member State of the European Economic Area in which the inspection was carried out.

Amendments to the paragraph of this Article:

No XII-1603, 9 April 2015, published in the Register of Legal Acts (TAR), 17 April 2015, ID code 2015-05897

11. The supervisory authority shall report the names and surnames (business names) of the persons, authorities and institutions set out in paragraphs 7 of this Article that may receive the information to the Commission and the supervisory authorities of other European Economic Area Member States.

12. Paragraphs 3, 4, 6 and subparagraphs 4 and 10 of paragraph 7 of this Article shall be without prejudice to the powers of investigation conferred on the European Parliament by Article 226 of the Treaty on the Functioning of the European Union (TFEU).

Amendments to the paragraph of this Article:

No XII-1603, 9 April 2015, published in the Register of Legal Acts (TAR), 17 April 2015, ID code 2015-05897

Article 204. Sanctions

The supervisory authority shall have the right to impose the following sanctions:

1) to warn insurance undertakings, reinsurance undertakings, insurance or reinsurance intermediaries, branches of third country insurance and reinsurance undertakings or branches of undertakings of independent insurance intermediaries established in the Republic of Lithuania, insurance holding company, mixed-activity financial holding company, persons hired by insurance and reinsurance undertakings (Article 30 of this Law), persons unlawfully engaged in activities of insurance or reinsurance undertakings, insurance or reinsurance intermediaries about the shortcomings or infringements discovered in their work and, where such shortcomings or infringements may be eliminated, to set the deadline for the elimination thereof;

2) to impose administrative penalties on members of the supervisory and management boards, managers of insurance undertakings, reinsurance undertakings, insurance or reinsurance intermediaries, undertakings contracted by insurance or reinsurance undertakings (Article 30 of this Law), insurance holding companies, mixed-activity financial holding companies, insurance undertakings, insurance brokers, heads of branches of third country insurance or undertakings or branches of insurance intermediaries established in the Republic of Lithuania, the persons responsible for the risk management, actuarial, compliance assessment and internal audit functions or other persons holding management positions of insurance or reinsurance undertakings and branches of the third country insurance or reinsurance undertakings established in the Republic of Lithuania as well as the persons who have illegally disclosed information of the supervisory authority related to supervision of the entities specified in this Law, persons unlawfully engaged in the activities of insurance or reinsurance undertakings, insurance or reinsurance intermediaries;

3) to impose penalties established in Article 208 of this Law on the grounds specified in Article 208 of this Law;

4) in the cases specified in Articles 45 or 46 of this Law to demand that an insurance or reinsurance undertaking or a branch of a third country insurance or reinsurance undertaking submits plans for the restoration of financial standing and to set a deadline for the submission of the plans;

5) on the grounds established in Article 206 of this Law to obligate an insurance undertaking or a branch of a third country insurance undertaking to assign the rights and duties under the insurance contracts within the time period set by the supervisory authority;

6) to demand that the management or supervisory bodies of an insurance or reinsurance undertaking replaced the supervisory body or its member, the board or its member, the manager, the person responsible for risk management, actuarial, compliance assessment and internal audit functions or other persons holding the management positions within the time period set by the supervisory authority;

7) to request that the insurance holding company, mixed-activity holding company replaced the supervisory board or a member thereof, the board or a member thereof, the manager within the time limit set by the supervisory authority;

8) to demand that a third country insurance or reinsurance undertaking replaced the head, the persons responsible for risk management, actuarial, compliance assessment and internal audit functions and the persons holding other management positions of a branch of a third country insurance or reinsurance undertaking established in the Republic of Lithuania within the time limit set by the supervisory authority;

9) to request to replace the liquidator, the chairman or a member of the liquidation commission, the person responsible for liquidation of a branch of a  third country insurance or reinsurance undertaking established in the Republic of Lithuania within the time limit set by the supervisory authority;

10) to seize, on the grounds, specified in Article 207 of this Law, the assets of insurance or reinsurance undertakings and branches of a third country insurance or reinsurance undertakings established in the Republic of Lithuania;

11) to remove the insurance broker from the list of insurance brokers or suspend the insurance broker’s certificate on the grounds laid down in subparagraphs 3–6 of paragraph 5 as well as in paragraph 6 of Article 166 of this Law;

12) to suspend the licence to engage in insurance activity, the licence to engage in reinsurance activity, the licence to engage in activities of an insurance broker undertaking, the authorisation to engage in insurance or reinsurance activity of a branch of a third country insurance or reinsurance undertaking or to engage in activities of a branch of independent insurance intermediaries of any other third country in the Republic of Lithuania, or the validity of the rights granted by them, to temporarily prohibit the tied insurance or reinsurance intermediary to engage in insurance mediation activity;

13) on the grounds specified in subparagraphs 1, 2, 4, 5 and 6 of paragraph 2 of Article 20, subparagraphs 1, 2, 4–10 of paragraph 2 of Article 82, subparagraphs 1, 2, 4, 5 of paragraph 2 of Article 164 or subparagraphs 1, 2, 4, 5 of paragraph 2 of Article 194 of this Law to revoke the licence to engage in insurance activity, the licence to engage in reinsurance activity, the licence to engage in activities of an insurance broker undertaking, the authorisation to engage in insurance activity of a branch of a third country insurance or reinsurance undertaking or to engage in activities of a branch of independent insurance intermediaries of any other third country in the Republic of Lithuania, to permanently prohibit a tied insurance or reinsurance intermediary from engaging in insurance mediation activity.

Article 205. Basic Principles of and Procedure for Imposing Sanctions

1. Except for the cases where Article 204 specifies the grounds for the imposition of a specific sanction, the supervisory authority shall impose the sanctions specified in Article 204 of this Law in the presence of at least one of the following grounds:

1) in case the supervisory authority has been refused information or the information furnished is inaccurate;

2) laws of the Republic of Lithuania, decisions of the supervisory authority or any other legal acts have been violated;

3) the legal acts of another Member State of the European Economic Area have been violated and the supervisory authority of another Member State of the European Economic Area has applied to the supervisory authority for imposition of sanctions on the natural or legal person in the Republic of Lithuania;

4) the conditions of insurance, reinsurance or reinsurance and insurance mediation activity have been breached;

5) in case of a failure to adhere to the plan for the restoration of financial standing of the insurance undertaking, reinsurance undertaking or another third country insurance or reinsurance undertaking approved by the supervisory authority in accordance with Article 45 of this Law;

6) where the group structure to which the insurance or reinsurance undertaking belongs makes effective supervision impossible;

7) the persons in control of an insurance or reinsurance undertaking, undertakings and persons participating therein; the members of the supervisory board, the board, the manager the persons responsible for risk management, actuarial, compliance assessment and internal audit functions or other persons holding the management positions in such insurance or reinsurance undertakings do not meet the criteria set out in paragraph 5 of Article 22 of this Law any longer;

8) the persons in control of an insurance or reinsurance undertaking of a third country, undertakings and persons participating therein; the members of the supervisory board, the board, the manager the persons responsible for risk management, actuarial, compliance assessment and internal audit functions or other persons holding the management positions in such undertakings do not meet the criteria set out in Article 80 of this Law any longer;

9) the persons in control of an insurance brokers undertaking, undertakings and persons participating therein; the members of the supervisory board, the board, the manager the persons responsible for risk management, actuarial, compliance assessment and internal audit functions or other persons holding the management positions in such undertakings do not meet the criteria set out in subparagraph 2 of paragraph 2 of Article 193 of this Law any longer;

10) the repute of the members of the supervisory board, the board and the manager of an insurance holding company, mixed-activity financial holding company is not considered as good and their qualification is not appropriate for ensuring sound and prudent management;

11) in the event of deterioration of the financial situation of an insurance undertaking, a reinsurance undertaking, an insurance broker undertaking or a branch of a third country insurance or reinsurance undertaking, or a branch of an independent insurance intermediary and the abovementioned financial situation does not longer meet the requirements set out in legal acts, when activities of an insurance undertaking, a branch of a third country insurance undertaking or an insurance broker undertaking may infringe the interests of policyholders, insured persons, beneficiaries or injured third parties, or when the threat of such a deterioration or infringement arises;

12) the shareholders of an insurance or reinsurance undertaking or the acquiring persons set out in Article 23 of this Law have a negative effect or intend to have a negative effect on the transparent, prudent and credible management of the insurance or reinsurance undertaking;

13) the standard terms and conditions of insurance contracts of an insurance undertaking, a branch of a third country insurance, an insurance undertaking of the Member State of the European Economic Area do not meet the requirements established by legal acts.

2. The supervisory authority shall choose a sanction having regard to the contents of the violation for which it is imposed, personal fault, proportionality of the violation and sanction, the consequences of the violation and the imposed sanction for the person on whom the sanction is imposed and for the security, stability and credibility of the system of insurance, reinsurance and insurance or reinsurance mediation in the Republic of Lithuania and, according to the available information, in the Member States of the European Economic Area.

3. The decision on the imposition of a sanction, except for the one specified in subparagraph 2 of Article 204 of this Law, shall be adopted within three months from the date of establishment of the violation or the grounds for the imposition of the sanction. Violations shall not be subject to sanctions after the lapse of more than two years from the day of the commitment thereof.

4. The issue of the imposition of a sanction shall be considered in the presence of the person who is subject to the sanction, or his representatives. Absence of the person or his representatives, if they were given due notice of the hearing of the issue, shall not preclude the passing of the decision to impose a sanction.

5. Any violation shall be subject to one sanction only, save for the exceptions established in this Law. Imposition of a sanction shall not exempt the person from fulfilling the duty the failure of fulfilment whereof served as grounds for the imposition of the sanction.

6. The operative part of the decision on the imposition of a sanction may, at the decision of the supervisory authority, be made public on the website of the supervisory authority not later than five working days from the date of the adoption of the decision.

7. The supervisory authority shall be entitled to assume all necessary measures to protect the interests of the policyholders under the insurance or reinsurance contracts where the financial standing of the insurance or reinsurance undertaking, a branch of a third country insurance or reinsurance undertaking established in the Republic of Lithuania has deteriorated without taking account of the provisions of Articles 45 and 46 of this Law. The applied measures must be proportionate and meet the solvency deterioration level and duration.

8. Where a violation of law is negligible and/or compliance with the requirements of the law may be ensured by other means, following the criterial of justice and reasonableness, the sanction provided for in Article 204 of this Law may be not imposed.

Article 206. Compulsory Transfer of Rights and Duties under Insurance Contracts

1. If the insurance undertaking faces a real threat of insolvency or if there is a threat that the liabilities of the branch of the third country insurance undertaking will exceed the assets assigned to it, in order to protect the interests of the policyholders, insured persons, beneficiaries or injured third parties, the supervisory authority shall have the right to obligate the insurance undertaking or a branch of a third country insurance undertaking to transfer the rights and duties under insurance contracts to the entities intending to take them over.

2. In the case specified in paragraph 1 of Article 141 and paragraph 3 of Article 146 of this Law, the supervisory authority must obligate to transfer the rights and duties under insurance contracts.

3. An agreement on the transfer of the rights and duties may not be and shall not be subject to a resolution passed by the insurance undertaking’s general meeting of shareholders, the supervisory board or the board or other persons or any approval or consent granted by these bodies. The agreement on the transfer of the rights and duties shall be signed by the head of the administration of the insurance undertaking or the head of the branch of the third country insurance undertaking.

4. An insurance undertaking or a branch of a third country insurance undertaking under an obligation to transfer rights and duties under insurance contracts must announce about the envisaged transfer and, if the authorisation of the supervisory authority oblige to publish only about the executed transfer, the executed transfer in at least two national newspapers and in another European Economic Area Member State where the insurance undertaking carries out its activities.

5. If the policyholder objects to the compulsory transfer of rights and duties 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 transfer of the rights and duties.

6. Where the policyholder terminates the insurance contract in the case specified in paragraph 5 of this Article, the following shall be reimbursed to him:

1) in case of provision of non-life insurance services – the entire amount of insurance premium paid for the period from the transfer of rights and duties under the insurance contract until the expiry of the term provided for in the insurance contract;

2) in case of provision of life assurance services, where the life assurance contract has been concluded only concerning death risk – the entire amount of insurance premium paid for the period from the transfer of rights and duties under the insurance contract until the expiry of the term provided for in the insurance contract, and where a life assurance contract related to capital accumulation has been concluded, the amount equal to the amount of technical provisions formed for the insurance contract of that policyholder on the day of transfer of the rights and duties under that contract.

7. If the assets to cover the technical provisions of the undertaking transferring its rights and duties are not sufficient for satisfying the claims arising out of the insurance contracts, the supervisory authority shall be entitled to oblige the insurance undertaking to transfer a part of the duties concerning payment of the benefit, repayment of the premium or, in case of provision of life assurance services, payment of surrender value. In such case, the supervisory authority obliging to transfer the rights and duties must indicate the part of the benefit, premium and surrender value that must be paid by the entity accepting the rights and duties under the insurance contracts. The remaining part of the claims must be satisfied by the insurance undertaking which transfers the rights and duties.

8. The supervisory authority obliging to transfer the rights and duties must consult the supervisory authorities of other Member States of the European Economic Area set out in Article 49 of this Law.

9. The supervisory authority shall establish detailed procedure for implementation of the provisions of this Article in its legal acts.

Article 207. Seizure of Assets

1. The supervisory authority shall have the right to seize the assets an insurance or reinsurance undertaking or a branch of an insurance or reinsurance undertaking of a third country only in the presence of one of the following conditions:

1) the requirements for calculation of the technical provisions are not complied with (Article 41 of this Law);

2) the solvency capital requirement or the minimum capital requirement are not complied with (Articles 37 and 40 of this Law);

3) the plans for the restoration of the financial standing have not been submitted or implemented (Articles 45 and 46 of this Law);

4) the obligation of the supervisory authority to transfer rights and duties under the insurance contracts has not been performed;

5) in the event of revocation of a licence to engage in insurance or reinsurance activity or an authorisation for insurance or reinsurance activity of a branch.

2. The assets seizure act shall be signed by the manager of the supervisory authority. Assets seizure acts shall be registered according to the procedure specified in the Law of the Republic of Lithuania on the Register of Property Seizure Acts.

3. The supervisory authority shall have the right to enter an action in court for the invalidation of the transaction involving the seized assets.

Article 208. Fines Imposed by the Supervisory Authority

1. A fine in the amount of up to EUR 30,000 may be imposed on an insurance or reinsurance undertaking, insurance or reinsurance undertaking of another Member State of the European Economic Area, a branch of a  third country insurance or reinsurance undertaking engaged in the activities which, according to the licence to engage in activity or an authorisation for the activities of the branch or other legal acts governing the activities, these persons have no right to engage in, the persons unlawfully engaged in the activities of an insurance or reinsurance undertaking, insurance or reinsurance intermediaries.

2. A fine in the amount of up to EUR 20,000 may be imposed on an insurance or reinsurance undertaking, undertaking of insurance or reinsurance intermediaries, insurance holding company, mixed-activity financial holding company, insurance or reinsurance undertaking of another Member State of the European Economic Area, a branch of the insurance or reinsurance undertaking, insurance or reinsurance mediation undertaking of a third country, the person hired by the insurance or reinsurance undertaking (Article 30 of this Law) that refused to furnish the supervisory authority with information or furnished the supervisory authority with false information.

3. A fine in the amount of up to EUR 100,000 may be imposed on an insurance or reinsurance undertaking, undertaking of insurance or reinsurance intermediaries, insurance holding company, mixed-activity financial holding company, insurance or reinsurance undertaking of another Member State of the European Economic Area, undertaking of insurance or reinsurance intermediaries of another Member State of the European Economic Area, insurance or reinsurance undertaking, undertaking of insurance or reinsurance intermediaries of a third country (Article 30 of this Law) that have committed gross violation of this Law or any other legal acts regulating insurance, reinsurance and insurance or reinsurance mediation activity.

4. A fine in the amount of up to EUR 100,000 may be imposed on an insurance undertaking, reinsurance undertaking, undertaking of insurance intermediaries or a branch of the insurance or reinsurance undertaking or independent insurance intermediary of a third country that have breached the requirements of Regulation (EC) No 1060/2009 of the European Parliament and of the Council of 16 September 2009 on credit rating agencies.

Supplemented with the paragraph of this Article:

No. XII-1476, 18 December 2014, published in the Register of Legal Entities (TAR), 31 December 2014, ID code 2014-21138

5. A fine shall be imposed in accordance with the procedure prescribed in paragraphs 2–5 of Article 205 of this Law.

Amended numbering of the paragraph of this Article:

No XII-1476, 18 December 2014, published in the Register of Legal Entities (TAR), 31 December 2014, ID code 2014-21138

6. A fine imposed by the supervisory authority must be paid into the State budget not later than within one month from the date when the person on whom the fine has been imposed received the decision on the imposition of the fine.

Amended numbering of the paragraph of this Article:

No XII-1476, 18 December 2014, published in the Register of Legal Entities (TAR), 31 December 2014, ID code 2014-21138

7. An unpaid fine shall be recovered according to the procedure prescribed by the Code of Civil Procedure of the Republic of Lithuania.

Amended numbering of the paragraph of this Article:

No XII-1476, 18 December 2014, published in the Register of Legal Entities (TAR), 31 December 2014, ID code 2014-21138

8. The imposition of fines shall not exempt a legal person or heads of a branch from civil and criminal liability established by law

Amended numbering of the paragraph of this Article:

No XII-1476, 18 December 2014, published in the Register of Legal Entities (TAR), 31 December 2014, ID code 2014-21138

Article 209. Supervision of Insurance and Reinsurance Undertakings of Other European Economic Area Member States Providing Services in the Republic of Lithuania or Established in the Republic of Lithuania

1. Financial supervision of insurance and reinsurance undertakings of other European Economic Area Member States providing services in the Republic of Lithuania, or of branches of such undertakings established in the Republic of Lithuania shall be carried out by the supervisory authority of respective European Economic Area Member States. Notwithstanding the above provision, the supervisory authority shall have the right to supervise if the said entities do not breach the terms and conditions of public order while carrying out activities in the Republic of Lithuania (paragraph 1 of Article 74 of this Law) and have other rights and duties provided for in this Article.

2. The supervisory authority must notify the supervisory authority of another Member State of the European Economic Area where there exist grounds for believing that the activities of the insurance or reinsurance undertakings of the other European Economic Area Member State providing services in the Republic of Lithuania and branches of the insurance or reinsurance undertakings of the European Economic Area established in the Republic of Lithuania may have an impact on the stable and sound financial standing of such undertaking.

3. The supervisory authority:

1) shall have the right to receive information necessary for carrying out the supervisory functions from an insurance or reinsurance undertaking of another European Economic Area Member State or a branch thereof. Information shall be provided in the Lithuanian and/or English languages;

2) shall have the right to carry out inspections of the branch established in the Republic of Lithuania according to the procedure prescribed in Article 212 of this Law;

3) shall have the right to participate in the inspection of a branch of an insurance and reinsurance undertaking of another European Economic Area Member State established in the Republic of Lithuania which is carried out by the supervisory authority of the European Economic Area Member State;

4) shall have the right to impose sanctions specified in paragraph 4 of this Article on the grounds provided for in subparagraphs 1 and 2 of paragraph 1 of Article 205 of this Law, also in the event of deterioration of the financial standing of a branch of the insurance and reinsurance undertaking of another European Economic Area Member State, where the activities of the insurance undertaking of another European Economic Area Member State may result in violation of interests of the policyholders, insured persons, beneficiaries or injured third parties or in the event of a threat of such deterioration of violation;

5) upon receipt of a request from the supervisory authority of another European Economic Area Member State, must impose sanctions referred to in subparagraphs 3 and 5 of paragraph 4 of this Article, without taking into consideration other provisions of this Article;

6) shall give recommendations and mandatory instructions to an insurance and reinsurance undertaking of another European Economic Area Member State or its branch concerning their activities in the Republic of Lithuania,

4. The following sanctions may be imposed on an insurance and reinsurance undertaking of another European Economic Area Member State by the supervisory authority:

1) to warn an insurance or reinsurance undertaking of another European Economic Area Member State of the established violations of legal acts of the Republic of Lithuania and set the time limits for the elimination of the violations;

2) to impose administrative penalties on the head of a branch of the insurance or reinsurance undertaking of another European Economic Area Member State, and demand his replacement;

3) in the manner specified in paragraph 2 of Article 207 of this Law and at the request of the competent authority of another European Economic Area Member State, to seize the assets of the insurance or reinsurance undertaking of another European Economic Area Member State located in the Republic of Lithuania;

4) to impose a fine on an insurance or reinsurance undertaking of a Member State of the European Economic Area (Article 208 of this Law);

5) to temporarily or permanently prohibit the insurance or reinsurance undertaking of another European Economic Area Member State from engaging in activities in the Republic of Lithuania.

5. If an insurance or reinsurance undertaking of another European Economic Area Member State violates legal acts of the Republic of Lithuania applicable to it, fails to submit information to the supervisory authority or is engaged in risky activities which may be detrimental to the interests of the policyholders, insured persons, injured third parties and beneficiaries, the supervisory authority shall first of all warn the insurance or reinsurance undertaking of the established violations of legal acts of the Republic of Lithuania and shall set the time limits for the elimination thereof. If the violations are not eliminated within the time limits and in the manner established by the supervisory authority, the supervisory authority must inform thereof the competent authority of another European Economic Area Member State and request that it undertakes all measures permissible under law to eliminate the violations.

6. If it becomes evident that the measures provided for in paragraph 5 of this Article are not sufficient to eliminate the violations, the supervisory authority, having warned the competent authority of another European Economic Area Member State, shall have the right to impose sanctions referred to in subparagraphs 2 and 4 of paragraph 4 of this Article. In case of urgent necessity, the supervisory authority shall have the right to impose these sanctions without taking into consideration provisions of paragraph 5 of this Article. The supervisory authority shall be entitled to apply to the European Insurance and Occupational Pensions Authority according to Article 19 of Regulation (EU) No 1094/2010.

Amendments to the paragraph of this Article:

No XII-1603, 9 April 2015, published in the Register of Legal Acts (TAR), 17 April 2015, ID code 2015-05897

7. The sanction shall be chosen having regard to the nature of the violation for which it is to be applied, the consequences of the violation and the sanction to be applied on the insurance or reinsurance undertaking of another European Economic Area Member State and on the security, stability and credibility of the insurance system of the Republic of Lithuania. The supervisory authority shall notify the insurance undertaking of another European Economic Area Member State in writing of the sanction, also providing thorough justification of the imposition of the sanction.

Article 210. Supervision of Insurance or Reinsurance Intermediaries of another European Economic Area Member State Providing Services in the Republic of Lithuania or Established in the Republic of Lithuania

1. Supervision of the activities of insurance or reinsurance intermediaries of another European Economic Area Member State providing services in the Republic of Lithuania or of branches of such intermediaries established in the Republic of Lithuania shall be carried out by the supervisory authority of this European Economic Area Member State. Notwithstanding this provision, the supervisory authority shall have the rights and duties established in this Article.

2. The supervisory authority shall have the right to:

1) receive information from an insurance or reinsurance intermediary of another European Economic Area Member State or a branch established by it;

2) carry out inspections of a branch of the insurance or reinsurance intermediary of another European Economic Area Member State according to the procedure laid down in Article 212 of this Law;

3) participate in the inspection of a branch of insurance or reinsurance intermediary of another European Economic Area Member State which is carried out by the supervisory authority of that European Economic Area Member State;

4) impose sanctions provided for in paragraph 3 of this Article on the grounds specified in subparagraphs 1 and 2 of paragraph 1 of Article 205 of this Law, also in case of deterioration of the financial standing of a branch of the insurance or reinsurance intermediary of another European Economic Area Member State and it no longer meets the requirements of legal acts or in case of violation of interests of the policyholders, insured persons, beneficiaries or injured third parties or in case of a threat of such deterioration or violation or where the risky activity of the insurance intermediary of another European Economic Area Member State or its branch may be detrimental to the interests of the policyholders, insured persons, injured third parties and beneficiaries;

5) put forward recommendations and mandatory instructions to an insurance intermediary of the European Economic Area Member State or a branch established by it concerning their activities in the Republic of Lithuania.

3. The supervisory authority shall have the right to impose the following sanctions on the insurance intermediary of another European Economic Area Member State or its branch:

1) to warn an insurance or reinsurance intermediary of another European Economic Area Member State of the established violations of legal acts of the Republic of Lithuania and set the time limits for the elimination of the violations;

2) to impose administrative penalties on the head of the branch of the insurance or reinsurance intermediary of another European Economic Area Member State established in the Republic of Lithuania in the manner established by law;

3) to demand replacement of the head or the staff involved in mediation activities of the branch of the insurance or reinsurance intermediary of another European Economic Area Member State established in the Republic of Lithuania;

4) to impose a fine on an insurance or reinsurance intermediary of a Member State of the European Economic Area (Article 208 of this Law);

5) to temporarily or permanently prohibit the activities of the insurance or reinsurance intermediary of another European Economic Area Member State in the Republic of Lithuania.

4. The supervisory authority shall choose the sanction having regard to the nature of the violation for which it is to be applied, the consequences of the violation and the sanction to be applied on the insurance intermediary of another European Economic Area Member State or its branch. The supervisory authority shall immediately inform the competent authority of another European Economic Area Member State of the applied sanction.

Article 211. Insurance Undertakings of Members of the World Trade Organisation Which Are Third Countries

1. In carrying out supervision of the activities of an insurance undertaking of a member of the World Trade Organisation which is a third country the supervisory authority shall be entitled:

1) to receive information from the third country insurance undertaking, necessary for the performance supervisory functions;

2) to impose sanctions specified in paragraph 2 of this Article on the grounds provided for in subparagraphs 1 and 2 of paragraph 1 of Article 205 of this Law or in case of infringement of interests of the policyholders, insured persons, beneficiaries or injured third parties.

2. The following sanctions may be imposed on an insurance undertaking of a member of the World Trade Organisation:

1) to warn the third country insurance undertaking of the discovered infringements of legal acts of the Republic of Lithuania and set the time limit for elimination thereof;

2) to temporarily or permanently prohibit the third country insurance undertaking from concluding insurance contracts with natural or legal persons of the Republic of Lithuania.

3. The supervisory authority shall inform in writing the insurance undertaking about the sanction and shall specify detailed reasons for imposing it.

Article 212. Inspections Carried Out by the Supervisory Authority

1. The supervisory authority shall have the right to organise and carry out inspections in order to verify compliance with this Law and the legal acts adopted on the basis thereof and for other purposes not set out in this Law.

2. The procedure for carrying out inspections shall be established by the supervisory authority.

3. The supervisory authority shall have the right to carry out inspections of the following:

1) insurance and reinsurance undertakings and undertakings of insurance or reinsurance intermediaries, insurance holding companies of the Republic of Lithuania;

2) branches of insurance, reinsurance undertakings and insurance and reinsurance intermediaries of the Republic of Lithuania established in another European Economic Area Member State, upon giving prior notice to the supervisory authority of this Member State and subject to providing conditions for participation of representatives of this authority in the verification;

3) branches of insurance and reinsurance undertakings, insurance and reinsurance intermediaries of another European Economic Area Member State established in the Republic of Lithuania at the request of the supervisory authority of this Member State;

4) branches of insurance and reinsurance undertakings, insurance and reinsurance intermediaries of a third country established in the Republic of Lithuania;

5) the persons with whom an insurance or reinsurance undertaking, insurance or reinsurance undertaking of another European Economic Area or a branch of an insurance or reinsurance undertaking of a third country has entered into outsourcing contracts;

6) the persons unlawfully pursuing the activities of an insurance or reinsurance undertaking, insurance or reinsurance intermediaries or are related with infringements of this Law or the legal acts adopted on the basis thereof;

7) other undertakings provided for in this Law.

4. In carrying out an inspection, the officers, servants, employees or hired persons of the supervisory authority shall have the right:

1) to receive oral and written explanations of the persons under inspection, request that these persons or representatives thereof arrived to present their explanations to the premises of the person conducting the inspection;

2) upon presentation of a professional card and/or identity document and a decision of the supervisory authority, to have unimpeded access to the commercial premises of legal persons during their working hours, inspect the documents, record books, and other sources of information needed for the carrying out of the inspection and, on the basis of the collected evidence, to receive conclusions from expert institutions or experts;

3) to obtain or produce copies of accounting documents, contracts, orders as well as other documents and information;

4) to temporarily, for not more than one month, seize the documents of the legal persons under inspection that may be used as evidence of violations, leaving a justified decision for the seizure of the documents and a statement of the seizure of the documents;

5) upon producing a decision of the supervisory authority, to obtain from credit and financial institutions the data, certificates and copies of documents of the financial operations related to the undertaking under inspection.

5. The rights of the supervisory authority to carry out inspections of branches of insurance undertakings, reinsurance undertakings or undertakings of insurance or reinsurance intermediaries of the Republic of Lithuania established in third countries and of other persons shall be specified in co-operation agreements with the supervision authorise of third countries.

6. Having notified the supervisory authority, the supervisory authority of another Member State of the European Economic Area shall be entitled to inspect a branch of the insurance or reinsurance undertaking, insurance or reinsurance intermediary of the Member State of the European Economic Area established in the Republic of Lithuania or the undertaking contracted by the insurance or reinsurance undertaking under the outsourcing contract and shall have the same rights in respect of such branch and undertaking as the supervisory authority in respect of the entities under inspection. The supervisory authority shall have the right to participate in such inspection.

Amendments to the paragraph of this Article:

No XII-1603, 9 April 2015, published in the Register of Legal Acts (TAR), 17 April 2015, ID code 2015-05897

7. The supervisory authority shall be entitled to apply to the European Insurance and Occupational Pensions Authority according to Article 19 of Regulation (EU) No 1094/2010 if the supervisory authority is prevented from exercising the right to arrange an inspection or participate in such inspection in the cases provided for in subparagraph 2 of paragraph 3 and paragraph 6 of this Law.

Amendments to the paragraph of this Article:

No XII-1603, 9 April 2015, published in the Register of Legal Acts (TAR), 17 April 2015, ID code 2015-05897

8. The European Insurance and Occupational Pensions Authority shall be entitled to exercise the right to participate in the inspection where it is conducted by two or more supervisory authorities.

Amendments to the paragraph of this Article:

No XII-1603, 9 April 2015, published in the Register of Legal Acts (TAR), 17 April 2015, ID code 2015-05897

Article 213. Insurance and Reinsurance Policy Conditions and Other Information

1. The supervisory authority shall not be entitled to request that insurance or reinsurance undertakings provided insurance or reinsurance rules or other descriptions of the terms and conditions of the contracts, non-life insurance and reinsurance premium rates or information of an increase therein and actuarial information used for calculation of non-life insurance and reinsurance premium rates and/or technical provisions for prior approval or on a periodical basis.

2. In case of provision of life assurance services, the insurance authority shall be entitled to request that insurance or reinsurance undertakings provided actuarial information used for calculation of the insurance and reinsurance premium rates and/or technical provisions on a periodical basis. A request to provide the afore-mentioned information cannot constitute a prerequisite for insurance activity.

3. The supervisory authority shall not be entitled to request that insurance or reinsurance undertakings of other European Economic Area Member States providing services or established in the Republic of Lithuania provided insurance or reinsurance rules or other terms and conditions of the contracts insurance and reinsurance premium rates or information of an increase therein and actuarial information used for calculation of non-life insurance and reinsurance premium rates and/or technical provisions for prior approval or on a periodical basis.

4. The supervisory authority shall be entitled to request that insurance undertakings other Member States of the European Economic Area providing services or established in the Republic of Lithuania provided insurance rules or other terms and conditions of the contract and documents with a view to assessing if they meet the requirements established in the legal acts of the Republic of Lithuania applicable to them. A request to provide the afore-mentioned information cannot constitute a prerequisite for insurance or reinsurance activity. The supervisory authority shall be prohibited from establishing provision of the afore-mentioned information on a periodical basis.

5. The exceptions of application of the provisions of paragraphs 1–4 of this Article to compulsory insurance and health insurance shall be established by this Law and other legal acts.

SECTION THREE

COOPERATION WITH THE COMMISSION, THE European Insurance and Occupational Pensions Authority AND THE SUPERVISORY AUTHORITIES OF OTHER EUROPEAN ECONOMIC AREA MEMBER STATES

Amendments to the paragraph of this Article:

No XII-1603, 9 April 2015, published in the Register of Legal Acts (TAR), 17 April 2015, ID code 2015-05897

Article 214. Cooperation on the Issues of Supervision

1. The supervisory authority must closely cooperate with the Commission and the supervisory authorities of other European Economic Area Member States on the issues of improvement of supervision of insurance and reinsurance, insurance and reinsurance mediation and regulation thereof in the European Economic Area.

2. The supervisory authority must inform the Commission of any major difficulties arising when applying the provisions of legal acts of the Republic of Lithuania drawn up on the basis of directives of the European Union, and together with the Commission and other supervisory authorities of the European Economic Area Member States analyse the problems encountered in order to find an appropriate solution to these problems.

3. The supervisory authority must notify the Commission of the following:

1) the number and types of cases which led to refusals to provide documents to the supervisory authority of another Member State of the European Economic Area under paragraph 3 of Article 68 and paragraph 4 of Article 69 of this Law;

2) the type and number of the sanctions imposed on insurance undertakings in the Member States of the European Economic Area.

Amendments to the paragraph of this Article:

No XII-1603, 9 April 2015, published in the Register of Legal Acts (TAR), 17 April 2015, ID code 2015-05897

4. The supervisory authority must notify the supervisory authority of another Member State of the European Economic Area of the following:

1) activities of the insurance undertakings in this Member State of the European Economic Area; at the request of the supervisory authority of the Member state of the European Economic Area, aggregate statistical data on activities;

2) circumstances relevant to fulfilment of the functions of the supervisory authority of this Member State of the European Economic Area in relation to licencing of a subsidiary insurance or reinsurance undertaking of the Republic of Lithuania or assessment of the repute, qualification and experience of the persons holding management positions in such undertaking.

5. The supervisory authority shall notify the European Insurance and Occupational Pensions Authority of the following:

1) issue of a licence to engage in activities or withdrawal of the licence to engage in activities in accordance with the procedure prescribed by the European Insurance and Occupational Pensions Authority;

2) the number and types of cases which led to refusals to provide documents to the supervisory authority of another Member State of the European Economic Area under paragraph 3 of Article 68 and paragraph 4 of Article 69 of this Law in accordance with the procedure prescribed by the European Insurance and Occupational Pensions Authority;

3) the type and number of the sanctions imposed on insurance undertakings in the Member States of the European Economic Area in accordance with the procedure prescribed by the European Insurance and Occupational Pensions Authority;

4) on the fact whether the insurance products placed on the market of Lithuania ensure long-term guarantees and the behaviour of insurance and reinsurance undertakings in investing in the long term on an annual basis;

5) the number of insurance and reinsurance undertakings that apply the adjustment correction, variation correction, extension of the period of restoration of the financial standing according to paragraph 4 of Article 45 of this Law or transitional measures for risk-free interest rates and technical provisions on an annual basis;

6) the impact of the symmetric adjustment mechanism of the adjustment correction, the variation correction, the capital requirement to cover the equity risk and the transitional measures for risk-free rates and technical provisions on the financial standing of the insurance and reinsurance undertakings at the level of all insurance and reinsurance undertakings and at the level of not specified individual insurance or reinsurance undertaking on an annual basis;

7) the impact of the symmetric adjustment mechanism of the adjustment correction, the variation correction, the capital requirement to cover the equity risk and the transitional measures for risk-free rates on the behaviour of insurance and reinsurance undertakings in investing and on whether such measures do not result in a too great decrease in the capital requirements on an annual basis;

8) the impact of extension of the period of restoration of the financial standing according to paragraph 4 of Article 45 of this Law on the efforts of insurance and reinsurance undertakings to re-establish the level of eligible own funds covering the solvency capital requirement or reduce the operational risk with a view to ensuring compliance with the solvency capital requirement on an annual basis;

9) where insurance and reinsurance undertakings apply the provisional period measures to the risk-free rates and technical provisions, information on whether they observe the procedure concerning gradual implementation plans established by the supervisory authority and the perspective of less dependence on the transitional period measures including information on the measures assumed or to be assumed by the undertakings and the supervisory authority according to the requirements of the legislation on an annual basis;

10) the average capital add-on that must be held by all insurance and reinsurance undertakings, life assurance undertakings and non-life insurance undertakings, undertakings providing life assurance and non-life insurance services and reinsurance undertakings (separately) during the last calendar year in per cent upon the solvency capital requirement and allocation of the capital add-on according to the afore-mentioned categories of undertakings and taking into account the reasons of the capital add-on requirement set out in subparagraphs 1, 2 and 3 of paragraph 1 of Article 48 of this Law given in per cent on an annual basis;

11) the number of insurance and reinsurance undertakings subject to reduced requirements for the reports regularly submitted for supervision purposes and the solvency capital requirements, insurance premiums, technical provisions and property of such undertakings expressed in per cent upon the solvency capital requirements, insurance premiums, technical provisions and property of all insurance and reinsurance undertakings on annual basis;

12) the number of groups subject to reduced requirements for the reports regularly submitted for supervision purposes and the solvency capital requirements, insurance premiums, technical provisions and property of such groups expressed in per cent upon the solvency capital requirements, insurance premiums, technical provisions and property of all groups.

Amendments to the paragraph of this Article:

No XII-1603, 9 April 2015, published in the Register of Legal Acts (TAR), 17 April 2015, ID code 2015-05897

Article 215. Information on Compulsory Insurance

1. The supervisory authority must inform the Commission about the compulsory insurance in the Republic of Lithuania, indicating the following:

1) legal rules regulating compulsory insurance;

2) information which must be included in the insurance policy of compulsory insurance.

2. Compulsory insurance policies of insurance undertakings of other European Economic Area Member States and other certificates the content of which complies with the requirements published by the Commission in the Official Journal of the European Union shall be recognised in the Republic of Lithuania.

Article 216. Information Related to Third Country Persons

1. The supervisory authority must inform the Commission and the competent authorities of other European Economic Area Member States about the following:

1) the issuance of a licence to engage in activity to an insurance undertaking which, directly or indirectly, is a subsidiary of a third country legal person or persons. In this case, the supervisory authority must also provide information on the structure of a group to which the subsidiary insurance or reinsurance undertaking belongs;

2) shares of an insurance or reinsurance undertaking acquired by a third country legal person or persons, if this undertaking becomes a subsidiary of the insurance or reinsurance undertaking;

3) public authorities competent to issue certificates of good repute, qualification and experience of the person;

4) submission of documents relevant to assessment of good repute, qualification and experience of the persons in relation to licensing of an insurance or reinsurance undertaking to the supervisory authority.

2. The supervisory authority must notify the Commission and the European Insurance and Occupational Pensions Authority of major obstacles and difficulties faced by insurance or reinsurance undertakings of the Republic of Lithuania when establishing or carrying out activities in third countries.

Amendments to the paragraph of this Article:

No XII-1603, 9 April 2015, published in the Register of Legal Acts (TAR), 17 April 2015, ID code 2015-05897

3. Upon request of the Commission, the supervisory authority must temporarily suspend procedures regarding:

1) granting of authorisations to engage in activities of a branch of a third country insurance or reinsurance undertaking in the Republic of Lithuania or issuance of a licence to engage in activity to an insurance or reinsurance undertaking which, directly or indirectly, is a subsidiary of a third country legal person or persons;

2) issuance of authorisations to acquire shares of an insurance or reinsurance undertaking to a third country legal person or persons which, following the acquisition, will directly or indirectly have a subsidiary in the Republic of Lithuania.

4. Procedures provided for in paragraph 3 of this Article shall be suspended for a period not longer than three months, however, the supervisory authority must extend this term upon the request of the Commission.

5. Provisions set forth in paragraph 3 of this Article shall not apply if subsidiaries of insurance or reinsurance undertakings of third country legal persons established in other European Economic Area Member States or subsidiaries of these insurance or reinsurance undertakings establish a subsidiary insurance or reinsurance undertaking in the Republic of Lithuania, or intend to acquire shares of an insurance undertaking in the Republic of Lithuania

6. Upon request of the Commission, the supervisory authority must inform the European Commission about:

1) all applications for granting of authorisations to engage in insurance or reinsurance activities of branches of third country insurance or reinsurance undertakings in the Republic of Lithuania or applications for issuance of a licence to engage in insurance activity to an insurance undertaking which, directly or indirectly, is a subsidiary of a third country legal person or persons;

2) applications for acquisition of shares of an insurance or reinsurance undertaking by a third country legal person or persons which, following the acquisition, will directly or indirectly have a subsidiary insurance or reinsurance undertaking in the Republic of Lithuania.

7. The supervisory authority must notify the European Insurance and Occupational Pensions Authority of the following:

1) structure of the group to which the subsidiary insurance or reinsurance undertaking belongs is the licence to engage in activities has been issued to the insurance or reinsurance undertaking which is a subsidiary of a third country legal person or persons (whether directly or indirectly);

2) shares of an insurance or reinsurance undertaking acquired by a third country legal person or persons if this undertaking becomes a subsidiary insurance or reinsurance undertaking.

Amendments to the paragraph of this Article:

No XII-1603, 9 April 2015, published in the Register of Legal Acts (TAR), 17 April 2015, ID code 2015-05897

Article 217. Transfer of Rights and Duties under Insurance or Reinsurance Contracts

1. If the supervisory authority of another European Economic Area Member State requests the supervisory authority for its opinion regarding the intention of the insurance or reinsurance undertaking supervised by the supervisory authority of another European Economic Area Member State to transfer the rights and duties under insurance or reinsurance contracts to an insurance or reinsurance undertaking of the Republic of Lithuania, the supervisory authority must, within three months, inform about its objection or consent to the transfer of rights and duties.

2. The supervisory authority shall object to transfer of rights and duties under insurance or reinsurance contracts if it may be concluded that after the transfer of rights and duties the accepting undertaking will not satisfy the solvency capital requirements.

Article 218. Sanctions

1. Having received information on the fact that an insurance or reinsurance undertaking, insurance or reinsurance intermediary of the Republic of Lithuania and engaged in activities in another Member State of the European Economic Area has violated the legal acts of such Member State or represents a threat to the interests of the policyholders, insured persons, beneficiaries or injured third parties from the supervisory authority of the other Member State of the European Economic Area, the supervisory authority must apply the sanctions provided for in this Law and notify the supervisory authority of the European Economic Area of the imposed sanctions.

2. Upon receipt of information from the supervisory authority of another European Economic Area Member State about restrictions on the management, use and disposal of assets as imposed on the insurance or reinsurance undertaking of the state and a request to impose such restrictions in the Republic of Lithuania, the supervisory authority must make a decision regarding imposition of these restrictions (seizure of assets) in the Republic of Lithuania.

3. Upon receipt of information from the supervisory authority of another European Economic Area Member State about revocation of a licence to engage in activity of the insurance or reinsurance undertaking of that state, the supervisory authority must adopt a decision to prohibit this insurance undertaking from engaging in insurance activities in the Republic of Lithuania.

Article 219. Intervention Measures

1. The intervention measures which are applied by institutions of other European Economic Area Member States that will or may affect natural and legal persons of the Republic of Lithuania shall be fully recognised in the Republic of Lithuania without any additional formalities even if the intervention measures of this kind are not provided for in the Republic of Lithuania or application of these intervention measures in the Republic of Lithuania is linked to fulfilment of certain additional conditions, and these conditions have not yet been fulfilled

2. Intervention measures applied by other European Economic Area Member States shall come into force in the Republic of Lithuania at the same time they become effective in other European Economic Area Member States.

3. Having received information from the competent authority of another European Economic Area Member State about the adopted decision to apply intervention measures, the supervisory authority shall have the right, taking into consideration the possible effect of such measures on natural and legal persons of the Republic of Lithuania, to announce the received information on the website of the supervisory authority.

Article 220. Liquidation and Bankruptcy

1. Having received information from the supervisory authority of another European Economic Area Member State about the adopted decision to liquidate an insurance or reinsurance undertaking of another European Economic Area Member State or to institute bankruptcy proceedings against it, the supervisory authority shall have the right, taking into consideration the possible effect of such measures on natural and legal persons of the Republic of Lithuania, to announce the received information on the website of the supervisory authority.

2. The decision to liquidate an insurance or reinsurance undertaking of another European Economic Area Member State and its branches in the Republic of Lithuania shall be fully recognised in the Republic of Lithuania without any additional formalities and shall come into force at the moment it becomes effective in the European Economic Area Member State.

3. A person appointed by the state institution of another European Economic Area Member State or another entity to the position referred in paragraph 1 of Article 157 of this Law, who intends to engage in activities in the Republic of Lithuania, must have a copy of translation of the decision on the appointment into the Lithuanian language. Legalisation and other similar formalities shall not be required.

4. Persons referred to in paragraph 3 of this Article or their representatives, appointed according to the procedure established by legal acts of another European Economic Area Member State, shall have the right to perform in the Republic of Lithuania all actions which they have the right to perform in that European Economic Area Member State.

CHAPTER IX

FINAL PROVISIONS

Article 221. Carrying Out of Life Assurance and Non-Life Insurance Activities

Operating non-life insurance undertakings which have valid life assurance contracts shall use rights and perform duties pursuant to such contracts until their expiry. After the effective date of this Law the parties to the said contracts may not change the term of the life assurance contract concluded prior to the effective date of this Law by establishing a longer term of the life assurance contract. Operating non-life insurance undertakings which have valid life assurance contracts must act in compliance with instructions of the supervisory authority regarding separate administration of life assurance and non-life insurance activities.

Article 222. Monetary Unit

1. Repealed on 1 January 2015

Amendments to the paragraph of this Article:

No XII-1114, 23 September 2014, published in the Register of Legal Acts (TAR), 2 October 2014, ID code 2014-13418

2. The values indicated in Euro in this Law, the indexing of which is established in legal acts of the European Union, shall be indexed by the supervisory authority taking into account the European Consumer Price Index as declared by the Eurostat.

Article 223. Repealed on 18 April 2015.

Amendments to the paragraph of this Article:

No XII-1603, 9 April 2015, published in the Register of Legal Acts (TAR), 17 April 2015, ID code 2015-05897

Annex to

the Republic of Lithuania

Law on Insurance

LEGAL ACTS OF THE EUROPEAN UNION IMPLEMENTED BY THIS LAW

1. Fourth Council Directive 78/660/EEC of 25 July 1978 based on Article 54(3)(g) of the Treaty on the annual accounts of certain types of companies (OJ 2004 Special Edition, Chapter 17, Volume 1, p. 21) as last amended by Directive 2012/6/EU (OJ 2012 L 81, p. 3).

2. Seventh Council Directive 83/349/EEC of 13 June 1983 based on the article 54(3)(g) of the treaty on consolidated accounts (OJ 2004 Special Edition, Chapter 6, Volume 17, p. 58) as last amended by Directive 2009/49/EC (OJ 2009 L 164, p. 42).

3. Council Directive90/618/EEC of 8 November 1990 amending, particularly as regards motor vehicle liability insurance, Directive 73/239/EEC and Directive 88/357/EEC which concern the co-ordination of laws, regulations and administrative provisions relating to direct insurance other than life assurance (OJ 2004 Special Edition, Chapter 6, Volume 1, p. 252).

4. European Parliament and Council Directive 95/26/EC of 29 June 1995 amending directives 77/780/EEC and 89/646/EEC in the field of credit institutions, directives 73/239/EEC and 92/49/EEC in the field of non-life assurance, directives 79/267/EEC and 92/96/EEC in the field of life assurance, directive 93/22/EEC in the field of investment firms and directive 85/611/EEC in the field of undertakings for collective investment in transferable securities (UCITS), with a view to reinforcing prudential supervision (OJ 2004 Special Edition, Chapter 6, Volume 2, p. 269) as last amended by Directive 2009/65/EC (OJ 2009 L 302, p. 32).

5. Directive 2000/64/EC of the European Parliament and of the Council of 7 November 2000 amending Council Directives 85/611/EEC, 92/49/EEC, 92/96/EEC and 93/22/EEC as regards exchange of information with third countries (OJ 2004 Special Edition, Chapter 6, Volume 3, p. 348) as last amended by Directive 2009/65/EC (OJ 2009 L 302, p. 32).

6. Council Regulation (EC) No 2157/2001 of 8 October 2001 on the Statute for a European company (OJ 2004 Special Edition, Chapter 6, Volume 4, p. 251).

7. Directive 2002/13/EC of the European Parliament and of the Council of 5 March 2002 amending Council Directive 73/239/EEC as regards the solvency margin requirements for non-life assurance undertakings (OJ 2004 Special Edition, Chapter 6, Volume 4, p. 310).

8. Directive 2002/92/EC of the European Parliament and of the Council of 9 December 2002 on insurance mediation (OJ 2004 Special Edition, Chapter 6, Volume 4, p. 330);

9. Directive 2002/87/EC of the European Parliament and of the Council of 16 December 2002 on the supplementary supervision of credit institutions, insurance undertakings and investment firms in a financial conglomerate and amending Council Directives 73/239/EEC, 79/267/EEC, 92/49/EEC, 92/96/EEC, 93/6/EEC and 93/22/EEC, and Directives 98/78/EC and 2000/12/EC of the European Parliament and of the Council (OJ 2004 Special Edition, Chapter 6, Volume 4, p. 340) as last amended by Directive 2010/78/EU (OJ 2010 L 331, p. 120).

10. Council Directive 2004/113/EC of 13 December 2004 implementing the principle of equal treatment between men and women in the access to and supply of goods and services (OJ 2004 L 373, p.37).

11. Directive 2005/1/EC of the European Parliament and of the Council of 9 March 2005 amending Council Directives 73/239/EEC, 85/611/EEC, 91/675/EEC, 92/49/EEC and 93/6/EEC and Directives 94/19/EC, 98/78/EC, 2000/12/EC, 2001/34/EC, 2002/83/EC and 2002/87/EC in order to establish a new organisational structure for financial services committees (OJ 2005 L 79, p.9) as last amended by Directive 2009/65/EC (OJ 2009 L 302, p. 32).

12. Directive 2007/44/EC of the European Parliament and of the Council of 5 September 2007 amending Council Directive 92/49/EEC and Directives 2002/83/EC, 2004/39/EC, 2005/68/EC and 2006/48/EC as regards procedural rules and evaluation criteria for the prudential assessment of acquisitions and increase of holdings in the financial sector (OJ 2007 L 247, p.1).

13. Directive 2009/103/EC of the European Parliament and of the Council of 16 September 2009 relating to insurance against civil liability in respect of the use of motor vehicles, and the enforcement of the obligation to insure against such liability (OJ 2009 L 263, p. 11).

14. Directive 2009/138/EC of the European Parliament and of the Council of 25 November 2009 on the taking-up and pursuit of the business of Insurance and Reinsurance (Solvency II) (OJ 2009 L 335, p. 1) as last amended by Directive 2014/51/EU of the European Parliament and of the Council of 16 April 2014 (OJ 2014 L 153, p. 1).

Supplemented with the paragraph of this Article:

No. XII-1476, 18 December 2014, published in the Register of Legal Entities (TAR), 31 December 2014, ID code 2014-21138

Amendments to the paragraph of this Article:

No XII-1603, 9 April 2015, published in the Register of Legal Acts (TAR), 17 April 2015, ID code 2015-05897

15. Directive 2009/138/EC of the European Parliament and of the Council of 25 November 2009 on the taking-up and pursuit of the business of Insurance and Reinsurance (Solvency II) (OJ 2009 L 335, p. 1) as last amended by Directive 2011/89/EU (OJ 2011 L 326, p. 113).

Amended numbering of the paragraph of this Article:

No XII-1476, 18 December 2014, published in the Register of Legal Entities (TAR), 31 December 2014, ID code 2014-21138

16. Directive 2011/89/EU of the European Parliament and of the Council of 16 November 2011 amending Directives 98/78/EC, 2002/87/EC, 2006/48/EC and 2009/138/EC as regards the supplementary supervision of financial entities in a financial conglomerate (OJ 2011 L 326, p. 113).”

Amended numbering of the paragraph of this Article:

No XII-1476, 18 December 2014, published in the Register of Legal Entities (TAR), 31 December 2014, ID code 2014-21138

Article 2. Entry into Force of the Law

This Law, except for Articles 3 and 4 and paragraph 9 of Article 5, shall come into force on 1 January 2016.

Amendments to this Article:

No XII-719, 19 December 2013, Official Gazette Valstybės žinios, 2013, No 140-7080 (30 December 2013), ID code 2013-00005

No XII-1603, 9 April 2015, published in the Register of Legal Acts (TAR), 17 April 2015, ID code 2015-05897

Article 3. Proposal to the Bank of Lithuania

The Bank of Lithuania shall approve the legal acts necessary for implementing this Law till 28 February 2015.

Amendments to this Article:

No XII-719, 19 December 2013, Official Gazette Valstybės žinios, 2013, No 140-7080 (30 December 2013), ID code 2013-00005

Article 4. Implementation of the Law

1.Following the legal acts of the supervisory authority and Commission Delegated Regulation (EU) 2015/35 of 10 October 2014 supplementing Directive 2009/138/EC of the European Parliament and of the Council on the taking-up and pursuit of the business of insurance and reinsurance (Solvency II) (OJ 2015 L 12, p. 1), a branch of the insurance and reinsurance undertaking or a third country insurance and reinsurance undertaking shall be entitled to submit applications and, according to the applications filed by the branch of the insurance and reinsurance undertaking or third country insurance or reinsurance undertaking or in implementation of the functions, rights and duties of the supervisory authority, the supervisory authority shall take decisions on issue of an authorisation to include additional own funds, approval of classification of the elements of own funds, issue of an authorisation to apply the undertaking-specific parameters, issue of an authorisation to use a partial or full internal model, issue of an authorisation to establish a special purpose vehicle, issue of an authorisation to include additional own funds of the insurance holding company, issue of an authorisation to calculate the capital solvency requirement of the insurance and reinsurance undertakings within a group of insurance and/or reinsurance undertakings according to the internal model, issue of an authorisation to apply the risk-free interest rate curve adjustment correction, issue of an authorisation to apply the transitional period measures for risk-free interest rates or technical provisions, determination of the level and scope of supervision of a group of insurance and/or reinsurance undertakings, designation of the supervisory authority of a group of insurance and/or reinsurance undertakings, establishment of a college of insurance supervisory authorities and which enter into force on 1 January 2016 provided that the afore-mentioned decisions are adopted till 31 December 2015.

2. As of 1 July 2015, following the legal acts of the supervisory authority and Directive 2009/138/EC of the European Parliament and of the Council of 25 November 2009 on the taking-up and pursuit of the business of Insurance and Reinsurance (Solvency II) (OJ 2015 L 12, p. 1), a branch of an insurance and reinsurance undertaking or a third country insurance and reinsurance undertaking shall be entitled to submit applications and, according to the applications filed by the branch of the insurance and reinsurance undertaking or third country insurance or reinsurance undertaking or in implementation of the functions, rights and duties of the supervisory authority, the supervisory authority shall take decisions on issue of an authorisation to deduct the amount showing participation in other undertakings from eligible own funds to cover the solvency capital requirement and the minimum capital requirement, choice of the method of calculation of the solvency of an a group of insurance and/or reinsurance undertakings, recognition of the third country solvency regime as equivalent to the solvency regime provided for in the Republic of Lithuania Law on Insurance laid down in Article 1 of this Law, issue of an authorisation to apply supervision of the solvency of groups with centralised risk management to insurance or reinsurance undertakings that are subsidiaries of the insurance and reinsurance undertakings, determination of the methods ensuring supervision of a group of insurance and/or reinsurance undertakings where the parent undertaking of the insurance or reinsurance undertaking is not an insurance undertaking of the European Economic Area, issue of an authorisation to apply other transitional period measures not set out in paragraph 1 of this Article and which enter into force on 1 January 2016 provided that the afore-mentioned decisions are adopted till 31 December 2015

3. The supervisory authority shall be entitled to request that a branch of an insurance and reinsurance undertakings or a third country insurance or reinsurance undertaking provided revised or missing documents and information necessary for taking the decisions referred to in paragraphs 1, 2 or 4 of this Article. In this case, the supervisory authority shall be obliged to substantiate its request, notify the branch of the insurance and reinsurance undertaking and the third country insurance or reinsurance undertaking and set a reasonable time limit for provision of documents and information.

4. If the supervisory authority takes a decision to refuse to issue an authorisation, it shall immediately notify the branch of the insurance and reinsurance undertaking and the third country insurance or reinsurance undertaking of the decision and indicate the reasons of such decision. The afore-mentioned decision shall come into force on the date of adoption thereof.

5. The procedure for adoption of the decisions provided for in this Article shall be established in the implementing regulations of the European Commission laying down the implementing technical standards concerning the procedures for issue of authorisations.

6. The supervisory shall notify the European Insurance and Occupational Pensions Authority of the structure of the group to which the subsidiary insurance or reinsurance undertaking belongs till 1 January 2016 under the procedure established by the European Insurance and Occupational Pensions Authority if the licence to engage in activities is issued to the insurance or reinsurance undertaking which is a subsidiary of a third country legal person or persons (whether directly or indirectly) and the shares of the insurance or reinsurance undertaking acquired by the third country legal person or persons if the undertaking becomes a subsidiary insurance ore reinsurance undertaking.

Supplemented with the article:

No XII-1603, 9 April 2015, published in the Register of Legal Acts (TAR), 17 April 2015, ID code. 2015-05897

Article 5. Application of the Law

1. The insurance or reinsurance undertaking or a branch of a third country insurance or reinsurance undertaking that do not enter into new insurance or reinsurance contracts and only administers the concluded insurance or reinsurance contracts since 1 January 2016 with a view to terminating their activities shall not be subject the provisions of Chapters I, II and V of the Republic of Lithuania Law on Insurance laid down in Article 1 of this Law:

1) if they prove to the supervisory authority that they would terminate their activities till 1 January 2019; or

2) where they are subject to the provisions of Chapter VI of the Republic of Lithuania Law on Insurance laid down in Article 1 to this Law and a liquidator, the chairman of the liquidation commission of the insurance or reinsurance undertaking, the person responsible for termination of the activities of a branch of a third country insurance or reinsurance undertaking or an administrator of the insurance or reinsurance undertaking in bankruptcy has been appointed.

2. The transitional period measures provided for in paragraph 1 of this Article shall be applicable only if all the following conditions apply:

1) the insurance or reinsurance undertaking or the third country insurance or reinsurance undertaking does not belong to a group of insurance and/or reinsurance undertakings and if it belongs to a group of insurance and/or reinsurance undertakings where all undertakings belonging to the group terminate conclusion of new insurance or reinsurance contracts;

2) the insurance or reinsurance undertaking or the branch of the third country insurance or reinsurance undertaking has notified the supervisory authority of application of the transitional period measures provided for in paragraph 1 of this Article;

3) the insurance or reinsurance undertaking or the branch of the third country insurance or reinsurance undertaking submits a progress report including information on the progress made in termination of the undertaking’s activities to the supervisory authority on an annual basis.

3. An insurance or reinsurance undertaking or a branch of a third-country insurance or reinsurance undertaking that apply the transitional period measures according to subparagraph 1 of paragraph 1 of this Law shall apply the provisions of Chapter I, II and V of the Republic of Lithuania Law on Insurance laid down in Article 1 to this Law since 1 January 2019 or an earlier data if, having assessed the progress report and taking into account the situation of the particular branch of the insurance or reinsurance undertaking or the third country insurance or reinsurance undertaking, the supervisory authority decides that the progress made in termination of activities is not sufficient (the necessary actions have not been carried out, the respective measures have not been assumed etc.).

4. An insurance or reinsurance undertaking or a branch of a  third-country insurance or reinsurance undertaking that apply the transitional period measures according to subparagraph 2 of paragraph 1 of this Law shall apply the provisions of Chapter I, II and V of the Republic of Lithuania Law on Insurance laid down in Article 1 to this Law since 1 January 2021 or an earlier data if, having assessed the progress report and taking into account the situation of the particular branch of the insurance or reinsurance undertaking or the third country insurance or reinsurance undertaking, the supervisory authority decides that the progress made in termination of activities is not sufficient (the necessary actions have not been carried out, the respective measures have not been assumed etc.).

5. The provisions of paragraphs 1, 3 and 4 of this Law shall not prevent an insurance or reinsurance undertaking or a branch of a third country insurance or reinsurance undertaking from application of the provisions of Chapters I, II and V of the Republic of Lithuania Law on Insurance laid down in Article 1 to this Law.

6. The supervisory authority shall draw up lists of insurance and reinsurance undertakings or branches of a third country insurance or reinsurance undertakings that apply the transitional period measures according to subparagraphs 1 and 2 of paragraph 1 of this Law and present them to the supervisory authorities of other Member States of the European Economic Area in accordance with the procedure prescribed in the implementing regulations of the European Commission establishing the implementing technical standards concerning information and cooperation processes.

7. For the purposes of calculation of the minimum capital requirement according to the provisions of paragraph 3 of Article 40 of the Republic of Lithuania Law on Insurance laid down in Article 1 of this Law must apply the solvency capital requirement calculated on the basis of the standard formula till 31 December 2017.

8. The insurance or reinsurance undertakings that properly complied with the solvency margin requirements till 31 December 2015, but do not have a sufficient amount of eligible main own funds to cover the minimum capital requirement must restructure their activities according to the requirements envisaged in Article 40 of the Republic of Lithuania Law on Insurance laid down in Article 1 of this Law without observing the provisions of Articles 20 and 46 of the Republic of Lithuania Law on Insurance laid down in Article 1 of this Law till 31 December 2016. If an insurance or reinsurance undertaking fails to restructure its activities till 31 December 2016, having carried out all actions necessary for ensuring the protection of the interests and rights of the policyholders, insured persons, beneficiaries and injured third parties of the insurance undertaking, the supervisory authority shall immediately revoke its licence to engage in activities.

9.The supervisory authority shall establish the procedure for application of the following transitional period measures:

1) concerning the periods of submission of reports to the supervisory authority and disclosure to the public;

2) concerning attribution of the elements of own funds to the main own funds;

3) concerning the requirements for the undertakings investing in securities and other financial instruments, in particular, loans;

4) concerning application of the standard parameters used according to the standard formula;

5) concerning conformity with the solvency capital requirement;

6) concerning application of the solvency capital requirement to the undertakings engaged in accumulation of occupational pensions;

7) concerning the requirements for application of the internal model of a group of insurance and/or reinsurance undertakings.

Supplemented with the article:

No XII-1603, 9 April 2015, published in the Register of Legal Acts (TAR), 17 April 2015, ID code. 2015-05897

I promulgate this Law adopted by the Seimas of the Republic of Lithuania.

PRESIDENT OF THE REPUBLIC                                               DALIA GRYBAUSKAITĖ

Amendments:

1.

Seimas of the Republic of Lithuania, Law

No XII-718, 19 December 2013, Official Gazette Valstybės žinios, 2013, No 140-7079 (30 December 2013), ID code 2013-00004

LAW Amending Article 1 of the Law Amending the Republic of Lithuania Law on Insurance

2.

Seimas of the Republic of Lithuania, Law

No XII-719, 19 December 2013, Official Gazette Valstybės žinios, 2013, No 140-7080 (30 December 2013), ID code 2013-00005

LAW Amending Articles 2 and 3 of the Law Amending the Republic of Lithuania Law on Insurance

3.

Seimas of the Republic of Lithuania, Law

No XII-1114, 23 September 2014, published in the Register of Legal Acts (TAR), 2 October 2014, ID code 2014-13418

LAW Amending Article 1 of the Law Amending the Republic of Lithuania Law on Insurance No XI-2277

4.

Seimas of the Republic of Lithuania, Law

No XII-1476, 18 December 2014, published in the Register of Legal Acts (TAR), 31 December 2014, ID code 2014-21138

LAW Amending Article 1 of the Law Amending the Republic of Lithuania Law on Insurance No XI-2277

5.

Seimas of the Republic of Lithuania, Law

No XII-1603, 9 April 2015, published in the Register of Legal Acts (TAR), 17 April 2015, ID code 2015-05897

LAW Amending Articles 1 and 2 of the Law Amending the Republic of Lithuania Law on Insurance No XI-2277 and Supplementing the Law with Articles 4 and 5

6.

Seimas of the Republic of Lithuania, Law

No XII-1883, 25 June 2015, published in the Register of Legal Acts (TAR), 7 July 2015, ID code. 2015-11083

LAW Amending Article 1 of the Law Amending the Republic of Lithuania Law on Insurance No XI-2277