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Stand:updated on 01.01.2016 | 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.

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Publications on this topic

Cir­cu­lar 11/2017 (VA)

Guidance on Investing the Guarantee Assets of Primary Insurance Undertakings which are subject to the Provisions for Small Insurance Undertakings (sections 212 to 217 of the German Insurance Supervision Act, as well as of German Pensionskassen and Pensionsfonds (Investment Circular)

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In times of low interest rates, insurers increasingly reach for derivatives – for hedging purposes but also to increase their yields. BaFin requires them to have the risks under control.

The right bal­ance

How insurers design their asset-liability management (ALM) and the role played by sustainability risks

Cir­cu­lar 3/2016 (VA) - Trustee for Mon­i­tor­ing of the Guar­an­tee As­sets (Sicherungsver­mö­gen)

Circular 3/2016 (VA) - Trustee for Monitoring of the Guarantee Assets (Sicherungsvermögen)

In­vest­ments: In­sur­ers search­ing for yield?

Towards the end of 2016, BaFin carried out a survey on behalf of the European Insurance and Occupational Pensions Authority (EIOPA) into insurers' investment behaviour. The results are published on the EIOPA website.

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