At the end of last year, the Belgian Financial Services and Markets Authority sent out letters prohibiting Belgian insurance intermediaries to distribute (Luxembourg) capital redemption operations linked to investment funds since such products would be contrary to the Belgian definition of capital redemption operations and Belgium considers this definition to be in the interest of the general good. The importance of the definition of capital redemption operations under Solvency II lies in its role in the scope of Solvency II. In this regard, Article 2, paragraph 3, b) ii) Solvency II provides that: “3. In regard to life insurance, this Directive shall apply: […] (b) to the following operations, where they are on a contractual basis, in so far as they are subject to supervision by the authorities responsible for the supervision of private insurance: […] (ii) capital redemption operations based on actuarial calculation whereby, in return for single or periodic payments agreed in advance, commitments of specified duration and amount are undertaken;”. EIOPA has been asked to clarify the definition of capital redemption operations in Solvency II (Question ID: 3084). The Luxembourg capital redemption operations linked to investment funds are authorised in Luxembourg and are subject to supervision by the Commissariat aux Assurances (“CAA”), the Luxembourg authority responsible for the supervision of private insurance, and are offered to clients on a contractual basis. The Belgian Insurance Law of 4 April 2014 defines capital redemption operations as follows: « une opération basée sur une technique actuarielle, dans le cadre de laquelle, en contrepartie de versements uniques ou périodiques fixés à l'avance, une partie, l'assureur, prend envers une autre partie, le preneur de l'opération de capitalisation, des engagements déterminés quant à leur durée et à leur montant et indépendants de tout événement aléatoire quelconque » (Article 5, 13°) The Royal Decree On Life Insurance Activities of 14 November 2003 adds: « Le présent arrêté s'applique aux opérations : […] 6° de capitalisation, c'est-à-dire les opérations basées sur une technique actuarielle comportant, en échange de versements uniques ou périodiques fixés à l'avance, des engagements déterminés quant à leur durée et à leur montant et indépendants de tout événement aléatoire quelconque. » (Article 2) « Relèvent, en ce qui concerne les opérations non liées à un fonds d'investissement : […] 3° de la branche 26 visée à l'annexe 1 du règlement général : les opérations visées à l'article 2, 6°. » (Article 3 paragraph 1) Under Solvency II, Luxembourg insurance companies benefit from a European passport. This means that they have the right to distribute their insurance products falling within the scope of Solvency II within other member states subject to home country control. In this regard, it is irrelevant whether the host member state authorises local life insurance undertakings to offer such products. Indeed, in its interpretative communication (Commission Interpretative Communication - Freedom to provide services and the general good in the insurance sector (2000/C 43/03) (16 February 2000)), the European Commission confirms the above as follows: “The Commission considers, therefore, that there is no reason to prohibit the marketing of capital redemption products which fulfil the conditions of the First Life Directive 79/267/EEC, as amended by Directive 92/96/EEC, and which are marketed in a Member State by an insurer authorised in its home Member State to pursue such activities. The fact that in the host Member State such activities are not regarded as insurance activities and are not therefore permitted for insurers which have their head office there does not prevent insurers from other Member States from pursuing those activities which, having been the subject of mutual recognition between the Member States, benefit from the single licence system introduced by the Third Life Directive 92/96/EEC (95).” Capital redemption products offered in the host member state still need to comply with the general good rules in the host country and the FSMA claims that the definition of said products is in the interest of the general good in Belgium. In this context article 180 of Solvency II provides the following: “Neither the Member State in which a risk is situated nor the Member State of the commitment shall prevent a policy holder from concluding a contract with an insurance undertaking authorised under the conditions of Article 14 as long as that conclusion of contract does not conflict with legal provisions protecting the general good in the Member State in which the risk is situated or in the Member State of the commitment.” In order to be able to hinder or make less attractive the exercise of fundamental freedoms, these national measures must fulfil four conditions: they must be applied in a non-discriminatory manner; they must be justified by imperative requirements in the general interest; they must be suitable for securing the attainment of the objective which they pursue, and they must not go beyond what is necessary in order to attain it. (Case C-55/94 Reinhard Gebhard v Consiglio dell'Ordine degli Avvocati e Procuratori di Milano (30 November 1995)) In addition, it is also necessary for the general good objective not to be safeguarded by rules to which the provider of services is already subject in the member state where he is established. Finally, the general good can only be invoked in fields that are not harmonised on the EU level. Even if capital redemption operations linked to investment funds would be considered as not falling under the scope of Solvency II, FSMA's position should still respect the free movement of capital.