Topic Investments of insurance companies Investments
When engaging in investment activity, insurance undertakings have to ensure that their obligations under the insurance contracts can be fulfilled at all times by carefully choosing the type, scope and quality of the coverage assets. The demands placed on the investment activities of insurers are therefore high. In order to ensure that the obligations under the insurance contracts can be met at all times, insurers must allocate sufficient assets to the guarantee assets (Sicherungsvermögen).
The guarantee assets, which are monitored by a trustee, are subject to special regulations that are aimed at providing policyholders with additional security regarding the undertakings' ability to fulfil their obligations under the insurance contracts.
Since Solvency II was implemented on 1 January 2016, investments of insurance undertakings have been governed by differing sets of rules. When making investments, undertakings subject to Solvency II are required to comply with the “prudent person principle”, for which there are a number of qualitative requirements. To this end, undertakings must prepare an internal schedule of investments, which replaces the relevant provisions of the Investment Regulation (Anlageverordnung – AnlV) and ensures the security, quality, liquidity and profitability of the investment as a whole. The corresponding legal texts also contain extensive provisions on risk management.
For undertakings outside the scope of Solvency II, the legal basis applying to investments continues to be the Investment Regulation. The Investment Regulation sets out the assets permitted by law to be included in the guarantee assets. Furthermore, it contains quantitative diversification and spread thresholds as well as matching and location requirements, and it obliges undertakings to implement qualitative investment management systems and internal control procedures. The BaFin circulars specify these provisions in further detail and provide guidelines on investment principles, the schedule of investments and, in particular, on investment risk management. As a result, the duty to implement qualitative investment management systems and internal control procedures is particularly important.