Group supervision is conducted at the level of the ultimate parent undertaking which has its head office in the Community. If this undertaking’s head office is in Germany, BaFin is the group supervisor. In exceptional cases, however, supervision can additionally be carried out at subgroup level.
When fulfilling the role of group supervisor, BaFin reviews the solvency at group level: this includes the consolidated group Solvency Capital Requirement, which is intended to properly reflect the risk exposures of the group. Furthermore, the group must have sufficient own funds to cover its solvency capital requirements. In order to protect policyholders and beneficiaries, it is also necessary to ensure that these own funds are appropriately distributed within the group and are available where needed.

BaFin’s supervisory priorities also include the supervision of the risk concentration and intra-group transactions within a group, as these can affect the financial position of insurance or reinsurance undertakings. BaFin is able to take appropriate measures at the level of the insurance or reinsurance undertaking where the undertaking’s solvency is being or may be jeopardised.

Lastly, BaFin also reviews whether the insurance and reinsurance undertakings within a group have appropriate systems of governance.

Under the current system for group supervision, a key role is assigned to the group supervisor, but the solo supervisor continues to play an important part as well. In this innovative supervisory system, the powers and responsibilities of supervisors are linked with their accountability. In the sections below you can find further information on the duties and powers of the authorities involved in supervision and on the cooperation between group supervisors and solo supervisors.

Legal framework

Comprehensive legal provisions on group supervision can be found in the German Insurance Supervision Act (Versicherungsaufsichtsgesetz – VAG), in particular in part 5 (section 245 et seq.), and in Delegated Regulation (EU) 2015/35 under Title II, “Insurance groups”. Furthermore, the European Insurance and Occupational Pensions Authority (EIOPA) has published guidelines on important aspects of group supervision.
Section 281 of the VAG specifies the following basic duties for BaFin as a group supervisor:

• coordinating the collection and dissemination of important information
• reviewing and assessing the financial position of the group from a supervisory perspective
• assessing compliance with the provisions on solvency, risk concentrations and intra-group transactions
• assessing the system of governance
• planning and coordinating ongoing supervision and supervisory activities in critical situations
• other duties, in particular in connection with internal models and group solvency
• furthermore, as a group supervisor BaFin chairs a college of supervisors (see section below) if the group does not only operate in Germany, i.e. it has subsidiaries in other Member States.
  Additional information

Supervisory colleges

Under section 283 of the German Insurance Supervision Act (Versicherungsaufsichtsgesetz – VAG), the members of the supervisory college are the group supervisory authority, the supervisory authorities of all member states in which subsidiaries are domiciled and, in accordance with Article 21 of Regulation (EU) No 1094/2010, the European Insurance and Occupational Pensions Authority.

The supervisory authorities responsible for significant branches and affiliated undertakings are entitled to participate in the college. However, their involvement is limited to ensuring an efficient exchange of information.

Objectives

There are two main objectives to the supervisory authorities’ cooperation in the college:

Firstly, to make it easier for the group supervisory authority to plan and coordinate cross-border supervisory activities by formalising cooperation and laying down in law the involvement of the other authorities. To this end, the group supervisory authority gives the college a formal organisational framework in the form of a “coordination arrangement”. It also coordinates and steers the supervisory activities of the college authorities by means of a joint work plan, which is developed and agreed upon in the college meetings.

Secondly, this systematised cooperation allows the supervisory authorities involved in the college to obtain information more quickly and more effectively. This allows the authorities to better identify risks , and to do so at an earlier stage, while also enabling them to perform their original supervisory tasks to a higher standard.

The college thereby ensures the effective application of the legal framework of procedures for cooperation, the exchange of information and consultation between the supervisory authorities that belong to it. Cooperation is organised in a flexible way according to the organisational requirements and supervisory issues. Specialised working groups can be set up, for example, and these can be of a permanent or a project-specific nature. Moreover, it is also possible to conduct joint on-site inspections with participants from a number of European supervisory authorities.

Legal framework

The current legal framework of Solvency II was implemented in Germany via the Act to Modernise Financial Supervision of Insurance Undertakings (Gesetz zur Modernisierung der Finanzaufsicht über Versicherungen). Section 283 of the VAG now explicitly states that supervisory colleges are to be set up. The other Member States and EEA countries have implemented corresponding provisions in their respective supervisory laws.

The provisions in the VAG regarding supervisory colleges are supplemented by a number of European Commission delegated acts. These are legally binding and are directly applicable in every Member State and EEA country. The most comprehensive of these acts, Delegated Regulation (EU) 2015/35, governs many of the finer details of the core elements of cooperation within colleges (conclusion of coordination arrangements, meetings, work plans, exchange of information), which would otherwise need to be discussed individually time after time. In this sense, the regulation makes working together less complex and creates the space to allow for supervisory cooperation to be more in-depth. With the same objective, the implementing technical standard (EU) 2015/2014 expands on the provisions regarding the exchange of information by describing procedures and templates for the submission of information.

Within this comprehensively regulated framework for cooperation, however, there is still space for cooperation to be tailored to the needs of the supervisory authorities, in line with the concept of proportionality: for instance, while Article 357 of the Delegated Regulation named above describes the information that in principle is to be exchanged on a systematic basis within the college, it leaves room for the college to adapt or reduce this content by means of the written coordination arrangements.

To supplement the legal provisions, the European Insurance and Occupational Pensions Authority (EIOPA) has issued guidelines regarding almost all aspects of cooperation within colleges. These can currently be found in two documents: the Guidelines on operational functioning of colleges and the Guidelines on exchange of information on a systematic basis within colleges. Furthermore, the Guidelines on supervisory review process cover important aspects regarding the involvement of supervisory colleges in supervisory procedures.