Long drawn out negotiations between Member States of the EEC resulted, in 1973, in the First Council Directive on the co-ordination of laws, regulations and administrative provisions relating to the taking-up and pursuit of the business of direct insurance other than life assurance. (73/239/EEC). This Directive, commonly called the harmonisation Directive, set down time limits during which its main Articles were to become part of the domestic law of each Member State. The Directive does not have direct applicability and therefore each State could choose its own method of adoption. The United Kingdom has conformed by means of several statutory instruments, whereas some States have chosen to combine all of the changes in one piece of legislation. (e.g., Eire, S.I. No. 115 of 1976).

Broadly speaking, the Directive is concerned with the regulation of insurance companies. (Harmonisation of insurance contract law still seems a long way off). That regulation takes two main forms—rules governing the authorisation of insurance companies and rules governing the solvency of such companies. The struggle between the competing philosophies of Member States with regard to supervision of insurance businesses, namely the strict Governmental supervision favoured by the Federal Republic of Germany and the minimal State control underlying the U.K. approach, has in the main resulted in success for those favouring more Government control. Fortunately, the increasing responsibility shown by the U.K. Government in supervision of insurance companies starting with the Companies Act 1967 and culminating in the Insurance Companies Act 1974, has meant that the requirements demanded by the First Council Directive have been or will be easier to conform with than perhaps originally anticipated.

The following is a brief explanation, in chronological order, of the requirements of the statutory instruments passed in response to the Directive.

These Regulations came into operation on Jan. 1, 1978. Under Part I of the 1974 Act general insurance business (other than life) was divided into six classes: liability insurance; marine, aviation and transport; motor vehicle; pecuniary loss; personal accident; property insurance. The Regulations now replace that classification with the

Regulation 4 and Sch. 3(5) deal with situations where a company carries out business that combines classes of business. It permits companies that have an authorisation for a class of business to issue policies that include cover for what are termed “ancillary