Minimum requirements for the governance of insurance undertakings (MaGo)

The Insurance Supervision Act, which – as described above – was amended by the German Act to Modernise the Financial Supervision of Insurance Undertakings (Gesetz zur Modernisierung der Finanzaufsicht über Versicherungen) at the start of 2016, contains numerous provisions relating to the governance of insurance undertakings. A delegated act of the European Commission contains additional directly applicable stipulations.¹ BaFin applies the EIOPA guidelines on the system of governance² for the purpose of interpreting the provisions on governance – except where it has stated that individual guidelines will not be applied in full.

BaFin had already published many of these requirements in 2014 and 2015 in order to prepare the undertakings for Solvency II. With the commencement of the new supervisory regime, it revised and updated the published requirements and carried them over into interpretative decisions. In the next step, BaFin summarised and further developed the minimum requirements from the interpretative decisions in a circular on the minimum requirements for the governance of insurance undertakings (Mindestanforderungen an die Geschäftsorganisation von Versicherungsunternehmen, only available in German), which was published in January 2017.

BaFin discussed the first draft of the MaGo with representatives of the industry associations in workshops in July and August 2016. It then revised the draft and made it available for public consultation until November 2016.

The circular is aimed at all undertakings falling within the scope of Solvency II. From the perspective of the supervisory system, it will replace the withdrawn circular 3/2009³ (MaRisk VA) and stand alongside the Minimum Requirements for Risk Management for banks and financial services institutions (Mindestanforderungen an das Risikomanagement – MaRisk BA) and the Minimum Requirements for the Compliance Function (Mindestanforderungen an die Compliance-Funktion – MaComp).

In the MaGo, BaFin brings together overarching aspects of governance and gives details of central concepts such as proportionality, administrative, management or supervisory bodies and significant risks. The circular incorporates the initial feedback from the workshops, the public consultation and supervisory practice under Solvency II.

Guarantee assets (Sicherungsvermögen)

BaFin revised its circular on guarantee assets⁴ in 2016 since, with the entry into force of the new Insurance Supervision Act, the investment rules have also changed. The Insurance Supervision Act now distinguishes between Solvency I and Solvency II undertakings and lays down different requirements for the investment of the guarantee assets. In future, there will therefore also be two separate circulars on the guarantee assets for Solvency I and Solvency II undertakings (see info box "Solvency I or II?"). Both circulars are expected to come into effect on 1 January 2018 and will replace the predecessor circular.

Guarantee assets circular for Solvency I undertakings

On 1 December 2016, BaFin published the guarantee assets circular for Solvency I undertakings.⁵ It is aimed at all undertakings authorised to engage in primary insurance business which are subject to the provisions for small insurance undertakings pursuant to sections 212 to 217 of the Insurance Supervision Act, as well as at German Pensionskassen and Pensionsfonds.

The circular provides Solvency I undertakings with instructions on how to maintain the guarantee assets register and contains minor substantive changes compared with the predecessor circular. It also refers to the amended Insurance Supervision Act as well as to the Investment Regulation for Solvency I undertakings and to the Regulation on the Supervision of Pensionsfonds (Pensionsfonds-Aufsichtsverordnung), which have been in force since 22 April 2016.

Draft guarantee assets circular for Solvency II undertakings

In December 2016, BaFin conducted a public consultation exercise on the draft of the guarantee assets circular for Solvency II undertakings.

The draft circular addresses all authorised primary insurers situated in Germany, which are not Pensionskassen or undertakings to which the rules for small insurance undertakings pursuant to sections 212 to 217 of the Insurance Supervision Act apply. It is also directed at all authorised primary insurance undertakings and institutions for occupational retirement provision situated outside the signatory states to the Agreement on the European Economic Area (EEA).

The provisions in the draft circular are based on the prudent person principle in accordance with section 124 (1) of the Insurance Supervision Act, according to which Solvency II undertakings must invest their guarantee assets. BaFin has therefore deleted all of the restrictions on the investment of guarantee assets that were based on the Investment Regulation. In addition, the structure of the revised register forms will in future reflect the asset-side balance sheet items in Form 1 of the Regulation on Insurance Accounting (Verordnung über die Rechnungslegung von Versicherungsunternehmen).

The circular will be published shortly.

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