The evaluation of the "day 1 reporting" and the first quarterly reports showed that – apart from a few exceptions in property/casualty insurance – all insurers were able to provide sufficient coverage for the new solvency capital requirement (SCR). In the firtst quarter of 2016, however, SCR ratios deteriorated considerably due to the difficult capital market environment, in particular in life insurance.

"By publishing this detailed summary, BaFin is paying due regard to the principle of transparency, which is firmly established in the new Solvency II regime", explained Chief Executive Director Frank Grund. BaFin considered it important to publish an overview of the major insurance classes before the undertaking-specific data is disclosed in 2017, Mr Grund added. "All market participants should have the chance to familiarise themselves with the effects of the new regime on life, property, casualty, health and reinsurance. The high level of volatility, in particular, which is due to changes in the market environment, clearly demonstrates that comparisons only involving SCR coverage ratios should be treated with caution."

Findings broken down by class of insurance

As at 1 January 2016, all of the 84 undertakings in the life insurance sector reported sufficient SCR coverage. The SCR coverage ratio of the segment totalled 283%. During the first quarter, however, it deteriorated noticeably. Nearly half of the life insurers make use of both the volatility adjustment and the transitional measures.
In property and casualty insurance, the average coverage ratio was 278% at the beginning of the year and remained virtually unchanged at 280% in Q1. As at 1 January 2016, three of the 186 property/casualty insurers subject to the reporting requirement failed to provide sufficient SCR coverage. By the end of Q1, this number was down to two. Thanks to supervisory measures, one of these two undertakings now meets the solvency capital requirement.

All of the 41 health insurance undertakings under BaFin's supervision reported sufficient coverage on both of the reporting dates mentioned. Eight health insurers apply long-term guarantee measures, i.e. specific measures for the assessment of long-term guarantees under Solvency II, and transitional measures.

As at 1 January 2016, the reinsurance sector showed an average SCR coverage of 326%, which had declined slightly to 320% by the end of Q1. Five reinsurers make use of a partial or full internal model.

BaFin has published on its website a detailed summary of the results broken down by class of insurance (only available in German). Starting in 2017, all primary insurers, reinsurers and insurance groups will have to publish a report on their solvency and financial condition under Solvency II.

Background

Pursuant to section 89 of the German Insurance Supervision Act (Versicherungsaufsichtsgesetz – VAG), insurers are required to hold eligible own funds at least equal to their respective SCR at all times. Section 96 ff. of the VAG governs how this is to be ascertained. Pursuant to section 97 of the VAG, the SCR corresponds to the Value-at-Risk of the basic own funds subject to a 99.5% confidence level over a 1-year period. Insurers with eligible own funds equal to the SCR will thus be able, with a probability of at least 99.5%, to absorb losses that might occur during the next year.

The calculation of the SCR must take into account all material quantifiable risks which the respective primary insurer or reinsurer is exposed to. The SCR may be calculated using a standard formula or an internal model (section 96 (1) of the VAG). The SCR coverage ratio is the ratio of eligible own funds to the solvency capital requirement.