This translation is furnished for information purposes only. The original German text is binding in all respects.

I. General Administrative Act

As a consequence of the withdrawal of the United Kingdom of Great Britain and Northern Ireland and of Gibraltar from the European Union (EU) on 31 January 2020 (hereinafter referred to as “Brexit”) and the end of the transition period on 31 December 2020 as defined in Articles 126 and 127 of the Agreement on the withdrawal of the United Kingdom of Great Britain and Northern Ireland from the European Union and the European Atomic Energy Community (OJ L 29 of 31 January 2020, p. 7 – hereinafter referred to as “Withdrawal Agreement”), and in the absence of a comprehensive trade agreement relating to insurance supervision, insurance undertakings located in the United Kingdom and Gibraltar will lose the European passporting rights granted under Article 15(1) of Directive 2009/138/EC of the European Parliament and of the Council of 25 November 2009 on the taking-up and pursuit of the business of Insurance and Reinsurance (Solvency II) while institutions for occupational retirement provision located in the United Kingdom will lose the rights under Articles 11 and 12 of Directive (EU) 2016/2341 of the European Parliament and of the Council of 14 December 2016 on the activities and supervision of institutions for occupational retirement provision (IORPs) which to date have allowed these undertakings and institutions to carry on cross-border activities in Germany.

In principle, only provisions applying to third countries are applicable to insurance undertakings and IORPs located in the UK and Gibraltar. This means that sections 67 to 73 of the German Insurance Supervision Act (Versicherungsaufsichtsgesetz – VAG) apply.

Under these provisions, insurance undertakings and IORPs that have underwritten business in Germany in exercise of the aforementioned rights arising from the Directives (existing business) may conduct and run-off this business in accordance with the applicable contractual provisions, but must take into account that primary insurance business is to be terminated at the earliest possible time to the extent possible under civil law.

On the basis of section 67 (2) sentence 1 and (4) in conjunction with section 294 (7), section 298 (1) sentences 1 and 2 and (2), section 294 (2) sentence 2 of the VAG, I issue the following order: in accordance with this General Administrative Act,

1.

a) insurance undertakings located in the United Kingdom and Gibraltar that carried out cross-border activities in Germany until midnight on 31 December 2020 in exercise of the rights under Article 15(1), also in conjunction with Articles 145 to 161, or on the basis of Article 306 of Directive 2009/138/EC,

and

b) IORPs located in the United Kingdom that carried out cross-border activities in Germany until midnight on 31 December 2020 in exercise of the rights under Articles 11 and 12 of Directive (EU) 2016/2341

do not require authorisation from BaFin under section 67 (1) of the VAG for the continuation and run-off of their existing business.

2. Undertakings specified in number 1a) and b) must

• terminate their existing primary insurance contracts and contracts relating to occupational retirement provision without delay as soon as possible and to the extent legally permissible,
• completely run-off their insurance contracts, terminated primary insurance contracts or terminated contracts relating to occupational retirement provision in accordance with the relevant contractual conditions and
• completely run-off insurance contracts and contracts relating to occupational retirement provision that had already been terminated on 31 December 2020, midnight on the basis of the relevant contractual conditions.

The conduct of existing business until completion of the run-off is only possible if and to the extent that termination of the primary insurance contracts and the contracts relating to occupational retirement provision is impermissible under civil law.

In addition, the following applies to IORPs:

• no new pension commitments for employees of a notified employer may be accepted.
• Contracts relating to occupational retirement provision for which contributions are still being paid to IORPs must be converted into paid-up policies as from 1 January 2021. Payment of contributions for contracts relating to occupational retirement provision that were already converted into paid-up policies may not be resumed.

3. Irrespective of the termination option, undertakings are permitted to conduct existing business until the finalisation of a transfer of insurance contracts initiated before midnight on 31 December 2020 to an undertaking authorised to carry on insurance business and located in Germany or in the EU or the European Economic Area (EEA) that is permitted to operate in Germany under the provisions of Directive 2009/138/EC, or to a third country branch authorised in Germany.

4. In accordance with the provisions of section 67 (2) sentence 1 and (4), section 294 (7), section 305 (1) number 1 of the VAG, I further order for the entire duration of the execution or run-off of insurance contracts and contracts in relation to occupational retirement provision by primary undertakings and IORPs, respectively, the submission of the following documentation/information:

The information/updates stated under a) and b) are to be submitted for the first time by 27 February 2021 at the latest, as well as on an ongoing basis in the event of any changes to the contingency plan.
The information/documentation required under c), d), e), f), g) and h) must be submitted once a year within three months after the end of the financial year. I expressly reserve the right to order the interim submission of information on a case-by-case basis. In addition, insurance undertakings must submit this information/documentation broken down by insurance class according to the classes defined in Annex I and II of Directive 2009/138/EC.
The information required under h) does not apply to IORPs.

5. This General Administrative Act shall enter into force on 1 January 2021 at midnight. It applies to all the insurance undertakings und IORPs concerned in each case until complete termination of the contracts.

6. This General Administrative Act is issued subject to revocation in accordance with section 36 (2) number 3 of the German Administrative Procedure Act (Verwaltungsverfahrensgesetz – VwVfG). Revocation may also be made to individual addressees of this General Administrative Act.

7. This General Administrative Act will be published on 31 December 2020. It shall be considered notified on the day following its publication (section 41 (4) sentence 4 of the VwVfG).

II. Grounds

This Administrative Act is based on section 67 (2) sentence 1 and (4) in conjunction with section 294 (7), section 298 (1) sentences 1 and 2 and (2), section 294 (2) sentence 2 and section 305 (1) number 1 of the VAG.

1. Facts and introduction

On 29 March 2017, the United Kingdom notified the European Council of its intention to withdraw from the EU, thus officially initiating the procedure under Article 50 TEU. The UK's membership of the EU would therefore have ended at the end of the two-year period referred to in Article 50(3) TEU on 30 March 2019 (midnight). This period was extended on the basis of the European Council Decision (EU 2019/476 of 22 March 2019 (OJ L 80I of 22 March 2019, p. 1) taken in agreement with the United Kingdom extending the period under Article 50 (3) TEU. Subsequently, the membership ended as at the close of 12 April 2019 since the British House of Commons had not approved the Withdrawal Agreement with the European Union (cf. Article 50(2) sentence 2 TEU) by 29 March 2019. With the ratification of the Withdrawal Agreement by the House of Commons and the EU (Council Decision (EU) 2020/135 of 30 January 2020 on the conclusion of the Agreement on the withdrawal of the United Kingdom of Great Britain and Northern Ireland from the European Union and the European Atomic Energy Community, OJ L 29 of 31 January 2020, p. 1), the United Kingdom and Gibraltar withdrew from the European Union as of 31 January 2020. Based on the Withdrawal Agreement under Article 50(2) sentence 2 TEU, Union law continued to apply in principle to relations with the United Kingdom and also within the United Kingdom including Gibraltar for a transitional period until 31 December 2020, so that the United Kingdom continued to be part of the EU Single Market until 31 December 2020. In the absence of a comprehensive trade agreement, which also would have regulated the execution and/or run-off of insurance contracts and contracts relating to occupational retirement provision concluded in exercise of the rights under Article 15 (1), also in conjunction with Articles 145 to 161, or in accordance with Article 306 of Directive 2009/138/EC, as well as in exercise of the rights under Articles 11 and 12 of Directive (EU) 2016/2341, a so-called "unregulated" or "hard" exit of the United Kingdom and Gibraltar from the EU's Single Market has occurred. In principle, only provisions applying to third countries are applicable to insurance undertakings and IORPs located in the UK and Gibraltar. Undertakings that are currently operating in Germany through a branch or by way of cross-border provision of services have therefore lost their right to market access; this applies even in cases where the transactions previously concluded are such that their contractual obligations and effects extend beyond the date of Brexit.

Pursuant to the Memorandum of Understanding between the UK Prudential Regulation Authority (PRA) und BaFin, the supervisory competence for the financial supervision of insurance undertakings continues to be based on Article 30 of Directive 2009/138/EC even after the UK’s and Gibraltar’s exit from the EU Single Market.

2. Criteria under section 67 (2) sentence 1 and (4) in conjunction with section 294 (7), section 298 (1) sentences 1 and 2 and (2), as well as section 294 (2) sentence 2 of the VAG

a) The criteria set out in section 67 (2) sentence 1 and (4) in conjunction with section 294 (7), section 298 (1) sentences 1 and 2 and (2) and 294 (2) sentence 2 of the VAG apply.

By withdrawing from the EU Single Market, the United Kingdom and Gibraltar are now considered third countries within the meaning of section 7 number 34 of the VAG. In accordance with section 1 (1) number 1 in conjunction with section 7 number 34 of the VAG, primary insurance undertakings and reinsurance undertakings located in a third country that would require official authorisation in accordance with Article 14 (1) of Directive 2009/138/EC if they were located in a state within the EEA are subject to the provisions of the VAG. The relevant provision applicable to IORPs is set out in section 67 (4) of the VAG.

The conduct of insurance business also includes the run-off of insurance contracts. This means that the run-off of existing insurance contracts is subject to my supervision. The fact that my comprehensive supervisory duty for the insurance undertakings and IORPs concerned begins at a time when these undertakings and institutions are already running-off the German part of their portfolio does not conflict with supervisory duty. Thus, UK and Gibraltar insurance undertakings, as well as IORPS located in the UK and Gibraltar are subject to insurance supervision under the VAG even if they do not intend to write new business in Germany after 31 December 2020, but merely to conduct or run-off the existing business concluded under the previous Passport Law.

In accordance with section 294 (7) of the VAG, which applies with the necessary modifications based on the provisions in section 67 (2) sentence 1 and (4) of the VAG, my supervision also extends to the run-off of existing insurance contracts and contracts relating to occupational retirement provision if business operations are prohibited or voluntarily discontinued or if the authorisation to carry on business is revoked. The purpose of this provision is to prevent so-called “precautionary authorisations”. Since undertakings benefiting from the General Administrative Act do not wish to write new insurance contracts and contracts relating to occupational retirement provision, any authorisation to conduct business granted under section 67 (1) of the VAG would have to be revoked pursuant to section 304 (2) of the VAG after 12 months at the latest. Undertakings that do not wish to write new business will not make any effort to conclude insurance contracts and contracts relating to pensions and thus will not make use of the authorisation to conduct business. Applying an authorisation procedure in which it is already clear at the beginning that the authorisation will not be used and that it is to be revoked would be a mere formality. Thus, the supervision of the run-off of existing contracts under section 294 (7) of VAG is applicable.

In accordance with section 67 (2) sentence 1 and (4) of the VAG, section 298 of the VAG applies with the necessary modifications.

Consequently, measures may be taken against UK and Gibraltar primary insurance undertakings on the basis of section 298 (1) of the VAG and against UK and Gibraltar reinsurance undertakings on the basis of section 298 (2) of the VAG. In the absence of a regulation at European or national level relating to insurance contracts concluded before the withdrawal of a member state by an insurance undertaking located in that state with contracting parties in another member state or EEA signatory state, arrangements must be made with regard to future supervision and existing contractual obligations in the specific case of UK and Gibraltar insurance undertakings. With respect to insurance undertakings, the arrangements aim at ensuring compliance with the applicable laws on the operation of primary and reinsurance business. On 31 December 2020, the undertakings will lose the European passporting rights enshrined in the relevant Directives. This means that they will no longer be able to conduct insurance business on this basis in Germany. The conduct of insurance business and the business of IORPs also includes the execution and run-off of the contracts.

This General Administrative Act informs the UK and Gibraltar undertakings about the supervisory regime under which contracts may be executed and run-off after 31 December 2020. It primarily requires the insurance undertakings and IORPs concerned to run-off the existing contracts in accordance with the contract terms. To this end, the insurance undertakings and IORPs must terminate the primary insurance contracts and contracts relating to occupational pensions as soon as possible and to the extent legally permissible. If termination is not possible under civil law, the General Administrative Act clarifies that the execution of these contracts is subject to the supervision of BaFin within the scope of this Administrative Act. Finally, the General Administrative Act determines how portfolio transfers initiated before midnight on 31 December 2020 will be dealt with.

Since the undertakings are subject to BaFin’s supervision for the run-off of their portfolios, it is necessary to communicate the framework in which the execution and run-off of contracts can take place. In principle, the undertakings should act on the assumption that from 1 January 2021 they will be fully subject to the provisions of the VAG and the regulations issued in this regard, in particular sections 67 et seq. of the VAG. Since section 294 (7) requires BaFin to take into account that the insurance relationships are maintained only until finalisation of the run-off, and section 296 of the VAG stipulates that the VAG requirements must be applied with due regard to the principle of proportionality, BaFin must apply the rules for execution and run-off with a sense of proportion. The General Administrative Act informs the undertakings about the extent to which BaFin wishes to make use of the power granted to it under section 294 (7) of the VAG. This General Administrative Act is issued to avoid, on the one hand, violations of the statutory rules that are to be applied in accordance with principle of proportionality, which is also enshrined in law, and, on the other hand, to avoid disadvantages forthe insureds.

In cases where termination is not possible under civil law, the arrangements set out in the General Administrative Act take account of the fact that, while illegal termination would violate contract law, continuation of the contract, even if in conformity with contract law, would violate insurance supervision law because of lack of authorisation to conduct business under section 67 (1) of the VAG.

The General Administrative Act is an appropriate measure for informing the undertakings concerned about the legal framework to be observed in the future for the execution and run-off of contracts. It is necessary in order to avoid violations by these undertakings of the applicable provisions of the VAG, and also to avoid disadvantages for the insureds because of non-conforming termination.

In order to enable BaFin to exercise supervision over the run-off of existing business, regular disclosure and submission requirements regarding business activities in Germany are ordered under number 4 in accordance with section 305 (1) of the VAG.

The General Administrative Act does not apply to new business. Undertakings that intend to write new business after 1 January 2021 require authorisation in accordance with sections 67 et seq. of the VAG.

b) Issuance of a general administrative act as a form of action is expressly provided for in section 35 sentence 2 of the VwVfG and section 17 (2) of the Act Establishing the Federal Financial Supervisory Authority (Finanzdienstleistungsaufsichtsgesetz – FinDAG).

A general administrative act is an administrative act addressed to a group of persons identified or identifiable according to general characteristics.

This General Administrative Act addresses insurance undertakings und IORPs as defined in number 1 a) and b. The group of persons is thus identifiable. An administrative act in the form of a general administrative act can be issued even if BaFin is aware of the names and addresses of the undertakings concerned.

Due to the urgency of a national provision, a general administrative act is to be given preference over individual administrative acts.

Individual administrative acts in accordance with section 67 (2) sentence 1 and (4) in conjunction with section 294 (7), section 298 (1) sentences 1 and 2 and (2), as well as section 294 (2) sentence 2 of the VAG are not practicable because of the large number of undertakings concerned and the very tight timeframe between the conclusion of the discussions on a trade agreement between the EU and the United Kingdom, which have dragged on well into the second half of December, and the necessary individual notifications to be made by the end of the transitional period.

3. Discretion

Since the criteria under section 67 (2) and (4) sentence 1 in conjunction with section 294 (7), section 298 (1) sentences 1 and 2 and (2), as well as section 294 (2) sentence 2 of the VAG apply, I am entitled to issue an order to that effect. This means that I have a discretion in that regard. I dutifully exercise this discretion by issuing this General Administrative Act in accordance with the purpose and within the legal limits. The issuance of a general administrative act within the scope indicated in the tenor complies with the purpose and general scheme of the law.

The General Administrative avoids violations of the VAG. In addition, it ensures that the interests of the insureds are not impaired by non-conforming termination.

Pursuant to section 294 (1) of the VAG, the primary objective of supervision is to protect the policyholders and beneficiaries of insurance benefits. This provision prevents disadvantages for policyholders and beneficiaries of insurance contracts and contracts relating to occupational retirement provision and for domestic ceding companies by creating legal certainty for the UK undertakings concerned and their customers with regard to the initiated portfolio transfers and the execution and run-off of cross-border insurance contracts and contracts relating to occupational retirement provision.

The order under number 3 is restricted to transfers of insurance contracts initiated before midnight on 31 December 2020 to undertakings authorised to carry on insurance business located in Germany or within the EU or the European Economic Area (EEA) that are authorised to operate in Germany under the provisions of Directive 2009/138/EC, or to a third country branch authorised to operate in Germany. BaFin does not have any information to suggest that transfers by IORPs affected by this General Administrative Act are to be expected.

4. Proportionality of orders under numbers 1., 2. and 3.

The General Administrative Act is based on section 67 (2) and (4) sentence 1 in conjunction with section 294 (7), section 298 (1) sentences 1 and 2 and (2), section 294 (2) sentence 2 of the VAG and is considered proportionate with regard to the orders under numbers 1., 2. and 3.

The General Administrative Act determines the extent to which BaFin will exercise its right to supervise the run-off of insurance business. It also explains how to avoid violations of law when executing and terminating contracts after 31 December 2020.

a) Appropriateness

The measures taken by the General Administrative Act are appropriate to avoid undesirable developments in the form of violations of statutory provisions and to continue to fulfil the main purpose of supervision, i.e. the protection of the policyholders and beneficiaries of insurance benefits, also in the future.

The General Administrative Act clarifies that the undertakings concerned must terminate their existing business as soon as possible and to the extent legally permissible.

If termination is not possible under civil law, the undertakings may continue to execute the contracts until finalisation of a portfolio transfer initiated before 1 January 2021.

If the portfolio is not transferred, the execution of contracts that may not be terminated under civil law is possible until complete termination. This provides the undertakings with the legally feasible option to execute contracts concluded within the framework of the law applicable at the time of the conclusion of the contract until their complete termination.
With regard to the execution of existing business of IORPs, it is ordered that

• no new pension commitments for employees of a notified employer may be accepted and
• contracts relating to occupational retirement provision for which contributions are still being paid to the IORP must be converted into paid-up policies as from 1 January 2021. Payment of contributions for contracts relating to occupational retirement provision that were already converted into paid-up policies may not be resumed.

These orders specify the framework of supervision under section 294 (7) of the VAG, taking into account the principle of proportionality and the fact that existing business is run-off, and prevent violations of statutory provisions.
The General Administrative Act is also issued in accordance with the main purpose of supervision, which is to protect the policyholders and beneficiaries of insurance contracts, as well as the beneficiaries under contracts relating to occupational pension provision and domestic ceding companies. The possibility of a (limited) continuance of contracts and the order for termination of contracts and run-off in accordance with the contract terms and within the scope of the applicable civil law, ensure that the contracts can be continued or run-off while at the same time the contractual entitlements or claims of the policyholders, the beneficiaries from contracts in relation to occupational retirement provision and domestic ceding companies can be maintained.

In view of the fact that this General Administrative Act is accompanied by a Memorandum of Understanding between the UK Prudential Regulation Authority (PRA) und BaFin, the supervisory competence for the financial supervision of insurance undertakings continues to be based on Article 30 of Directive 2009/138/EC even after the UK’s and Gibraltar’s exit from the EU Single Market. The regulatory position of the policyholders will thus be the same as if there had been no “unregulated” or “hard” exit of the United Kingdom from the EU Single Market. The policyholders’ deliberate choice of taking out insurance with a cross-border insurer at the time of conclusion of the contract and the shared supervisory competences resulting from this choice will thus remain unaffected.

The orders under numbers 1., 2. and 3. for termination or, on an exceptional and partly temporary basis, the conduct of existing business that is not authorised by BaFin under section 67 (1) of the VAG, take appropriate account of the civil law restrictions on immediate termination of contract. However, contract amendments based on unilateral contract design options granted to the insured persons in their previously concluded insurance contracts and contracts relating to occupational retirement provision, are still possible. The policyholders therefore retain the contractual options available to them.

As regards the insurance undertakings and IORPs affected, the General Administrative Act also takes appropriate account of the legal circumstances at the time the insurance contracts and contracts relating to occupational retirement provision were concluded. At that time, the undertakings concerned had the right to conclude insurance contracts and contracts relating to occupational pensions under the European passport regime.

When dealing with these contracts, it must therefore also be taken into account that they were concluded within the scope of an appropriate right to market access. The General Administrative Act thus takes into account, in an appropriate manner, the interests of the insurance undertakings and IORPs located in the United Kingdom and Gibraltar.

b) Necessity

The General Administrative Act is also necessary since there is no obvious, more moderate measure that would be equally effective to counter the above described possible consequences of an unregulated exit of the United Kingdom from the EU on the insurance and occupational pensions sectors. In accordance with the regulatory content of section 294 (7) of the VAG, in principle all provisions of the VAG apply. However, given the fact that in principle these provisions were established with regard to undertakings that ensure the continuation of their activities by, inter alia, writing new business, they should be adapted to take account of the special situation of UK and Gibraltar undertakings that merely intend to run-off the cross-border insurance contracts and contracts relating to occupational retirement provision concluded in Germany under the European passport regime and following notification procedures. Pursuant to section 296 (1) of the VAG, I am required to apply the requirements of the VAG in a manner that is proportionate to the nature, scale and complexity of the risks associated with the activities of the supervised undertakings. This means that I can refrain from requiring compliance with certain provisions in whole or in part as long as the protection of the policyholders and beneficiaries of insurance contracts and contracts relating to occupational retirement provision and of domestic ceding companies is ensured. Currently, the legal framework for the supervision of UK and Gibraltar insurance undertakings ensures adequate financial and legal supervision.

It is therefore justified to maintain the existing distribution of competences for financial and legal supervision of the insurance contracts concerned, which will decrease in numbers over time, beyond 31 December 2020, as was done by the Memorandum of Understanding between BaFin and the PRA. In particular, this will help to avoid a costly adaptation of the contractual bases to the national specifics of the German Insurance Supervision Act, if such adaptation were possible at all under contract law. As a consequence, the impairment of the existing contracts, in particulars contracts with savings components or discretionary participation feature, can be avoided, which is in the interests of the policyholders. If the regulatory standards in the United Kingdom [or Gibraltar] no longer ensure adequate supervision, the Memorandum of Understanding can be terminated by notice. In this case, I expressly reserve the right to revert to the independent conduct of supervision of third country insurance undertakings based on full and direct application of sections 67 et seq. of the VAG for the time required for the run-off or execution of the insurance contracts concerned. The same also applies in the event that the competent home supervisory authority is not willing to cooperate with BaFin.

The legal framework of the supervision of IORPs in the UK and Gibraltar currently complies with the principles laid down in Directive (EU) 2016/2341. In this context, it should be noted that section 67 (4) of the VAG, which stipulates, with the necessary modifications, the application of the provisions on insurance undertakings located in a third country to IORPs, entails a change of supervisory regime. While IORPs located in the UK are currently subject to the supervisory regime under Directive (EU) 2016/2341, they will in future be subject to the supervisory regime for insurance undertakings, i.e. Directive 2009/138/EC. This would entail significant changes (complete change of supervisory regime) for IORPs, which are avoided by the ordered measures.

The order ensures that insurance undertakings or IORPs that have ceased writing new business can terminate and run-off their existing contracts to the extent legally permissible. Contracts that cannot be terminated can be continued within a limited scope. In so far as is necessary, the civil law basis of the insurance contracts is thus taken into account.

The option to ensure the execution of the contracts by transferring the portfolio to an undertaking authorised to operate in Germany is only possible if the transfer was initiated before the end of the transitional period on 31 December 2020 and only to the extent that the portfolio transfer is realistic and eligible for approval. My order is therefore in line with EIOPA’s Recommendations for the insurance sector in light of the United Kingdom withdrawing from the European Union. Recommendation no. 5 states that the competent supervisory authorities should allow the finalisation of portfolio transfers from UK insurance undertakings to EU27 insurance undertakings, provided that the transfer was initiated before the withdrawal date. A portfolio transfer is deemed to be initiated if the UK supervisory authorities have notified the competent authorities in the EU member states about the initiation of the portfolio transfer and the UK insurance undertaking has paid the regulatory transaction fee to the supervisory authority/authorities in the UK and appointed an independent expert for the transfer. The United Kingdom left the European Union on 31 January 2020 at midnight CET. However, the withdrawal was effectively completed on 31 December 2020. From that date, EU law has ceased to apply to the UK, which means that this date is relevant. By initiating the portfolio transfer procedure, the UK and Gibraltar undertakings have done everything that is legally necessary within their scope of action to enable the continuance of the existing business in conformity with the law even after the end of the transitional period. Since a portfolio transfer of cross-border business depends on several factors that are outside the legal competence of the undertakings, there is a need to regulate how portfolio transfers initiated before the end of the transitional period should be dealt with.

If, during the application procedure for permission to carry on insurance business in Germany through a third country branch, a UK or Gibraltar insurance undertaking allocates contracts written under the previously applicable legal regime to that branch, no additional approval of a “transfer” of the insurance portfolio is required. The authorisation granted to the third country branch, which includes the internally allocated insurance portfolio, will suffice.

c) Reasonability

The General Administrative Act is also reasonable. The United Kingdom is the first member state to leave the European Union. In this situation, legal uncertainties could arise affecting the undertakings and their customers. Directive (EU) 2016/2341 does not contain any provisions on third country undertakings operating cross-border into an EU/EEA member state. Directive 2009/138/EC only regulates cross-border insurance transactions within the EU member states and third country undertakings operating cross-border into an EU/EEA member state. There is no European regulation addressing the withdrawal of a member state from the EU and the associated lapse of rights under the European passport and, consequently, the regulated liquidation of liabilities legally assumed under the European passport and in compliance with the notification procedure. As there is no comprehensive trade agreement containing rules for dealing with the existing business, there is no solution to this problem. The General Administrative Act takes account of this gap in European law. So far, conflicts between undertakings and their customers arising from Brexit have been avoided, partly because the European and national supervisory authorities have encouraged the market participants to prepare for the consequences of the UK leaving the EU without a comprehensive trade agreement and to inform their customers about the measures taken in this respect. Experience has shown that it will probably not be possible to implement all the measures taken in good time before the UK's exit from the EU, as these also depend on external approvals which the undertakings cannot influence in terms of timing. The General Administrative Act establishes a legal basis for the run-off of the existing business of the UK and Gibraltar undertakings and thus prevents violations of statutory provisions.

If the existing contracts are terminated in compliance with the relevant notice periods, the consequences of termination will occur at different times, depending on the conclusion and term of the contract concerned. Due to the nature of the liabilities assumed, any date of termination for long-term insurance contracts would not be reasonable. In line with the primary objective of supervision, namely the protection of the policyholders and beneficiaries of insurance contracts and contracts relating to occupational retirement provision and the domestic ceding companies, BaFin must exercise its supervision in accordance with the provisions of the VAG and take reasonable account of the nature and specificities of the liabilities assumed.

Given the low volume of existing business, which, moreover, will gradually decrease over time, full application of the provisions of the VAG, in particular of sections 67 et seq., to undertakings that wish to withdraw from the German market by refraining from writing new business and merely intend to fulfil and run-off their contractual obligations would not be reasonable.

When exercising the rights arising from the abovementioned Directives, the insurance undertakings were required to apply German legal provisions for the conclusion and execution of insurance contracts to the extent that these provisions were “General Good Requirements” that undertakings needed to comply with. However, with regard to the activities of third country undertakings, the provisions of sections 67 et seq. of the VAG did not fall under these requirements. In fact, the specific provisions relating to the activities of insurance undertakings and IORPs located in an EU/EEA member state set out in sections 61 to 66a, section 169 and section 243 to 243b of the VAG, rendered these provisions inapplicable. However, due to the withdrawal of the United Kingdom and Gibraltar from the EU and the EEA, sections 67 to 73 of the VAG now apply, instead of sections 61 to 66a, section 169 and section 243 to 243b of the VAG. As a consequence, the undertakings concerned will no longer be required to comply with German law only in part, i.e. within the framework of the General Good Requirements. This extension of the national legal framework may require an adaptation of the framework conditions for the execution of contracts.

For IORPs, the full application of the provisions of sections 67 et seq. of the VAG would not only lead to a change in supervisory regimes, but also eliminate the need to monitor compliance with German labour and social law.
To the extent that execution of the contracts within the scope of the specific national features of insurance contracts and supervision is at all possible after the necessary adaptation, such adaptation to national specificities may be less suitable for serving the interests of the policyholders and beneficiaries of insurance contracts and contracts relating to occupational retirement provision and of domestic ceding companies than the arrangements of this General Administrative Act.

At the time the contracts were concluded, the undertakings concerned were entitled to conclude insurance contracts and contracts relating to occupational retirement provision on the basis of the passporting rights and notification. Therefore, when dealing with these contracts, it must also be taken into account that the undertakings were entitled to lawfully conduct insurance business and business relating to occupational retirement provision in Germany. The conduct of this business also includes execution of the written contracts in accordance with the contract terms during the undertakings’ liability period until complete termination at the end of the run-off. In principle, the undertakings concerned have a legitimate interest in terminating the assumed obligations in accordance with the contract terms. This legitimate interest is taken account of by subjecting the undertakings to a supervisory regime - and, in the case of IORPs, to certain contractual adjustments with regard to payment of contributions. This takes reasonable account of these interests and thus responds to the special situation created by Brexit in accordance with the principle of proportionality set out in section 296 of the VAG. The consideration of the interests of the undertakings concerned does not conflict with the primary objective of supervision, i.e. the protection of the policyholders and beneficiaries of insurance contracts and contracts relating to occupational retirement provision and of domestic ceding companies.
The General Administrative Act is therefore reasonable.

5. Criteria under section 67 (2) sentence 1 and (4) in conjunction with section 294 (7) in conjunction with section 305 (1) number 1 of the VAG

The criteria of section 67 (2) sentence 1 and (4) in conjunction with section 294 (7) in conjunction with section 305 (1) number 1 of the VAG apply.
In accordance with section 305 (1) number 1 of the VAG, BaFin is authorised to require the insurance undertakings, the members of their governing bodies, employees and persons controlling the undertakings to provide information about all business matters and submit or forward all business documents.
The order for informal submission of documentation and information requires the undertakings to provide BaFin with certain information about the existing business.

6. Discretion

Since the criteria under section 67 (2) and (4) sentence 1 in conjunction with section 294 (7) in conjunction with section 305 (1) of the VAG apply, I am entitled to issue an order to that effect. This means that I have a discretion in that regard. I dutifully exercise this discretion by issuing this General Administrative Act in accordance with the purpose and within the legal limits. The issuance of a general administrative act within the scope indicated in the tenor complies with the purpose and general scheme of the law. The authorisation to require the provision of information and submission of documents is to enable BaFin to get a comprehensive overview of the undertakings’ business activities. The disclosure and submission requirement also complies with the purpose of the law. As set out in section 294 (1) of the VAG, the primary objective of supervision is to protect the policyholders and the beneficiaries of insurance benefits.

The ordered submission of documentation and information provides BaFin with the necessary information on the existing business. This enables it to check whether the primary objective of supervision is being met in the course of the run-off or the limited execution of the contracts.

7. Proportionality of the General Administrative Act in relation to number 4.

In order to protect the interests of the policyholders and beneficiaries of insurance contracts and contracts relating to occupational retirement provision and of domestic ceding companies, BaFin must exercise its supervision in accordance with the provisions of the VAG and take reasonable account of the nature and specificities of the liabilities assumed.

The reasonability of supervision is taken into account by the limited application of the provisions of the VAG. Such limitation, however, is only acceptable if it does not impair the protection of the policyholders and beneficiaries of insurance contracts and contracts relating to occupational retirement provision and of domestic ceding companies. In order to obtain a minimum of information on the status of the liquidation, the expected maturities, the amount of the liabilities and the expected duration of the run-off of the contracts, the ordered submission requirements are proportionate.

a) Appropriateness

The order for the submission of documents and certain information is appropriate to provide BaFin with essential information on the status of the liquidation, the expected maturities, the amount of the liabilities and the expected duration of the run-off of the contracts. BaFin is thus in a position to make a judgment as to whether the General Administrative Act can remain valid vis-à-vis a particular insurance undertaking or in general. In addition, the submission requirement enables BaFin to make representations to the PRA or the British Pensions Regulator (TPR), if necessary, in order to avoid any impairment of the protection of policyholders and beneficiaries of insurance contracts and contracts relating to occupational retirement provision and of domestic ceding companies. The General Administrative Act is therefore appropriate to achieve the primary objective of supervision.

b) Necessity

The submission requirement is necessary because although the insurance undertakings have access to contract data that involve risks situated in Germany, these data are not available to BaFin and the PRA or the TPR, at least not in this form. There is no obvious, more moderate measure that would be equally effective to obtain the required information.

c) Reasonability

The reasonability follows from the fact that without such a disclosure and submission requirement, the agreed sharing of supervision of the portfolios of insurance contracts and contracts relating to occupational retirement provision that are to be continued or in run-off is not possible. Instead, undertakings located in the United Kingdom and Gibraltar would have to be subjected to comprehensive reporting obligations towards BaFin to be established in accordance with the principles of the reporting obligations under the German Insurance Reporting Regulation (Verordnung über die Berichterstattung von Versicherungsunternehmen gegenüber der Bundesanstalt für Finanzdienstleistungsaufsicht – BerVersV) applicable to other third-country insurance undertakings. As these would be far more extensive, they would place a much greater burden on the UK and Gibraltar undertakings and increase the costs of portfolio management, possibly to the detriment of policyholders.

8. Possibility of revocation

The possibility of revocation in accordance with number 6. results from the enabling provisions in section 67 (2) sentence 1 and (4) in conjunction with section 294 (7), section 298 (1) sentences 1 and 2 and (2), section 294 (2) sentence 2 and section 305 (1) number 1 in conjunction with section 297 (1) of the VAG, which confer on BaFin a discretion, and is based on section 310 (1) in conjunction with section 36 (2) number 3 of the VwVfG. In terms of content, it aims to provide BaFin with the most flexible responsiveness, also towards individual addressees of this General Administrative Act, if necessary.

9. Publication

The publication of the General Administrative Act shall take place on 31 December 2020 in the form of a publicly exhibited copy and on the BaFin website. The announcement of the General Administrative Act shall take place publicly since this is expressly provided for (see section 41 (3) sentence 1 of the VwVfG in conjunction with section 17 (2) of the FinDAG). The possibility of publication within the meaning of section 41 (4) sentence 1 of the VwVfG on the BaFin website is based on section 17 (2) sentence 2 of the FinDAG.

10. Hearing dropped

BaFin has decided in its reasonable discretion to refrain from hearing the parties affected by this General Administrative Act in accordance with section 28 (2) nos. 1 and 4 of the VwVfG. Due to the negotiations between the EU and the United Kingdom on a trade agreement, which continued well into the second half of December 2020, and the need to create a supervisory regime immediately following the end of the transitional period, and thus a legal basis for the future handling of existing business by the undertakings concerned, it was not possible to hold a hearing, as generally required before the issuance of an administrative act, within a reasonable hearing period. Moreover, the General Administrative Act is only a minor infringement of the rights of the addressees; in fact, most of the provisions are in their interest.

Instructions on available remedies

Objections to this General Administrative Act can be submitted to BaFin in Bonn or Frankfurt am Main within one month of its publication.
Elke Washausen-Richter