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Topic Authorisation Domestic insurers

If an undertaking domiciled in Germany wishes to obtain authorisation to engage in insurance business, it must meet certain conditions.

The main conditions are as follows:

  • The undertaking must have a particular legal form – that of a German public limited company (Aktiengesellschaft), including a European Company (SE), a mutual society or a corporate body or institution governed by public law.
  • It may engage only in insurance business and directly related business; it may not engage in non-insurance business. Furthermore, the principle of segregation of business applies: a life insurance undertaking, for example, may not at the same time provide health or property insurance.
  • The undertaking must submit a business plan describing the risks it intends to cover. It must also set out the guiding principles of its reinsurance policy.
  • The insurance undertaking must be able to demonstrate that it has at least two senior managers ("four eyes" principle). The senior managers and all other persons who effectively run the undertaking or have other key tasks must be "fit and proper" persons. Key tasks/functions include at least

    • the four key functions: risk management function, compliance function, actuarial function and internal audit function and
    • the supervisory board mandates.
  • The specific requirements regarding the criterion of "fitness" depend on the respective key task and the responsibilities of the person carrying out this task. The size of the undertaking as well as the nature, scale, complexity and risk content of its business must also be taken into account.
  • The undertaking has to prove that it has the required own funds. Insurers subject to the Solvency II regime must, while taking into account the undertaking-specific risks, calculate the level of the required own funds using either the standard formula, a partial internal model or a full internal model developed wholly by the undertaking itself. For all other undertakings, the calculation of the minimum level of own funds depends on the line of business they intend to operate. They have to submit estimates regarding the future Solvency Capital Requirement (SCR) and Minimum Capital Requirement (MCR). When commencing business operations, insurance undertakings must have own funds at least amounting to the calculated level of the SCR. Furthermore, the undertaking must prove that it has sufficient resources to cover the cost of setting up the administrative services and the sales network (organisational fund).
  • If qualifying holdings are held in an undertaking, their holders must be named. Holders of qualifying holdings are persons or commercial partnerships that have a direct or indirect holding in an undertaking which represents 10% or more of the capital or of the voting rights or who have other options of exercising a significant influence over the management of that undertaking. Holders of qualifying holdings must also meet certain requirements in order to guarantee sound and prudent management of the undertaking.

In addition, the following applies to insurance undertakings domiciled in Germany that intend to take up business operations in another EU/EEA member state:

Upon receipt of the required documents, BaFin will assess the lawfulness of the intended business. If the requirements are met, BaFin sends to the supervisory authority of the country in which the undertaking intends to engage in insurance business the documents submitted by the insurer, a certificate of solvency and, in the case of cross-border provision of insurance services, a certificate specifying the classes of insurance the undertaking intends to operate and the risks it is permitted to cover. The supervisory authority of the host country communicates to the insurer the conditions under which, in the interest of the general good, the intended business must be pursued in the host Member State.

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