Audit Report Regulation

In August 2016 the new Audit Report Regulation (Prüfungsberichtsverordnung) was available for public consultation. It will replace the 1998 regulation that was in force until 31 March 2016, and be applicable for the first time to the audit of financial years beginning after 31 December 2015. For BaFin, audit reports are a crucial source of information on the business situation of the undertakings under supervision. The Audit Report Regulation sets out in detail the Supervisory Authority's requirements for the contents of the audit reports as well as the nature and scope of the reporting.

The German Act to Modernise Financial Supervision of Insurance Undertakings (Gesetz zur Modernisierung der Finanzaufsicht über Versicherungen) came into effect in full on 1 January 2016.¹ It amends the Insurance Supervision Act and transposes the Solvency II Directive into German law.² Among other things, the Insurance Supervision Act provides in section 35 that the solvency statement undertakings are required to submit must be audited and reported on by an auditor. In the solvency statement, insurance undertakings subject to the Solvency II supervisory requirements list their assets and liabilities in accordance with supervisory recognition and measurement principles that are different from those applying under commercial law.

The solvency statement forms the basis for calculating the supervisory capital requirements and own funds, and is therefore critically important for the Supervisory Authority. It must also be published by the insurance undertakings under the new disclosure requirements.

The previous version of the Audit Report Regulation has subsequently been expanded for the future to include more detailed regulations governing the scope of the auditor's reporting obligations. There are additional new reporting obligations regarding supervisory requirements. They relate to compliance with orders issued by BaFin in accordance with section 4 (1) sentence 3 of the German Securities Trading Act (Wertpapierhandelsgesetz), compliance with obligations arising from derivatives transactions and for central counterparties and also the use of ratings.

Expertise for the granting of consumer loans for immovable property

Legislators have revised a large number of regulations relating to consumer loans in the form of the Act Implementing the Mortgage Credit Directive and Amending the Provisions of Commercial Law.³ Of particular importance for the insurance industry is the newly added section 15a (1) of the Insurance Supervision Act which refers to section 18a (6) of the German Banking Act (Kreditwesengesetz). Under section 18a (6) of the Banking Act, persons engaged in the granting of consumer loans for immovable property must have appropriate specialist knowledge and abilities and keep them up-to-date.

The Federal Ministry of Finance has issued a regulation on the requirements relating to the expertise of internal and external staff of insurance undertakings and Pensionsfonds engaged in granting consumer loans for immovable property (Verordnung über die Anforderungen an die Sachkunde der mit der Vergabe von Immobiliar-Verbraucherdarlehen befassten internen und externen Mitarbeiter von Versicherungsunternehmen und Pensionsfonds) in order to specify the requirements in detail.⁴ The regulation is based on the authorisation to issue regulations contained in section 15a (2) of the Insurance Supervision Act and entered into force on 7 December 2016. It represents the counterpart to the regulation on the requirements for the expertise of internal and external staff engaged in granting consumer loans for immovable property applying to banks (Immobiliar-Darlehensvergabe-Sachkunde-Verordnung).⁵

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