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BRUSSELS, Belgium -- The Council of the European Union has agreed on the outlines of a long-awaited directive to improve policyholder security by tightening regulation of international insurance groups.

The directive on the additional oversight of insurers belonging to insurance groups aims mainly to give E.U. regulatory authorities more effective ways of measuring the viability of a subsidiary within a larger group.

The draft of the directive was published in October 1995, but it has taken on more importance as global mergers and acquisitions by insurers and reinsurers have created many subsidiaries.

However, implementation of the directive still is a considerable way off. The text has to be finalized and then go before the European Parliament for acceptance. This is unlikely to happen before the second half of 1998, making adoption under each member country's national legislation unlikely before the end of 1999, according to the Assn. of British Insurers.

Measures in the directive would establish a test for an insurance holding company's solvency and set a 20% stake as the threshold for deciding whether a company is part of a group. Other measures would set stricter terms for reporting subsidiaries' results.

The directive would increase the supervision to which E.U. insurance companies are subjected, including where financial data must be made available and reporting by insurance subsidiaries based outside the European Union. Transactions such as loans, guarantees, investments and reinsurance among companies within the same group would have to be reported annually. The directive sets out a mechanism for calculating solvency, including measures to prevent double accounting of capital within different parts of the group.

Germany has been the chief opponent of the proposals. Among other things, Germany's chief concern is that the directive would extend E.U. supervision for the first time to reinsurers. Several of the world's largest reinsurers, including Munich Reinsurance Co., are based in Germany.

Insurers also have not embraced the directive.

The Comite Europeen des Assurances, a Paris-based lobbying group for European insurers, said criteria other than the 20% participation threshold should be taken into account. These other criteria should include the nature of the relationship between a parent company and its subsidiaries, such as the possible existence of majority voting rights, a dominant influence or a single management.

The lobbying group also thinks reinsurance companies should be excluded from the directive, believing each member country should decide the matter individually.

However, the ABI, which has been closely monitoring the pro-gress of the directive, advocates the inclusion of reinsurers as an important part of the insurance industry.

Nevertheless, the ABI expressed concerns about the cost implications of the directive. In a statement, the ABI said the complexity of reporting under the directive, possibly on different bases and to a number of supervisors, "could give rise to significant additional costs for companies and would not provide any increase in security."

While the directive only applies to insurance groups, similar measures for financial conglomerates are expected to follow.