If an undertaking also intends to outsource key tasks – e.g. one of the four key functions – it must designate an "outsourcing officer" responsible for supervising the outsourcing process. However, the ultimate responsibility of the management board (or other persons appointed to represent the undertaking) for the outsourced function or insurance activity cannot be delegated but always remains within the undertaking.

Other requirements are specified in the following – non-exhaustive – list of legal bases and interpretative decisions.

Legal bases

Insurance Supervision Act

• Section 23 (3);
• Section 32;
• Section 47 nos. 8 and 9.

Delegated Regulation (EU) 2015/35

• Article 258(2);
• Article 274.

Guidelines on System of Governance (EIOPA-BoS-14/253 EN)

• Guidelines 14 and 60 to 64.

Notification requirement in case of intended outsourcing of important functions or insurance activities

This publication should be read in the context of BaFin's publication "Rundschreiben 11/2023 (VA) - Fachliche Eignung und Zuverlässigkeit von Personen, die für Schlüsselfunktionen verantwortlich oder für Schlüsselfunktionen tätig sind, gemäß VAG".

I. Notification requirement

In accordance with section 47 no. 8 of the VAG, the intention to outsource important functions or insurance activities has been subject to immediate notification including submission of the respective draft agreement since 1 January 2016. Section 47 no. 8 of the VAG requires undertakings that had intended to outsource important functions or insurance activities before 1 January 2016 but failed to carry out their intention by 1 January 2016 to make appropriate notification, which includes submission of the draft agreement, without delay.
The term "important" is defined as follows: key tasks are always considered important.
Taking into account the numerus clausus provision of section 5 (3) no. 4 of the VAG (old version), BaFin generally also considers the following areas important:

• sales,
• portfolio management,
• claims administration,
• accounting,
• asset investment and management.

II. Scope

The notification requirement applies to all domestic insurance undertakings and Pensionsfonds and to all insurance groups consisting exclusively of domestic primary insurers and reinsurers, as well as to groups with primary insurers and reinsurers domiciled in other member states or EEA signatory states pursuant to section 7 no. 22 of the VAG that are subject to supervision by BaFin as the competent authority for group-wide supervision according to the criteria set forth in section 279 (2) of the VAG. German branches of third country insurance undertakings are also subject to notification requirements.

III. General guidance on notification requirements

In order to be able to clearly allocate the notification and the necessary documentation, the four-digit BaFin registration number assigned to the undertaking must be indicated as reference.
The notification and all documents submitted with it must be in German. Where documents are not issued in German, a certified translation or a translation prepared by a publicly appointed or sworn interpreter or translator will be required in addition to the original version. The relevant BaFin division may waive the translation of English-language documents on a case-by-case basis.
The notification letter must be signed by at least one of the representatives of the undertaking and state the position held by them.

IV. Information and documentation required

The notification must contain:

• he name of the service provider,
• its address,
• a description of the scope of the outsourced activities,
• the reasons for outsourcing,

• if key tasks are outsourced, in particular one of the statutory four key functions, the name of the competent person at the service provider.
  

Submission of the draft agreement is required.

If key tasks are outsourced, it is not necessary to include documents concerning the competent person at the service provider (for example CV or certificate of criminal record) together with the notification.

V. Outsourcing arrangements that existed prior to 1 JAnuary 2016

BaFin expects undertakings that outsourced important functions or insurance activities prior to 1 January 2016 to submit an overview of all existing outsourcing arrangements for such functions or activities. In this context, the explanations stated under points I to III above should be taken into account. Since this is not a formal notification stipulated under section 47 no. 8 of the VAG, the requirement that it should be made without delay does not apply.

• The overview should include:
• the name of the service provider,
• its address,
• a description of the scope of the outsourced activities,
• the reasons for outsourcing,
• the date the agreement was entered into,
• if key tasks are outsourced, in particular one of the statutory four key functions, the name of the competent person at the service provider,
• any subdelegations.
  

Submission of the outsourcing agreement is not required. BaFin reserves the right to request submission on a case-by-case basis.