Application

Since 1 April 2015, undertakings have been able to submit applications to BaFin for approval of ancillary own funds.

Application form

The application form for approval of ancillary own funds includes a list of the requirements that must be met in making the application. The completed application form must be submitted together with a cover letter and the other documentation required. The documentation submitted must give BaFin enough information to decide whether the prerequisites for an approval have been met. The application does not need to be renewed annually once the approval has been granted. If the undertaking has applied for approval of a calculation method, BaFin will inform the undertaking in the approval letter of the period for which the calculation has been approved. In the case of mutual societies with variable contributions, the ancillary own funds may also include calls for supplementary contributions from their members (section 89 (4) sentence 2 no. 2 of the VAG). Such an application for ancillary own funds can only be approved if the undertaking’s articles of association state that the purpose of supplementary contributions also includes coverage of losses under Solvency II conditions. Merely referring to underfunding in accordance with the German Commercial Code (Handelsgesetzbuch – HGB) is not sufficient. The relevant articles of association must be enclosed with the application documents.

Processing of applications

After receiving the application, BaFin sends the applicant a confirmation of receipt. It then checks that the application is complete and confirms its completeness within 30 days following receipt of the application. If the application is not complete, the applicant receives a list of the documentation that is still missing.

If the application is not approved, the undertaking is informed of the reasons. The undertaking is notified of the approval or rejection in writing. The application procedure is subject to a fee. The application does not need to be renewed annually once the approval has been granted. If the undertaking has applied for approval of a calculation method, BaFin will inform the undertaking in the approval letter of the period for which the calculation has been approved.

Reporting obligations

If the undertaking is granted an approval it must notify the supervisory authority of any future changes that may have the effect of reducing the loss-absorbency of the ancillary own-fund item. For this purpose, the undertaking must have corresponding internal processes in place in accordance with Article 62(1) letter d of the Commission Delegated Regulation (EU) 2015/35 of 10 October 2014 (“Delegated Regulation”).

When assessing the applications, BaFin applies the provisions under Directive 2009/138/EC (Solvency II Directive) implemented in particular in sections 89 (4) and 90 of the VAG, the provisions of the Delegated Regulation (Articles 62 to 67, 74, 75 and 78) and the implementing technical standards of the European Commission on the ancillary own funds and the relevant supplementary EIOPA-Directives.