Member States shall require undertakings to establish reserves, referred to in Article 17, adequate to cover the underwriting liabilities assumed in their territories. Member States shall see that the agency or branch covers such reserves by means of assets which are equivalent to such reserves and, to the extent fixed by the Member State in question, matching assets.
The law of the Member States shall be applicable to the calculation of such reserves, the determination of categories of investment and the valuation of assets, and, where appropriate, the determination of the extent to which these assets may be used for the purpose of covering such reserves.
The Member State in question shall require that the assets covering these reserves, shall be localized in its territory. Article 17(3) shall, however, apply.