Topic Financial reporting enforcement Interpretative decisions
Content
Article from the Annual Report 2016 of the BaFin
Annual statement: reporting of the policyholders' share of the valuation reserves
In the case of insurance contracts with discretionary benefits, the insurer is required to inform the policyholders of the performance of their entitlements, including the discretionary benefits, annually in text form, in accordance with section 155 of the German Insurance Contract Act (Versicherungsvertragsgesetz) in conjunction with section 6 (1) no. 3 of the Regulation on Information Obligations for Insurance Contracts (VVG-Informationspflichtenverordnung). BaFin had noticed that some life insurers are only reporting a guaranteed minimum level of participation in the valuation reserves, also known as the base amount or minimum threshold, in this annual communication – frequently referred to as the annual statement. In BaFin's view, this does not comply with the requirements of section 155 of the Insurance Contract Act in conjunction with section 6 (1) no. 3 of the Regulation on Information Obligations for Insurance Contracts.
BaFin therefore published an interpretative decision (only available in German) on 10 June 2016. This makes it clear that, in the case of life insurance policies entitled to discretionary benefits, the full extent of the policyholders' share of the valuation reserves which is calculated to be attributable to the relevant insurance contract in accordance with section 153 (1) and (3) of the Insurance Contract Act, must be reported in the annual communication.
Reinsurance business of insurance undertakings situated in a third country
The German Act to Modernise the Financial Supervision of Insurance Undertakings (Gesetz zur Modernisierung der Finanzaufsicht über Versicherungen)1 also changed the legal basis for the conduct of reinsurance business by insurance undertakings situated in a third country. Undertakings from a country that is not a member of the EU or an EEA signatory state must hold an authorisation and establish a branch in Germany if they want to carry on reinsurance business in Germany. The first half sentence of section 67 (1) sentence 2 of the Insurance Supervision Act provides an exemption. According to this exemption, authorisation is not necessary if the third country insurance undertaking conducts only reinsurance business in Germany through provision of cross-border services and if the European Commission has given a positive decision on the equivalence of the solvency system for reinsurance activities of undertakings in that third country on the basis of Article 172(2) or (4) of the Solvency II Directive.2 BaFin published an interpretative decision on this subject on 30 August 2016 in response to a large number of inquiries from German and foreign market participants. Among other things, the interpretative decision addresses the effects of the new legal position on new business as well as the exemptions from the authorisation requirement.
Footnotes:
- 1 Federal Law Gazette I 2015, page 434.
- 2 Directive 2009/138/EC, OJ EU L 335/1.