BaFin

Act on the Supervision of Insurance Undertakings

Versicherungsaufsichtsgesetz - VAG

Date: 01.01.2000

As published in the announcement of 17 December 1992 (BGBl. 1993 I, p. 2)

Last amended by Article 44 of the Law of 26 March 2007 (BGBl. I, p. 378)

On this page:

I. Introductory provisions

Section 1
Undertakings subject to supervision

(1) Subject to supervision under this Act are undertakings which carry on insurance business and which are not social insurance institutions (insurance undertakings), as well as pension funds within the meaning of section 112 (1) below.

(2) (rescinded)

(3) The following are not subject to supervision under this Act:

1. Bodies of persons which grant their members benefits without a legal claim to such benefits, in particular relief funds and relief associations of professional associations,

1a. Support funds established by guilds under the Skilled Crafts Regulations (Handwerksordnung),

2. Confederations of chambers of commerce and industry with trade associations, which have legal personality, if the purpose of such confederations is to balance their members’ encumbrances from benefit commitments via cost allocation, and if such confederations were granted their status as legal entities by the government,

3. Confederations of local governments and associations of local governments, without legal personality, if their purpose is to balance, via cost allocation, the following losses resulting from risks taken by their members and by undertakings operated to provide public services, in which one or several members or - in the case of b) - other regional and/or local authorities hold a share of at least 50 percent:
a) Losses for which the members or their staff may be held responsible by third parties on the basis of statutory liability provisions,

b) Losses arising from ownership of motor vehicles,

c) Benefits paid under the local government accident compensation scheme,

4. Corporations and institutions under public law with a statutory obligation to provide insurance or imposed as insurance providers by mandatory law,

4a. Public law health care schemes of the Federal Railways Fund (Bundeseisenbahnvermögen) and the Postal Civil Service Health Insurance Fund (Postbeamtenkrankenkasse),

4b. The Supplementary Pension Agency of the Federal Government and State Government (Versorgungsanstalt des Bundes und der Länder), the Railway Insurance Institute (Bahnversicherungsanstalt) – section B – [1] and the German Post Office Pensions Institution (Versorgungsanstalt der Deutschen Bundespost),

5. Undertakings operating within narrow territorial limits, which provide benefits upon occurrence of an uncertain event against payment of a lump sum, provided such benefits do not take the form of cash payments, coverage of costs or indemnification with respect to third parties.

(4) The business listed under nos. 23 and 24 of part A of the Annex does not fall within the scope of this Act unless conducted by insurance undertakings authorised for the classes of insurance under nos. 19 to 21 of part A of the Annex; in such cases, this business is treated in the same way as life insurance business. Capital redemption operations (no. 23 of part A of the Annex) refer to any business operations for which an actuarial method has been used to determine the duration and amount of fixed single or regular premiums and benefits provided. Business within the meaning of no. 24 of part A of the Annex refers to the administration of schemes which pay death or survival benefits or which provide benefits in the event of discontinuation of employment or impairment of earning capacity, including the investment and management of assets. For the purpose of business referred to in sentence 3, the insurance undertakings may also grant guarantees for capital protection and minimum return guarantees in connection with such management. Death benefit funds may not conduct the business specified in the sentences 1 to 4; Pensionskassen may not conduct the business specified in sentences 1, 2 and 4.

Section 1a
Public sector schemes

(1) For public law insurance undertakings of the civil service or the churches, which provide exclusively retirement, invalidity or dependant benefits, only section 13 (1), sections 14, 54 (4) sentence 1 no. 1 and sentence 2 , section 55 (1) and (2), section 55a and sections 81, 81a, 82, 83, 83a, 86, 88, 89, and 89a shall apply.

(2) To the extent that public sector schemes, including the non-autonomous municipal and church supplementary benefit funds and the Supplementary Pension Agency of the Federal Government and the State Government without status as legal entities, provide voluntary retirement insurance, the liabilities and assets relating to this business are to be segregated. The liabilities and assets shall be ring-fenced, managed and organised separately from the other business of the scheme, without the possibility of transfer. The provisions of this Act pertaining to the business of Pensionskassen, excluding section 156a, shall apply accordingly to the segregated business; to this extent, the schemes are subject to supervision under this Act.

(3) The Federal Ministry of Finance is authorised to exempt public law insurance undertakings within the meaning of subsections (1) and (2), which are not subject to individual federal state supervision, from supervision under this Act by regulation not requiring approval by the Bundesrat, if, taking into account the statutory provisions for the establishment of such undertakings or the agreements existing between the undertakings and their sponsoring agencies, supervision is deemed unnecessary to safeguard the interests of the insured.

(4) For insurance undertakings and public sector schemes within the meaning of subsections (1) and (2), which are established under state law and subject to supervision by the individual federal state, applicable state law may stipulate otherwise.

Section 1b
Insurance holding companies

(1) Insurance holding companies are those domiciled in Germany, the main activity of which is the acquisition and holding of participating interests in primary or reinsurance undertakings. For companies that also conduct primary insurance or reinsurance business, only those provisions relating to the supervision of primary insurance or reinsurance undertakings shall apply.

(2) In addition to subsections (3), (4) and (5), only sections 2, 7a (1) sentences 1 and 4 as well as subsection (2), section 13d nos. 4a and 5, sections 83, 84, 89a, 104 and 138 shall apply accordingly for insurance holding companies; section 81 (4) remains unaffected.

(3) In the event of the cases specified in section 104h, the Supervisory Authority may also subject the relevant insurance holding company to the required measures.

(4) The Supervisory Authority may fully or partially transfer the powers held by the bodies of an insurance holding company by virtue of law, or in accordance with the memorandum and articles of association or rules of procedure to a special commissioner if

  1. there is evidence to suggest that one or more managers do not fulfil the requirements of section 7a (1), or
  2. the insurance holding company has persistently violated the provisions of this Act or the regulations or orders issued to implement this Act.

Section 83a (2) applies accordingly.

(5) In the cases specified in subsection (4) sentence 1 no. 1 above, or if managers either intentionally or negligently violate provisions of this Act, the Supervisory Authority may require the dismissal of managers and prohibit them from conducting business activities , implementing regulations under this Act, or orders of the Supervisory Authority, and persist in this conduct despite a warning from the Supervisory Authority.

Section 2
Decision as to whether an undertaking is subject to supervision

The Supervisory Authority decides whether an Undertaking is subject to supervision in accordance with section 1 above; this decision is binding on the administrative authorities. A decision made by a court or an administrative authority before 1 April 1931, shall not negate a decision made by the Supervisory Authority.

Section 3
Bodies of insurance undertakings under public law

To the extent that rules relating to the management or supervisory board have been stipulated in this Act and if insurance undertakings under public law do not have bodies so designated, the relevant executive body takes the place of the management board, and the relevant supervisory body takes the place of the supervisory board.

Section 4
Designations

(1) The terms "Versicherung", "Versicherer", "Assekuranz", "Rückversicherung", "Rückversicherer" or their equivalents in a foreign language, as well as terms in which these words appear, may be used in the name, as an addition thereto, to describe the object of the business or for advertising purposes, only by insurance undertakings within the meaning of section 1 (1) and (2) and by their associations, unless otherwise provided for by legislation. Insurance intermediaries may use the terms in sentence 1 above only with an addition clearly pointing to the activity as intermediary.

(2) In cases of doubt, the Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht; hereinafter referred to as the “Supervisory Authority”) decides if an undertaking is permitted to use the terms specified in subsection (1) above. It shall communicate its decisions to the court of registration.

(3) If an undertaking uses a name, or an addition thereto, which is impermissible under subsection (1) above, or a term designating the object of the business the court of registration shall by virtue of its authority cancel such name, addition or term designating the object of the business; section 142 (1) sentence 2, (2) and (3) and section 143 of the German Act on Matters Relating to Voluntary Jurisdiction (Gesetz über die Angelegenheiten der freiwilligen Gerichtsbarkeit) shall apply accordingly. The undertaking shall be induced to discontinue the use of the name or addition thereto or term designating the object of the business by the imposition of an administrative fine; section 140 of the Act on Matters Relating to Voluntary Jurisdiction shall apply accordingly.

II. Authorisation to carry on business

Section 5
Authorisation; application; documents to be submitted

(1) Insurance undertakings may not carry on business without authorisation from the Supervisory Authority.

(2) The operating plan shall be submitted together with the application for authorisation; it shall disclose the purpose and structure of the business, the region in which business is to be conducted and in particular, clearly state the conditions which shall secure that the future liabilities of the undertaking may be fulfilled at any time.

(3) The following shall be submitted as part of the operating plan:

  1. The memorandum and articles of association, provided they do not refer to general policy conditions,
  2. Information about the classes of insurance that are to be carried on and which risks of a class of insurance are to be covered; in the case of death benefit funds, the general policy conditions and the documents related to the insurance business, specifically the premium rates and principles for calculation of the premiums and the mathematical provisions, including the calculation basis, mathematical formulas, actual calculations made, and statistical evidence used,
  3. Enterprise agreements as specified under sections 291 and 292 of the German Stock Corporation Act (Aktiengesetz),
  4. Agreements for the purpose of permanently transferring distribution, management of the portfolio of insurance contracts, claims administration, accounting, investments or asset management of an insurance undertaking wholly or an essential part of it to another undertaking (outsourcing).

(4) The operating plan shall give evidence of the existence of own funds in the amount of the minimum guarantee fund (section 53c (2)). Their composition shall be detailed. Additionally, estimates shall be submitted for the first three financial years with respect to the expenses for commissions and other current operating expenses, the expected premiums, the expected charges for claims incurred and the expected liquidity situation. The financial means expected to be available to meet the liabilities under the insurance contracts and the capital requirements are to be stated.

(5) In addition, the following shall be submitted:

1. For health insurance within the meaning of section 12 (1) and compulsory insurances, the general policy conditions,

1a. For health insurance within the meaning of section 12 (1), the principles for calculation of the premiums and mathematical provisions, including the calculation basis, mathematical formulas, actual calculations made and statistical evidence used,

2. Information about the intended reinsurance arrangements,

3. An estimate of expenses for setting up administration and the sales network; the undertaking shall prove that it disposes of the necessary funds for this purpose (organisation fund),

4. If an application is filed for authorisation to carry on insurance business in the class under no. 18 of part A of the Annex: information about the means of which the undertaking disposes to provide the promised assistance,

5. As regards the managers and directors, the information necessary to assess their reliability and qualification (section 7a (1)),

6. If qualified participating interests are held in the insurance undertaking (section 7a (2) sentence 3)

a) The names of the holders and the amounts of the participating interests,

b) The information necessary to assess if the requirements under section 7a (2) sentences 1 and 2 are met,

c) If the holders are required to prepare annual accounts: Their annual accounts for the previous three financial years, including the audit reports by independent auditors provided that such reports are to be prepared, and

d) If the holders belong to a group: Details of the group structure and, if such accounts are to be prepared, the consolidated accounts for the previous three financial years, including the audit reports by independent auditors provided that such reports are to be prepared,

6a. Facts pointing at a close relationship (section 8 (1) sentence 4) between the primary insurance undertaking and other natural persons or undertakings,

7. Data required for assessing the reliability and qualification of the appointed actuary (section 11a (1), sections 11d, 11e and 12 (2) sentence 2),

8. For coverage of the risks named in no.10 (a) of part A of the Annex, the name and address of the claims representatives within the meaning of section 7b.

(6) The Federal Ministry of Finance is authorised to issue by regulation supplementary provisions with respect to the nature, extent, and date of submission of the information to be provided in accordance with subsection (5), nos. 5, 6 and 6a above, section 13d nos. 1, 2, 4, 4a and 5 below and section 13e (1) sentence 1 no. 1 and (2) and (3), to the extent that this is required for the Supervisory Authority to fulfil its duties. This power may be delegated by regulation to the Supervisory Authority. The latter shall issue the rules in consultation with the supervisory authorities of the individual federal states.

Section 5a
Consultation with the competent authorities of another member state or a signatory to the EEA Agreement

(1) With respect to applications for authorisation to carry on insurance business in accordance with section 5 (1) by an undertaking that is

  1. a subsidiary or sister company of a primary insurance undertaking, a deposit-taking credit institution within the meaning of section 1 (3d) sentence 1 of the German Banking Act (Kreditwesengesetz), an e-money institution within the meaning of section 1 (3d) sentence 4 of the German Banking Act or a securities trading firm within the meaning of section 1 (3d) sentence 2 of the German Banking Act and its parent company is authorised to carry on business in another member state or EEA state or
  2. controlled by the same natural persons or undertakings which control a primary insurance undertaking, deposit-taking credit institution, an e-money institution or a securities trading firm domiciled in another member state or EEA state,

the Supervisory Authority must consult with the competent authorities of the other member states or EEA states in which the parent or sister company pursuant to no. 1 or the controlling persons within the meaning of no. 2 have their habitual residence, or in which the controlling companies within the meaning of no. 2 have their head office, prior to the granting of the authorisation. Sister companies within the meaning of sentence 1 no. 1 above are companies which have a common parent company.

(2) The consultation in accordance with subsection (1) above shall cover, in particular, the information necessary for assessing the reliability and qualification of the persons referred to in section 7a (1) sentence 1, and for assessing the reliability of the holders of qualified participating interests within the meaning of section 7a (2) and section 104 in companies belonging to the same group within the meaning of subsection (1) above, which are domiciled in the relevant member state or EEA state, as well as the information concerning own funds.

(3) These provisions shall not apply to the granting of authorisation to death benefit funds and the schemes named in section 159 (1).

Section 6
Scope of authorisation; lapse

(1) The authorisation is granted for an unlimited period of time unless otherwise provided for in the operating plan. It is granted, notwithstanding any limitation of the application, for the territory of all member states of the European Community and all the other signatories to the Agreement on the European Economic Area (EEA Agreement) (member states and EEA states) as amended by the Adjustment Protocol of 17 March 1993 (BGBl. 1993 II, p. 1294).

(2) The authorisation is granted for each class of insurance separately. It covers the entire class of insurance unless the undertaking intends to cover only part of the risks of such class of insurance according to its operating plan.

(3) The authorisation may also be granted jointly for several classes of insurance under designations specified in part B of the Annex.

(4) The authorisation granted for one or several classes of insurance also includes coverage of additional risks of other classes of insurance if these risks relate to a risk of a class of insurance operated, concern the same object and are covered by the same contract. Risks from the classes of insurance under nos. 14, 15 and 17 of part A of the Annex are not deemed to be additional risks for the purpose of an authorisation granted for other classes of insurance. Risks from the class of insurance under no. 17 of part A of the Annex, which meet the requirements of sentence 1 above, however, are covered by an authorisation granted for other classes of insurance if they refer to disputes or claims arising from the operation of ships at sea or relating to such operation or if the authorisation is granted for carrying on the class of insurance business under no. 18a of part A of the Annex.

(5) The authorisation granted for individual classes of insurance or for the whole of business operations lapses if the insurance undertaking

  1. expressly refrains from accepting the authorisation,
  2. has not made use of the authorisation within twelve months of its being granted, or
  3. has ceased operations for more than six months, or
  4. is excluded from the guarantee scheme in accordance with section 132.

After hearing the insurance undertaking, the Supervisory Authority renders an administrative decision on the lapse.

(6) The Supervisory Authority shall publish a notice of the granting, the lapse and the revocation of the authorisation in its official bulletin or electronically. If such information relates to an insurance undertaking subject to guarantee requirements pursuant to section 124, it shall also inform the guarantee scheme.

Section 7
Permissible legal forms; non-insurance business

(1) The authorisation may only be granted to public limited companies, mutual societies and corporations and institutions under public law.

(1a) The head office must be located in Germany.

(2) Beyond insurance business, the insurance undertakings are only permitted to carry on such other business as is directly related with insurance business. Such a relationship shall be deemed to exist in the case of dealings in futures, options and other financial instruments if these are to serve as hedge against price and interest rate risks in connection with existing assets or future purchases of securities or if any additional return is to be generated on existing securities, without performance of delivery obligations causing a shortfall of the restricted assets.

Section 7a
Qualification of managers and holders of qualified participating interests

(1) The managers of insurance undertakings must be reliable and qualified. To meet the qualification requirement, the manager must dispose of sufficient theoretical and practical knowledge relating to insurance business, as well as management experience. This shall be deemed to be the case if documentation can be furnished of a managerial position held with an insurance undertaking of comparable size and type of business for at least three years. Managers are those natural persons appointed by virtue of law or the memorandum and articles of association or as authorised agents of a branch in a member state of the European Community or another signatory to the EEA Agreement to manage the business affairs and represent the insurance undertaking.

(2) The holders of a qualified participating interest in the insurance undertaking must meet the demands required in the interest of ensuring sound and prudent management of the insurance undertaking, in particular the requirement of reliability. If the participating interest is held by legal persons or partnerships the same applies to the natural persons who have been appointed by virtue of law, the memorandum and articles of association or the partnership agreement to manage the business affairs and represent the insurance undertaking and to the personally liable partners. A qualified participating interest shall be deemed to exist if at least 10 percent of the capital or the voting rights in a public limited insurance company or the initial fund of a mutual society are held directly or indirectly through one or more subsidiaries or a similar relationship or through collaboration with other persons or undertakings, in the holder’s own interest or in the interests of a third party, or if a significant influence can be exercised on the management of another undertaking. Section 22 (1) to (3), as well as (3a) in conjunction with a regulation pursuant to subsection (5) of the German Securities Trading Act (Wertpapierhandelsgesetz) applies to the calculation of the percentage of voting rights held. Indirectly held participating interests shall be fully attributed to the persons and undertakings holding the indirect participating interest. Subsidiaries are defined as undertakings which are subsidiaries within the meaning of section 290 of the German Commercial Code (Handelsgesetzbuch) or undertakings over which a dominant influence can be exercised, irrespective of their legal form and place of registered office. Parent undertakings are defined as undertakings which are parent companies within the meaning of section 290 of the Commercial Code or which are able to exercise a dominant influence, irrespective of their legal form and place of registered office. Control is deemed to exist if an undertaking is considered to be the parent of another undertaking, or if a similar relationship exists between a natural or legal person and an undertaking.

(3) Persons who effectively direct the business of an insurance holding company within the meaning of section 104a (2) no. 4 or a mixed financial holding company within the meaning of section 104k no. 3 must be reliable and be adequately qualified to manage such business.

Section 7b
Claims representative in motor third party liability insurance

(1) For authorisation to provide coverage for the risks named in no. 10 (a) of part A of the Annex, the insurance undertaking must appoint a claims representative in all other member states of the European Union and signatories to the EEA Agreement. This person shall work on behalf of the insurance undertaking to process and settle damage claims for personal injury and property damage resulting from an accident, which took place in a member state other than the member state of residence of the claimant, involving the use of a motor vehicle insured in a member state and normally based there.

(2) The claims representative must reside or be established in the country of appointment. The claims representative may act for the account of one or more insurance undertakings. The representative must have sufficient powers to represent the insurance undertaking vis-à-vis injured parties and to satisfy their compensation claims in full. He must be able to process the case in the official language or languages of the country of appointment.

(3) The claims representative shall compile any and all of the information required to settle claims which arise in connection with a vehicle insured by the undertaking in question. If the accident occurred in a country other than a member state of the European Union or a signatory to the EEA Agreement, this shall apply only insofar as the injured party is domiciled in a member state or EEA state, the vehicle which caused the accident is normally based in one of these states and the national insurers’ bureau within the meaning of Article 1 (3) of Council Directive 72/166/EEC of 24 April 1972 on the approximation of the laws of member states relating to insurance against civil liability in respect of the use of motor vehicles, and to the enforcement of the obligation to insure against such liability (OJ L 103 p. 1) of the country in which the accident occurred has joined the ‘green card’ system. In such cases, section 3a nos. 1 and 2 of the German Compulsory Insurance Act (Pflichtversicherungsgesetz) applies accordingly. The appointment of a claims representative in the Federal Republic of Germany by a foreign insurance undertaking does not in itself constitute the establishment of a branch; the claims representative shall not be regarded as a branch.

Section 8
Refusal, suspension and restriction of authorisation

(1) The authorisation shall be refused if

1. there is evidence indicating that the managers do not meet the requirements under section 7a (1),

2. there is evidence to suggest that the holder of a qualified participating interest in the primary insurance undertaking, or if such holder is a legal person, a legal representative or representative according to the memorandum and articles of association, or, if such holder is a partnership, a partner, is not reliable or for any other reason does not meet the demands required in the interest of ensuring a sound and prudent management of the primary insurance undertaking; this shall also apply if there is evidence to suggest that the funds raised in order to purchase the qualified participating interest have been acquired by an action which objectively constitutes a criminal offence,

2a. upon granting of the authorisation, the primary insurance undertaking becomes the subsidiary of an insurance holding company within the meaning of section 104a (2) no. 4 or a mixed financial holding company within the meaning of section 104k no. 3 and there is evidence to suggest that a person within the meaning of section 7a (3) is not reliable or not adequately qualified to manage the business affairs of the insurance holding company or mixed financial holding company,

3. the operating plan and the documents submitted in accordance with section 5 (4) sentences 3 and 4, and subsection (5) do not show that the interests of the insured are adequately safeguarded, or do not provide sufficient evidence that the obligations under the insurance contracts can be fulfilled at all times.

The authorisation may be refused if there is evidence to suggest that effective supervision of the primary insurance undertaking will be hindered. This is specifically the case if

  1. the primary insurance undertaking is affiliated or closely linked with other persons or undertakings through corporate ties which, due to the ownership structure or poor economic transparency, hinder the effective supervision of the primary insurance undertaking, or
  2. the effective supervision of the primary insurance undertaking is hindered due to the legal or administrative provisions applicable to these persons or undertakings of nonmember states within the meaning of section 105 (1) sentence 2 and 3, or
  3. the effective supervision of the primary insurance undertaking is hindered due to a lack of effective supervision over these persons or undertakings in the states where they have their registered office or head office, or due to unwillingness by their competent supervisory body to cooperate satisfactorily with the Supervisory Authority.

A close link is deemed to exist if a primary insurance undertaking and another natural person or another undertaking are affiliated

  1. through direct or indirect holding of at least 20 percent of the capital, the voting rights of a public limited insurance company, or the initial fund of a mutual society, by one or more subsidiaries or trustees, or
  2. as parent and subsidiary, through a similar relationship, or as sister companies. Sister companies are defined as undertakings sharing the same parent.

The authorisation may also be refused if contrary to section 5 (5) no sufficient information or documents have been submitted with the application.

(1a) The authorisation to carry on life insurance business (numbers 19 to 24 of part A of the Annex) and the authorisation to carry on other classes of insurance are mutually exclusive. The same applies for the authorisation to carry on health insurance business within the meaning of section 12 (1) and an authorisation to operate in other classes of insurance.

(2) There may be further requirements and conditions placed on the granting of the authorisation.

(3) The Supervisory Authority shall defer decision on the application for authorisation or limit the authorisation in the event of a decision by the Commission or Council of the European Communities pursuant to Article 29b (4) of the First Council Directive 73/239/EEC of 24 July 1973, on the coordination of laws, regulations and administrative provisions relating to the taking-up and pursuit of the business of direct insurance other than life assurance (OJ L 228, p. 3) or Article 59 (4) of Directive 2002/83/EC of the European Parliament and of the Council of 5 November 2002 concerning life assurance (Life Assurance Directive) (OJ L 345, p. 1.). Such deferral or limitation may not exceed three months from the date on which such decision was taken. Sentences 1 and 2 above are also applicable to applications for authorisation submitted after the date of the decision. If the Council of the European Communities decides to extend the period referred to in sentence 2, the Supervisory Authority shall observe such extension.

(4) Authorisation may not be refused for reasons other than those given under subsections (1) and (1a) above.

Section 8a
Loss adjustment firms in legal expenses insurance

(1) An insurance undertaking which carries on legal expenses insurance together with other classes of insurance shall transfer the claims administration under legal expenses insurance to another undertaking with a legal form as specified under section 7 (1) or that of another incorporated company (loss adjustment firm). The transfer is deemed to be outsourcing.

(2) The loss adjustment firm may not operate in any classes of insurance other than legal expenses insurance and may not administer any claims in other classes of insurance.

(3) Section 7a (1) applies accordingly to the managers of the loss adjustment firm. They may not at the same time conduct activities for an insurance undertaking which operates in other classes of insurance in addition to legal expenses insurance. Employees entrusted with the claims administration may not conduct any similar activity for such an insurance undertaking.

(4) The members of the management board and the employees of an insurance undertaking pursuant to subsection (1) above may not issue any instructions to the loss adjustment firm with respect to the administration of individual claims. The managers and employees of the loss adjustment firm may not provide any such insurance undertaking with information which could result in conflicts of interest to the disadvantage of the insured.

(5) Subsections (1) to (4) above do not apply to legal expenses insurance, if it relates to disputes or claims arising from or linked to the operation of ships at sea.

Section 9
Contents of the memorandum and articles of association

The memorandum and articles of association of an insurance undertaking shall include the individual classes of insurance to be operated, and specify the principles for investment; they shall also specify whether insurance business is to be conducted only directly or indirectly as well (by way of reinsurance).

Section 10
General policy conditions

(1) The general policy conditions shall contain complete information about:

  1. The events upon the occurrence of which the insurer is liable to pay benefits, and the cases in which this liability is to be excluded or suspended for special reasons,
  2. The form and amount of the benefits provided by the insurer and when they fall due,
  3. The date when the premium falls due and the legal consequences of a delay in payment,
  4. The rights of the policyholder and the insurer to determine the contents of the contract and the obligations and disclosure and notification duties before and after the insured event,
  5. The forfeiture of an insurance claim if stipulated periods are not observed,
  6. The domestic places of jurisdiction,
  7. The principles and standards pursuant to which the insured participate in the surplus.

(2) For mutual societies and insurance undertakings under public law, the provisions of subsection (1) above may be incorporated into the memorandum and articles of association rather than the general policy conditions.

(3) Subsection (1) above is not applicable to reinsurance and the large risks named in section 10 (1) of the German Introductory Law to the Insurance Contract Act (Einführungsgesetz zu dem Gesetz über den Versicherungsvertrag).

Section 10a
Consumer information; multiple applications

(1) The insurance undertakings shall ensure that the policyholder, if a natural person, receives a consumer information leaflet providing information in accordance with part D of the Annex about the essential facts and rights under the insurance contract before conclusion and during the term of the contract. In the case of large risks pursuant to Article 10 (1) of the Introductory Law of the Insurance Contract Act it is sufficient to mention the applicable law and the competent supervisory authority. To the extent that life insurance undertakings and Pensionskassen are active in occupational retirement provision business, they must also provide information in accordance with part D section III of the Annex to beneficiaries who are not themselves policyholders.

(1a) Prior to concluding a private health insurance contract, the interested person shall confirm receipt of an official information sheet issued by the Supervisory Authority, which explains the different principles behind the statutory and private health insurance systems.

(2) The consumer information shall be in writing, or in text form in the case of distance contracts. The information is to be presented in a clearly organised format; the wording must be unambiguous and comprehensible, in German or in the native language of the policyholder.

(3) Application forms shall contain only so many applications for the conclusion of legally independent insurance contracts that clarity, legibility and comprehensibility are not affected. The applicant shall be informed in writing, with particular emphasis placed on the legal independence of the policies for which applications have been submitted, including the relevant general policy conditions, and the periods of validity of the applications and the term of the contracts.

Section 11
Premium calculation in life insurance; equal treatment

(1) Premiums in life insurance must be calculated on the basis of reasonable actuarial assumptions and sufficient to enable the insurance undertaking to meet all its liabilities, and in particular, to establish adequate premium reserves (Deckungsrückstellungen) for the individual contracts. For this purpose, the financial situation of an insurance undertaking may be taken into account, without the inclusion of any regular and permanent funding from resources other than premiums.

(2) All factors being equal, the same principles must be used to calculate premiums and benefits.

Section 11a
Appointed actuary in life insurance

(1) Every life insurance undertaking shall appoint a responsible actuary. This appointed actuary must be reliable and qualified. Qualification presupposes sufficient knowledge of actuarial theory and professional experience. Adequate professional experience shall be deemed given if documentation can be furnished of at least three years of experience as an actuary.

(2) The name of the designated appointed actuary must be submitted to the Supervisory Authority, together with the information necessary to assess reliability and qualification in accordance with subsection (1) above before appointment. If there is evidence that the designated appointed actuary does not meet the requirements for reliability or qualification, the Supervisory Authority may require that another person be appointed. If, after the appointment, there should be evidence of circumstances which would have prevented appointment, or if the appointed actuary does not properly fulfil the duties under this Act, the Supervisory Authority may require that another appointed actuary be appointed. If the designated or the newly appointed actuary in the cases mentioned in sentences 2 and 3 also fails to meet the requirements, or if no new appointment is made, the Supervisory Authority may itself appoint an actuary. The Supervisory Authority shall be informed immediately upon resignation or dismissal of the appointed actuary.

(2a) Appointment or dismissal of the appointed actuary is subject to the approval of the supervisory board. If a small mutual association (section 53) has no supervisory board, the management board appoints the actuary unless the memorandum and articles of association stipulate appointment by the senior representative body.

(3) The duties of the appointed actuary are as follows:

  1. To ensure that the calculation of premiums and the premium reserve is in line with the principles of section 11 above and the regulations issued pursuant to section 65 (1) and section 341f of the Commercial Code. In the process, the appointed actuary shall assess the financial situation of the undertaking, in particular with respect to whether or not the undertaking is in a position to fulfil its liabilities under the insurance contracts at all times and whether it disposes of adequate resources in the amount of the solvency margin.
  2. Except in the case of a small mutual association (section 53 (1), sentence 1), the appointed actuary shall certify at the end of the balance sheet that the premium reserve has been established in accordance with section 341f of the Commercial Code and the regulations issued in accordance with section 65 (1) below (actuarial certification); this is without prejudice to section 341k of the Commercial Code relating to auditing. He shall specify in a report to the management board of the undertaking the calculation basis and any additional assumptions upon which the certification is based.
  3. In the event that, in the performance of the assigned duties, the appointed actuary recognises a possibility that circumstances will preclude the granting of a certification in accordance with number 2, or allow only a qualified certification, he shall inform the management board and, if the board does not immediately remedy the situation, the Supervisory Authority without delay; in the event that, in the performance of the position as appointed actuary, facts are discovered which could threaten the going concern status of the undertaking or seriously hinder its development, he shall immediately inform the management board and the Supervisory Authority.
  4. For with-profits policies, the appointed actuary shall submit to the management board proposals for suitable participation in the surplus.

(4) The management board of the undertaking is obliged

  1. to make available to the appointed actuary all the necessary information which will enable him to fulfil his duties properly pursuant to subsection (3) above, and
  2. to submit to the Supervisory Authority the report accompanying the actuarial certification in accordance with subsection (3) no. 2 above.

(5) Subsection (3) no. 1 sentence 1 and no. 2 sentence 2, as well as subsection (4) no. 2 do not apply to death benefit funds. The assessment obligation pursuant to subsection (3) no. 1 sentence 2 shall also apply in such cases. Subsection (3) no. 2 sentence 1 above applies, except for small mutual associations (section 53 (1) sentence 1), with the proviso that the certification mentioned there is replaced with a certification that the premium reserve has been established in compliance with the approved operating plan (actuarial certification).

(6) The Federal Ministry of Finance is authorised to issue by regulation supplementary provisions on the wording of the actuarial certification and any further details regarding the content and scope as well as the deadline for submission of the report pursuant to subsection (3) no. 2 and subsection (5) above. This power may be delegated by regulation to the Supervisory Authority. The latter shall issue the rules in consultation with the supervisory authorities of the individual federal states.

Section 11b
Changes to existing life insurance contracts

To the extent that the premiums and terms and conditions of life insurance contracts concluded after 28 July 1994 may be changed with effect for existing contracts, any such changes may only be implemented after approval by an independent trustee. Section 12b (3) and (4) and section 12d (2) apply accordingly. To meet the qualification requirement, the trustee must dispose of adequate legal knowledge, relating in particular to the field of life insurance. The involvement of an independent trustee is not required if changes pursuant to sentence 1 above are subject to the approval of the Supervisory Authority.

Section 11c
Continued application of approved operating plans in life insurance

For life insurance contracts concluded before 29 July 1994 (existing portfolio), the operating plan approved by the Supervisory Authority before that date remains fully applicable. Section 13 (1) in conjunction with section 8 (1) sentence 1 no. 3 applies to changes of the operating plan. Section 11a (1), (2) and (4) above apply accordingly, and subsection (3) above applies with the proviso that the premium reserve is to be calculated in accordance with the applicable operating plan.

Section 11d
Accident insurance with premium refund

If accident insurance undertakings write contracts with premium refund, sections 11 to 11c above apply accordingly.

Section 11e
Premium reserve (Deckungsrückstellung) for benefit obligations in third party liability and accident insurance

For the calculation of the premium reserve for benefit obligations under general third party liability insurance, motor third party liability insurance, motor vehicle accident insurance and general accident insurance without premium refund section 11a above applies accordingly.

Section 12
Substitutive health insurance

(1) To the extent that health insurance is suitable as a full or partial substitute to statutory health insurance (substitutive health insurance) it shall be operated in Germany only in accordance with the technical principles of life insurance, i.e.

  1. premiums shall be calculated in accordance with actuarial principles on the basis of probability tables and other pertinent statistical data, specifically taking into account any relevant assumptions with respect to the risk of invalidity and illness, to mortality, to the dependence of the risk on age and gender and to the probability of cancellation, also taking into account safety loadings and other loadings and a technical interest rate,
  2. the ageing provision is to be recognised in accordance with section 341f of the Commercial Code,
  3. in the insurance contract, the right of termination without cause for the insurance undertaking must be excluded, in daily benefits insurance from the fourth policy year at the latest, and a premium increase permitted,
  4. the insurance contract shall grant the policyholder the right to policy alteration by choosing other premium scales with comparable coverage while maintaining the rights and ageing provision entitlements acquired so far under the contract.

(2) Insurance undertakings active in substitutive health insurance business shall appoint a responsible actuary. Section 11a (1) sentences 2 to 4, as well as (2) and (2a) apply accordingly.

(3) The duties of the appointed actuary are as follows:

  1. To ensure that in calculating the premiums and mathematical provisions, in particular the ageing provision, the actuarial methods (subsection (1) nos. 1and 2 above) are followed and the rules of the regulation issued pursuant to section 12c below are observed. In the process, the appointed actuary shall assess the financial situation of the undertaking, in particular with respect to whether or not the undertaking is in a position to fulfil its liabilities under the insurance contracts at all times and whether it disposes of adequate resources in the amount of the solvency margin.
  2. The appointed actuary shall certify at the end of the balance sheet that the ageing provision has been calculated in accordance with no. 1 above (actuarial certification). This does not apply to small mutual associations (section 53 (1) sentence 1).

Section 11a (3) no. 3 and (4) no. 1 apply accordingly.

(4) Section 11 (2) applies accordingly for substitutive health insurance. The premiums for new business may not be lower than the premiums for the insured of the same age under the existing portfolio of insurance contracts, not including their ageing provision.

(4a) In substitutive medical expenses insurance, a loading of 10 percent of the annual zillmerised gross premium shall be charged to the insured, allocated annually and directly to the ageing provision pursuant to section 341 f (3) of the Commercial Code, and used for the purpose of premium reduction in old age in accordance with section 12a (2a), at the latest with the beginning of the calendar year following the year in which the insured attains the age of 21 and ending in the calendar year of the insured person’s attaining the age of 60. Sentence 1 above does not apply to private dental prosthesis insurance within the meaning of section 58 (2) of book five (V) of the German Social Security Code (Sozialgesetzbuch), for policies with defined terms covering the insured during periods of training or education, stays abroad, or travel, and to premium rates terminating automatically at the latest upon the insured’s attaining the age of 65.

(5) If the non-substitutive health insurance is operated in accordance with the technical principles of life insurance, subsection (1) nos. 1 to 4 and subsections (2) to (4) above apply accordingly.

Section 12a
Ageing provision; direct credit

(1) In medical expense insurance and voluntary long-term care insurance (long-term care costs and long-term care daily benefits insurance) operated in accordance with the technical principles of life insurance, the insurance undertaking shall annually credit to the insured, the investment income attributable to any positive sum of the ageing provision for the policies concerned at the end of the preceding financial year. The amount credited shall total 90 percent of the average investment income generated beyond the level of the technical interest rate (excess yield).

(2) The share of the amount determined in accordance with subsection (1) above, which is attributable to the share of the ageing provision accumulated from the loading, shall be annually credited in full to the insured who paid the loading pursuant to section 12 (4a), until the end of the financial year in which they attain the age of 65. Of the remaining amount, 50 percent shall be credited annually directly to the ageing provision of all insured persons. The percentage rate defined in sentence 2 above shall increase by two percent annually, from the financial year of the insurance undertaking beginning in 2001, until it reaches 100 percent.

(2a) When the insured attains the age of 65, the amounts referred to in subsection (2) above shall be used to fund, for an unlimited period, the additional premiums arising from premium increases, or a portion of the additional premiums if the available funds are not sufficient to fully fund the additional premiums. Unused amounts shall be utilised for premium reduction as of the point at which the insured attains the age of 80. Any subsequent allocations shall be used for an immediate premium reduction. In voluntary long-term care daily benefits insurance, the general policy conditions may provide for an according increase in benefits instead of a premium reduction.

(3) The share of the investment income determined in accordance with subsection (1) above remaining after deduction of the amounts used in accordance with subsection (2), shall be set aside for the insured who have attained the age of 65 by the balance sheet date, for a rebate and be used within a period of three years to offset or limit premium increases, or to reduce premiums. Notwithstanding sentence 1 above, until the balance sheet date following 1 January 2010, 25 percent may also be used for insured persons who have attained the age of 55 but not yet the age of 65. The premium reduction in accordance with sentence 1 above may be limited to prevent the premium of the insured from falling below the level paid at the initial age at entry; the unused portion of the amount credited shall be credited additionally in accordance with subsection (2) above.

Section 12b
Changes to health insurance premiums; trustee

(1) For health insurance operated in accordance with the technical principles of life insurance, premium adjustments may only be implemented after approval by an independent trustee. The trustee shall verify whether the premium has been calculated in accordance with the applicable legal requirements. For this purpose, all technical calculation bases required for verification, including actual calculations made and statistical evidence, are to be provided to the trustee. The technical calculation basis shall comprise all the principles for the calculation of the premiums and ageing provision, including the calculation basis and mathematical formulas used. Approval shall be granted if the requirements of sentence 2 above have been met.

(1a) The following shall be subject to the approval of the trustee:

  1. The date and the amount of the withdrawal and the use of funds from the provision for rebates, to the extent that they are to be used in accordance with section 12a (3),
  2. The use of the funds from the provision for bonuses.

In the cases mentioned in sentence 1 nos. 1 and 2 above, the trustee ensures that the requirements set forth in the memorandum and articles of association and the general policy conditions are met and that the interests of the insured are sufficiently safeguarded. If the funds are utilised to limit premium increases, the trustee shall ensure, in particular, an appropriate distribution amongst the groups of the insured who paid the premium loading under section 12 (4a) and those who did not, and sufficiently take into account the aspect of reasonableness of the premium increases, in percentage and absolute terms, for the older insured.

(2) For every insurance tariff calculated in accordance with the technical principles of life insurance, the insurance undertaking shall compare, at least annually, the required benefits with the calculated benefits. If the comparison to be submitted to the Supervisory Authority and the trustee indicates a deviation of more than 10 percent for a certain tariff, provided the general policy conditions do not require a lower percentage, the undertaking shall examine all premiums subject to this tariff and, if the deviation may be considered to be more than just temporary, adjust them with the approval of the trustee. In this context, the fixed amount of any excess may also be adjusted and any agreed premium loading changed accordingly if this has been stipulated in the contract. There shall be no adjustment if the insurance benefits were inadequately calculated at the time of initial calculation, or recalculation, and a prudent and conscientious actuary should have recognised this. If the trustee finds that premium increases or reductions are necessary wholly or partly for a tariff, and if no agreement on this can be reached with the undertaking, the trustee shall immediately inform the Supervisory Authority.

(3) Only persons may be appointed as trustee who are reliable and qualified and not affiliated with the insurance undertaking and who, in particular, have not concluded an employment contract or other service contract with the insurance undertaking or any affiliated undertaking, and have no claims against the undertaking under such a contract. To meet the qualification requirement, the trustee shall dispose of sufficient knowledge in the field of premium calculation in health insurance. The appointment of a person already active as trustee or appointed actuary for ten insurance undertakings or pension funds is generally excluded. A higher number of mandates may be permitted by the Supervisory Authority.

(4) Before appointment of the designated trustee, the Supervisory Authority shall be informed and provided with the information necessary to judge the requirements referred to in subsection (3) above. If there is evidence to suggest that the designated trustee does not meet the requirements for reliability or qualification, the Supervisory Authority may require that another person be appointed. If, after the appointment, there should be evidence of circumstances which would have prevented the appointment in accordance with subsection (3) above, or if the trustee does not properly fulfil the duties under this Act, in particular if any premium adjustment is approved, which does not comply with the statutory requirements, the Supervisory Authority may require that another trustee be appointed. If the designated or the newly appointed trustee in the cases mentioned in sentences 2 and 3 also fails to meet the requirements, or if no new appointment is made, the Supervisory Authority may itself appoint a trustee.

(5) As regards the appointment of a trustee in the event of a contract adjustment pursuant to section 178g (3) of the German Insurance Contract Act (Versicherungsvertragsgesetz), subsection (3) sentences 1, 3 and 4, and subsection (4) above apply accordingly. To meet the qualification requirement the trustee must dispose of sufficient legal knowledge, relating in particular to the field of health insurance.

Section 12c
Enabling provision

(1) As regards health insurance operated in accordance with the technical principles of life insurance, the Federal Ministry of Finance is authorised to

  1. issue by regulation provisions on the actuarial methods for the calculation of the premiums, including premium adjustments and the mathematical provisions, namely the ageing provision, specifically to take into account any relevant assumptions with respect to the risk of invalidity and illness, long-term care requirements, mortality, dependence of the risk on age and gender, and probability of cancellation as well as the amount of the safety loading and interest rate and the principles for the assessment of the other loadings,
  2. issue by regulation more detailed provisions with regard to the equivalence of the insurance coverage and transfer of acquired rights and the ageing provision in the event of a change of tariff pursuant to section 12 (1) no. 4,
  3. define by regulation how the excess yield as defined in section 12a (1) is to be calculated, how the amounts are to be distributed among the entitled insured persons in accordance with section 12a (2) and (3), and how the initial premium at the age of entry is to be determined,
  4. define by regulation the procedure for comparing the required insurance benefits with the calculated insurance benefits within the meaning of section 12b (2) sentences 1 and 2, and the deadline for submitting this comparison to the Supervisory Authority and the trustee.

This power may be delegated by regulation to the Supervisory Authority. The latter shall issue the rules in consultation with the supervisory authorities of the individual federal states.

(2) Regulations pursuant to subsection (1) sentence 1 no. 1 above shall be issued in agreement with the Federal Ministry of Justice. The same applies to regulations pursuant to subsection (1) sentence 2 above, if they serve to delegate the authorisation to issue regulations in accordance with subsection (1) sentence 1 no. 1.

Section 12d
Transitional provisions applicable to trustees in health insurance

(1) If the premiums for insurance contracts concluded before 29 July 1994 in health insurance operated in accordance with the technical principles of life insurance may be adjusted under an adjustment clause subject to the approval of the Supervisory Authority, such approval by the Supervisory Authority is replaced by the consent of the trustee (section 12b (1) and (2)).

(2) (rescinded)

Section 12e
Loading

As regards insurance contracts concluded before 1 January 2000, section 12 (4a) applies, with the proviso that

  1. the loading is to be charged for the first time on 1 January of the calendar year which follows the 1 January 2000,
  2. the loading in the first year totals two percent of the gross premium, and increases by two percent on 1 January of each of the following years, up to a maximum of 10 percent of the gross premium, unless it is terminated because the insured attains the age of 60,
  3. the insurance undertaking is obliged of inform the policyholder in good time of the amount and annual increases of the loading before it is charged for the first time,
  4. the loading shall only be charged if the policyholder does not object in writing within three months after receipt of the information pursuant to no. 3 above.

Section 12f
Long-term care insurance

Subject to the regulations set forth in book eleven (XI) of the Social Security Code (sections 110, 111), sections 12 (1) to (4), 12b and 12c above apply accordingly to private compulsory long-term care insurance.

Section 13
Changes to the operating plan

(1) Any change to the operating plan may only be implemented after approval by the Supervisory Authority. Sentence 1 does not apply to amendments to the memorandum and articles of association, with the purpose of a capital increase. Section 8 applies accordingly.

(1a) Subsection (1) above does not apply to outsourcing contracts (section 5 (3) no. 4). Any such contracts concluded with insurance undertakings subject to supervision under this Act do not become effective until they have been submitted to the Supervisory Authority. Any such contracts concluded with other undertakings do not become effective until three months have elapsed from their submission to the Supervisory Authority, provided the latter does not object on the grounds set forth in section 8 (1). The Supervisory Authority may extend this period to six months if this is justified by circumstances. This period ends earlier as soon as the Supervisory Authority declares the contracts unobjectionable. Sentences 2 to 5 do not apply if only the remuneration has been changed. Changes in remuneration for contracts with affiliated companies (section 15 of the Stock Corporation Act) and undertakings deemed equivalent to these pursuant to section 53d (3), do not become effective until the amended contract has been submitted to the Supervisory Authority. This is without prejudice to section 53d. Termination of any unlimited-term outsourcing contract must be reported immediately to the Supervisory Authority.

(2) If business operations are to be extended to other classes of insurance, the documentation pursuant to section 5 (3) to (5) must be submitted. In addition, the undertaking shall prove that it disposes of own funds in the amount of the solvency margin (section 53c (1) sentence 1), or the minimum guarantee fund prescribed for the new activity if the latter is greater.

(3) If business operations are to be expanded to a territory outside of the member states and EEA states, proof must be provided that the insurance undertaking will also be able to meet the capital requirements of the these states after the intended expansion, and that if it establishes a branch in a territory outside the member states and EEA states, the undertaking has been granted the authorisation required to operate there; moreover, the intended classes and types of insurance to be operated must be specified.

Section 13a
Operation of insurance business via branches or cross-border provision of services

(1) In accordance with sections 13b and 13c, the insurance undertaking may operate direct insurance business in the other member states or EEA states via branch offices or cross-border provision of services. A branch is also deemed to exist if insurance business is operated through a person who is independent, but permanently in charge of such business, from a permanent establishment in such other member state or EEA state. Sentences 1 and 2 do not apply to death benefit funds; section 13 (3) applies to these, with the proviso that it is applicable to all activities abroad.

(2) Cross-border provision of services within the meaning of this Act is deemed to exist if, from its registered office or branch in a member state or EEA state, the insurance undertaking domiciled in a member state or EEA state covers risks situated in another member state or EEA state by way of direct insurance, without the undertaking making use of a branch in that state. A member state or EEA state where the risk is situated is

  1. as regards the coverage of risks relating to immovables, in particular buildings, plants and their installations covered by the same contract, the member state or EEA state where these are situated,
  2. as regards the coverage of risks relating to vehicles of any kind, which must be entered into an official or officially recognised register and are provided with an identifier in a member state or EEA state, such member state or EEA state,
  3. as regards the coverage of travel and tourism risks in insurance contracts with a maximum term of four months, the member state or EEA state in which the applicant performed the actions legally required for conclusion of the contract,
  4. in all other cases,

    1. if the policyholder is a natural person, the member state or EEA state where the policyholder has his habitual residence,
    2. if the policyholder is not a natural person, the member state or EEA state where the undertaking, permanent establishment or relevant facility to which the contract refers is located.

Section 13b
Establishment of a branch

(1) The insurance undertaking shall notify the Supervisory Authority of the intended establishment of a branch, indicating the respective member state or EEA state. This notification must contain:

  1. The information and estimates pursuant to section 5 (3) no. 2 and (4) sentences 3 and 4, as well as section 5 nos. 3 and 4 above; if the undertaking is to be active in health insurance business within the meaning of Article 54 (2) of the Third Non-Life Insurance Directive, the information pursuant to section 5 (5) no. 1a as well,
  2. Information about the organisational structure,
  3. The name of the designated authorised agent who possesses sufficient authority to bind the undertaking in relation to third parties and to represent it vis-à-vis the administrative authorities and courts of the other member state or EEA state,
  4. The prospective address, which must also be the business address of the authorised agent,
  5. If the risks defined in no. 10 (a) of part A of the Annex are to be covered through the branch, a declaration to the effect that the undertaking has become member of the national indemnity fund for the victims of road accidents caused by uninsured or unidentified motor vehicles, and of the national insurers’ bureau in the other member state or EEA state.

(2) For the purpose of the above, within a period of three months of receiving the documents mentioned under subsection (1) sentence 2 above, the Supervisory Authority shall assess the lawfulness, as well as the adequacy of the administrative structures and financial situation of the undertaking, and whether the authorised agent and responsible managers of the branch meet the requirements of section 7a (1). If unobjectionable, before the above period expires, it shall send the following to the supervisory authority of the member state or EEA state:

  1. These documents and
  2. A certification that the undertaking disposes of own funds in the amount of the solvency margin or of the minimum guarantee fund required for the classes of insurance operated, whichever is the greater

and notify the undertaking accordingly. Otherwise, it shall inform the undertaking before the above period expires that approval for the establishment of a branch will not be granted, naming the grounds for refusal. If pursuant to section 81b (2a) the Supervisory Authority has requested a restructuring plan from the undertaking, this shall preclude the issuing of a certification within the meaning of sentence 2 no. 2 above, provided the rights of policyholders are at risk.

(3) In the case of subsection (2) sentence 2 above, the branch may be established and take up its activities if two months have elapsed since the undertaking received the notification, unless the supervisory authority of the other member state or EEA state has specified an earlier date.

(4) The insurance undertaking shall report to the Supervisory Authority any changes in the information provided in accordance with subsection (1) sentence 2 nos. 1 to 4 above, no later than one month before such changes are to be put into effect. In all other respects, subsection (2) above applies accordingly.

Section 13c
Cross-border provision of services

(1) The insurance undertaking shall notify the Supervisory Authority of its intention to conduct cross-border business, naming the relevant member state or EEA state. It shall also state which classes of insurance it intends to operate and which risks of an insurance class it intends to cover there; if the undertaking intends to conduct health insurance business within the meaning of Article 54 (2) of the Third Non-Life Directive, the information pursuant to section 5 (5) no. 1a shall also be provided. As regards the coverage of risks pursuant to no. 10 (a) of part A of the Annex, the notification shall also include:

  1. A declaration in accordance with section 13b (1) sentence 2 no. 5,
  2. The name and business address of a representative (claims representative) residing or established in the other member state or EEA state to whom section 7a (1) sentence 1 applies accordingly and who

    1. collects all the necessary information about losses and has the necessary facilities for this purpose,
    2. has sufficient powers to represent the undertaking vis-à-vis persons making damage claims in or out of court, in particular before administrative authorities and to confer powers of attorney in this context,
    3. has sufficient powers until final settlement of the damage claims to pay the amounts due in relation to such claims, and
    4. has the power to represent the undertaking vis-à-vis the authorities of the other member state or EEA state as regards the existence and validity of the insurance contracts.

(2) Within a period of one month from receipt of the documents mentioned in subsection (1) sentences 2 and 3 above, the Supervisory Authority shall assess the lawfulness of the intended business. If unobjectionable, before the above period expires, it shall send the following to the supervisory authority of the other member state or EEA state:

  1. These documents,
  2. A certificate specifying the classes of insurance the undertaking is permitted to operate and the risks of an insurance class it is permitted to cover,
  3. A certification pursuant to section 13b (2) sentence 2 no. 2

and notify the undertaking accordingly. Otherwise, it shall inform the undertaking before the above period expires that the approval to operate cross-border direct insurance business will not be granted, naming the grounds for refusal. Approval is deemed to have been refused if the Supervisory Authority has not made a decision by the end of the above period. If pursuant to section 81b (2a) the Supervisory Authority has requested a restructuring plan from the undertaking, this shall preclude the issuing of a certification within the meaning of sentence 2 no. 3 above, provided the rights of policyholders are at risk.

(3) In the case of subsection (2) sentence 2 above, the undertaking may commence its activities upon receipt of the relevant notification.

(4) Subsections (1) to (3) above also apply if the undertaking wishes to operate additional classes of insurance or cover additional risks or appoint another claims representative.

Section 13d
Notification requirements

The insurance undertakings shall notify the Supervisory Authority immediately about

1. the intention to appoint a manager, stating all facts necessary to assess reliability and qualification (section 7a (1)),

2. the resignation or removal of a manager, and the revocation of the power to represent the insurance undertaking,

2a. following the granting of authorisation to carry on business, the coming into effect or subsequent amendment of the rules of procedure for the management and supervisory boards, submitting the relevant documentation,

3. amendments to the memorandum and articles of association for the purpose of increasing capital,

4. the acquisition or disposal of a qualified participating interest in the own insurance undertaking, the reaching, exceeding or falling below the thresholds of 20 percent, 33 percent and 50 percent of the voting rights or capital, as well as the fact that the insurance undertaking will become a subsidiary of another undertaking, as soon as the change in ownership structure becomes known to the insurance undertaking,

4a. the existence, modification or termination of any close link within the meaning of section 8 (1) sentence 4 with another natural person or undertaking,

5. the name and address of the holder of a qualified participating interest in the insurance undertaking and the amount of that participating interest annually, as soon as the undertaking has received this knowledge,

6. the principles for the calculation of the premiums and the premium reserve, with the relevant information to be submitted, including the calculation basis, mathematical formulas, actual calculations made and statistical evidence used, after granting of the authorisation to operate life insurance and immediately after commencement of operations in accident insurance with premium refund; this also applies accordingly for the use of new or amended principles,

7. with respect to health insurance within the meaning of section 12 (1) and compulsory insurance, the intended use of new or amended general policy conditions, submitting the relevant documents,

8. the intended use of new or amended principles within the meaning of section 5 (5) no. 1a with respect to health insurance within the meaning of section 12 (1), submitting all documents referred to therein,

9. with respect to insurance covering the risks set forth in no. 10 (a) of part A of the Annex, the appointment of a claims representative in all other member states and EEA states, submitting all documents referred to under section 5 (5) no. 8.

Section 13e
Notification requirements of insurance holding companies and mixed financial holding companies

(1) Insurance holding companies shall notify the Supervisory Authority immediately about:

  1. Any intention to appoint a person who is to effectively direct the business of the insurance holding company, including all facts necessary to assess reliability and qualification, as well as the realisation of such an intention; section 5 (5) no. 5 applies accordingly,
  2. The resignation or removal of a person who effectively directed the business of the insurance holding company,

    Changes to the structure of the group headed by the insurance holding company, through which the group expands into other sectors.

With respect to mixed financial holding companies, sentence 1 nos. 1 and 2 apply accordingly to those persons who effectively direct the business of the company, with the proviso that the information must be submitted to both the Supervisory Authority and the Bundesbank.

(2) Insurance holding companies must submit a summary report of participating interests to the Supervisory Authority once each year. They must inform the Supervisory Authority immediately of any acquisition, change or disposal of such participating interests.

(3) Mixed financial holding companies which head a financial conglomerate must submit a summary report of their conglomerate entities to the Supervisory Authority and the Bundesbank once each year. It must inform the Supervisory Authority immediately of any changes to the membership of the conglomerate.

Section 14
Transfer of portfolio

(1) Any contract by which the insurance portfolio of an undertaking is to be transferred wholly or partly to another undertaking is subject to approval by the supervisory authorities responsible for the undertakings in question. The transferee must prove that, after the transfer, it will dispose of own funds in the amount of the solvency margin. In all other respects, section 8 above applies accordingly. For the purpose of the portfolio transfer, the rights and obligations of the transferor under the insurance contracts, also in relation to the policyholders, are transferred to the transferee; section 415 of the German Civil Code (Bürgerliches Gesetzbuch) shall not apply.

(1a) If a domestic insurance undertaking wholly or partly transfers a portfolio of insurance contracts concluded under section 13a to an undertaking domiciled in a member or EEA state via a branch or cross-border services, only the approval of the competent supervisory authority of the transferor is required, in derogation from subsection (1) sentence 1 above. This approval, provided there are no grounds for refusal in accordance with subsection (1) sentence 3 above, shall only be granted if

  1. there is documentation, in the form of a certification from the supervisory authority of the home member state stating that, after the transfer, the transferee will dispose of own funds in the amount of the solvency margin,
  2. the supervisory authorities of the member states or EEA states in which the risks in the portfolio are situated have given their approval, and
  3. in the case of a portfolio transfer from a branch, the supervisory authority of the member state or EEA state where the branch is located has been consulted.

Sentences 1 and 2 of no. 1 above also apply to the transfer of a portfolio acquired in Germany. In the cases of sentences 1 and 3, subsection (1) sentence 4 above applies accordingly.

(1b) Section 5a, regarding consultation with the competent authorities of another member state or EEA state applies accordingly.

(2) The portfolio transfer agreement shall be concluded in writing; section 311 (3) of the Civil Code shall not apply.

(3) Approval of the portfolio transfer shall be published in the electronic Federal Gazette (Bundesanzeiger).

Section 14a
Transformation

Any transformation of an insurance undertaking in accordance with section 1 of the German Transformation Act (Umwandlungsgesetz) shall be subject to approval by the Supervisory Authority. Section 14 (1) sentences 2 to 4 and subsection (1b) apply accordingly. Approval may also be refused if the rules governing transformation have not been observed.


III. Mutual Societies

Section 15
Legal personality

A society which intends to insure its members according to the mutuality principle acquires legal personality with permission by the Supervisory Authority to conduct business as a “mutual society”.

Section 16
Application of the Commercial Code

The requirements of the first and fourth books of the Commercial Code with respect to merchants, with the exception of sections 1 to 7, shall apply accordingly to mutual societies, unless otherwise set forth in this Act. With respect to accounting, the provisions of the second subpart of the fourth part in conjunction with the provisions of the first and second parts of the third book of the Commercial Code apply accordingly.

Section 17
Memorandum and articles of association

(1) The governing framework of a mutual society is laid down in its memorandum and articles of association, unless otherwise stipulated in this Act.

(2) The memorandum and articles of association require notarial certification according to German standards (notarielle Beurkundung).

Section 18
Name

(1) The memorandum and articles of association shall define the name and registered office of the society.

(2) The name should make apparent the location of the society’s registered office. The name or an addition thereto, shall also convey that the society operates mutual insurance.

Section 19
Liabilities

The creditors of a mutual society shall only be entitled to satisfaction from the assets of the society. The members are not liable for claims of the creditors.

Section 20
Membership

The memorandum and articles of association shall include provisions about the commencement of membership. A requirement for membership is an insurance relationship with the mutual society. Membership ends upon termination of the insurance relationship unless otherwise stipulated in the memorandum and articles of association.

Section 21
Equal treatment

(1) All factors being equal, member contributions and benefits must be calculated based on the same principles.

(2) The mutual society may not offer insurance coverage against fixed premiums without the policyholder becoming a member, unless this is expressly permitted by the memorandum and articles of association.

Section 22
Initial fund

(1) The memorandum and articles of association shall provide for the establishment of an initial fund to cover the costs of establishing the mutual society and serve as guarantee and operational funds. The memorandum and articles of association shall contain the conditions of access by the society to the initial fund and in particular, stipulate rules for repayment, as well as if and to what extent the persons who provided the fund shall be entitled to participate in the administration of the mutual society.

(2) Only legal tender, checks certified by the Bundesbank, transfer to a domestic account with the Bundesbank or a credit institution of the society or its management board, available at its free disposal, may be used to contribute to the initial fund. Any claims of the management board against these paid-in funds shall be deemed claims of the society. The memorandum and articles of association may permit promissory notes instead of the above payments.

(3) The persons who provided the initial fund shall not be granted an early repayment right. In addition to interest payments from the annual income, the memorandum and articles of association may grant them a right to participation in the surplus as shown in the annual balance sheet; it is within the discretion of the Supervisory Authority to decide on the maximum percentage of the interest and total payments received on the paid-in cash amount. The initial fund may be divided into shares for which share certificates may be issued.

(4) The initial fund may be repaid only out of the annual income and only to the extent that the loss reserve under section 37 has increased; repayment shall begin as soon as the capitalised start-up costs have been fully amortised.

Section 23
(repealed)

Section 24
Contributions

(1) The memorandum and articles of association shall stipulate whether the expenses are to be covered by single or recurring contributions to be paid in advance, or by contributions allocating actual costs among the members.

(2) If the contributions are to be paid in advance, the memorandum and articles of association shall also specify whether a right to call for supplementary contributions is reserved or excluded; if it is to be excluded, the memorandum and articles of association must also stipulate whether benefits may be reduced.

(3) The memorandum and articles of association may provide maximum amounts for supplementary contributions and cost allocations. Any restrictions to the effect that payments of supplementary contributions or cost allocations may only be called for to cover insurance claims of the members are prohibited.

Section 25
Liability for contributions by former members

(1) Members who left or joined the mutual society during the financial year shall also be liable to pay supplementary contributions or cost allocations. Their liability to pay contributions depends on the length of time they were members within the financial year.

(2) If the supplementary contribution or the cost allocation amount of a member is determined on the basis of the contribution paid in advance or the sum insured, and if the contribution or sum insured was increased or reduced during the financial year, the higher amount shall be used as a basis for the calculation.

(3) Subsections (1) and (2) above apply only to the extent that the memorandum and articles of association do not stipulate otherwise.

Section 26
Prohibition of setting-off

A member shall not be entitled to set off the obligation to pay contributions against any claim the member may have against the mutual society.

Section 27
Call for cost allocations or supplementary contributions

(1) The memorandum and articles of association shall specify the conditions under which supplementary contributions or cost allocations may be called for, in particular, to what extent other funds (initial fund, reserves) shall be used first.

(2) The memorandum and articles of association shall also specify how the supplementary contributions or cost allocations are to be called for and collected.

Section 28
Publication of notices

(1) The memorandum and articles of association shall stipulate how notices of the mutual society are to be published.

(2) Notices shall be included in the electronic Federal Gazette.

Section 29
Bodies

The memorandum and articles of association shall specify how a management board, a supervisory board and senior representative body (senior body; assembly of members or of representatives of the members) shall be established.

Section 30
Commercial register application

(1) An application for registration of the mutual society by all members of the management and supervisory board must be filed with the court of the district where the society has its registered office. The application shall state the powers of the individual members of the management board to represent the society.

(2) The Supervisory Authority shall inform the court of registration of any authorisation granted to carry on business (section 15).

Section 31
Registration documents

(1) The application shall be accompanied by

1. the certificate authorising the society to operate;

2. the memorandum and articles of association;

3. the documents relating to the appointment of the management board and the supervisory board;

3a. a list of the members of the supervisory board signed by the applicants and specifying the name, surname, profession and domicile of each member;

4. the document relating to the establishment of the initial fund, together with a declaration by the management board and the supervisory board as to how and to what extent the initial fund has been paid in and that the management board has the paid-in amount at its free disposal;

5. an overview of whether the expenses are to be covered by contributions paid in advance or allocated among the members later and, if contributions are to be paid in advance, whether a right to call for supplementary contributions is reserved or excluded, whether the liability to pay contributions is limited and whether benefits may be reduced.

(2) Section 12 (2) of the Commercial Code applies accordingly to the submission of documents under this Act.

(3) (rescinded)

Section 32
Entry into the commercial register

(1) The entry into the commercial register (Handelsregister) shall contain the name and registered office of the mutual society, the classes of insurance to be included in the scope of operations, the amount of the initial fund, the date on which authorisation to carry on business was granted, and the names of the members of the management board. The powers of the members of the management board to represent the society shall also be entered.

(2) If the memorandum and articles of association include any provision with regard to the duration of the society this shall also be entered.

Section 33
Publication

(rescinded)

Section 34
Management board

The management board consists of at least two persons. Section 76 (1) and (3) and sections 77 to 91, 93 and 94 of the Stock Corporation Act apply accordingly to the management board. The provisions contained therein with regard to resolutions by the shareholders' meeting apply here to the resolutions by the senior representative body. Section 93 (3) of the Stock Corporation Act is replaced by the following provision:

The members of the management board shall in particular be liable for damages if, contrary to this Act,

  1. The initial fund is repaid or interest is paid thereon,
  2. The assets of the mutual society are distributed,
  3. Payments are made after the society has become insolvent or overindebted; this does not apply for payments which, even after this point, are consistent with the care of a prudent and conscientious manager,
  4. Loans are granted.

Section 35
Supervisory board

(1) The supervisory board consists of three members. The memorandum and articles of association may specify a higher number. This number must also be divisible by three. The maximum number of supervisory board members is twenty-one.

(2) The supervisory board of mutual societies subject to the rules of one-third co-determination, under section 1 (1) no. 4 of the German One-Third Participation Act (Drittelbeteiligungsgesetz), is composed of members elected by the senior representative body, and by employee representatives; for other societies, it is composed only of members elected by the senior representative body.

(3) Section 30 (2) and (3) sentence 1 and first half of sentence 2, section 96 (2), sections 97 to 100, section 101 (1) and (3), sections 102, 103 (1), (3) to (5) and sections 104 to 116 of the Stock Corporation Act apply accordingly to the supervisory board. The duties assigned therein to the shareholders’ meeting shall in this context be performed by the senior representative body. Every member of the senior representative body has the right to make motions in accordance with section 98 (2) no. 3 and section 104 (1) sentence 1 of the Stock Corporation Act. Section 113 (3) of the Stock Corporation Act is replaced by the following provisions which apply in addition to section 116 of the Stock Corporation Act:

  1. If the members of the supervisory board are entitled to profit participation, this is calculated on the basis of the annual surplus less accumulated losses brought forward, and transfers to retained earnings; the share of the surplus shall be deducted, which has been appropriated to the persons who provided the initial fund, pursuant to section 22 (3) above. Any provisions to the contrary shall be null and void.
  2. The members of the supervisory board shall in particular be liable for damages if any of the acts under section 34 sentence 4 above are performed with their knowledge and without their intervention.

Section 35a
Liability for damages

Section 117 of the Stock Corporation Act applies accordingly.

Section 36
Senior representative body

Sections 118, 119 (1) nos. 1 to 3, 5, 7 and 8 and subsection (2), sections 120, 121 (1) to (4), subsections (5) sentence 1 and (6), sections 122, 123 (1), sections 124 to 127, 129 (1) and (4), section 130 (1) sentences 1 and 2, subsections (2) to (5), sections 131 to 133, 134 (4) and sections 136, 142 to 149, 241 to 253 and 257 to 261 of the Stock Corporation Act applicable to the shareholders’ meeting apply accordingly to the senior representative body. Section 256 of the Stock Corporation Act applies accordingly. If the senior representative body is the general assembly of members, section 134 (3) of the Stock Corporation Act also applies accordingly. Participation rights (section 53c (3a)) may only be granted pursuant to a resolution by the senior representative body. A three-fourths majority of votes cast is required to pass the resolution. The memorandum and articles of association may stipulate a different majority and additional requirements.

Section 36a
(repealed)

Section 36b
Minority rights

To the extent that the provisions of the Stock Corporation Act, which apply accordingly pursuant to sections 34, 35a and 36 above, grant rights to a minority of shareholders (section 93 (4) sentence 3, section 117 (4), section 120 (1), sections 122, 142 (2) and (4), sections 147, 258 (2) sentence 3, section 260 (1) sentence 1, and subsection (3) sentence 4 of the Stock Corporation Act) the memorandum and articles of association shall specify the required minority of the members of the senior representative body.

Section 37
Loss reserve

The memorandum and articles of association shall stipulate that a reserve to cover extraordinary operational losses (loss reserve, reserve fund) shall be established, the annual amounts to be transferred to the reserve, and the minimum amount of the reserve.

Section 38
Use of surplus

(1) Any surplus shown in the balance sheet is distributed among the members specified in the memorandum and articles of association, unless such surplus is to be allocated to the loss reserve or other reserves or used for the payment of remunerations or carried forward to the next financial year in accordance with the memorandum and articles of association. This is without prejudice to section 53c (3a) of this Act, and section 269 of the Commercial Code.

(2) The memorandum and articles of association shall stipulate the rules for any such distribution and whether the surplus is to be distributed only among the existing members at the end of the financial year or also among the former members of the mutual society.

(3) (rescinded)

Section 39
Amending the memorandum and articles of association

(1) Only the senior representative body is entitled to amend the memorandum and articles of association.

(2) It may delegate the power to make amendments that only affect the form to the supervisory board.

(3) It may authorise the supervisory board to make any changes required by the Supervisory Authority before approval of an amendment resolution.

(4) A resolution by the senior representative body to discontinue operating a class of insurance or to introduce a new one requires a three-fourths majority of votes cast; the memorandum and articles of association may set forth additional requirements. Such a majority is only required for other resolutions pursuant to subsections (1) to (3) above if not otherwise specified in the memorandum and articles of association.

Section 40
Registering amendments to the memorandum and articles of association

(1) An application for registration in the commercial register must be filed for any amendment to the memorandum and articles of association. The application shall be accompanied by the certificate of approval. The complete text of the memorandum and articles of association shall also be submitted; this must be accompanied by notarial certification that the amended provisions of the memorandum and articles of association comply with the amendment resolution and that the non-amended provisions comply with the last version of the memorandum and articles of association submitted for registration in the commercial register.

(2) The documents submitted to the court relating to the amendment may be referred to for registration, unless the amendment pertains to the information under section 32.

(3) The amendment does not become effective until it has been entered in the commercial register with the competent court of the district where the mutual society has its registered office.

Section 41
Amending the general policy conditions

(1) Subject to subsection (2) below, section 39 (1) and (2) apply accordingly to amendments to the general policy conditions within the meaning of section 10.

(2) The memorandum and articles of association may authorise the management board to introduce or amend general policy conditions with the approval of the supervisory board. If neither the management board nor the supervisory board are authorised by the memorandum and articles of association to amend the general policy conditions, the senior representative body may authorise the supervisory board to make preliminary amendments to the general policy conditions in cases of urgent need; the amendments shall be submitted to the senior representative body at its next meeting and repealed if so required by this body.

(3) Any amendment to the memorandum and articles of association or the general policy conditions shall only affect an existing insurance contract if the insured explicitly approves the amendment. This does not apply to provisions for which the memorandum and articles of association expressly stipulate that amendments may also have effect on existing contracts.

Section 42
Dissolution

The mutual society is dissolved:

  1. After expiry of the period of time specified in the memorandum and articles of association,
  2. Through a resolution by the senior representative body,
  3. Upon opening of insolvency proceedings against the mutual society,
  4. From the date on which the order to dismiss an insolvency petition due to a lack of assets becomes final.

Section 43
Dissolution resolution

(1) The resolution of the senior representative body to dissolve the society (section 42 no. 2) requires a three-fourths majority of votes cast, unless otherwise set forth in the memorandum and articles of association. Members of the senior representative body who voted against the dissolution may have their objection to the dissolution recorded.

(2) The resolution is subject to approval by the Supervisory Authority. The Supervisory Authority shall inform the court of registration of its approval.

(3) If the mutual society has been dissolved by a resolution of the senior representative body, the insurance contracts concluded between the members and the society expire on the date specified in the resolution, at the earliest, however, after a period of four weeks. Any claims arising by that date may be asserted; as regards any contributions paid in advance for future periods of insurance, these may be reclaimed only after deduction of the incurred expenses. These provisions do not apply to life insurance contracts; these are not affected unless otherwise set forth in the memorandum and articles of association.

Section 44
Portfolio transfer

Contracts for the purpose of transferring the portfolio of a mutual society wholly or partly to another undertaking are subject to approval by the senior representative body before coming into effect. The resolution requires a three-fourths majority of votes cast, unless otherwise set forth in the memorandum and articles of association.

Section 44a
(repealed)

Section 44b
(repealed)

Section 44c
(repealed)

Section 45
Registration of dissolution

The management board shall apply for registration of the dissolution of the mutual society in the commercial register. This does not apply if insolvency proceedings have been opened or an insolvency petition has been dismissed. In these cases (section 42 nos. 3 and 4) the court shall by virtue of its authority register the dissolution of the society and the grounds thereof; the office of the insolvency court shall send to the court of registration a certified copy of the order to open insolvency proceedings or a certified copy of the order to dismiss an insolvency petition, certifying that the order has become final.

Section 46
Winding-up

(1) Winding-up follows dissolution of the mutual society, unless insolvency proceedings have been opened against the mutual society.

(2) During winding-up, the same provisions apply as beforehand, unless otherwise set forth in the following provisions or implied from the purpose of the winding-up. In particular supplementary contributions or cost allocations (sections 24 to 27) may be called for and collected. New policies may no longer be written; the existing policies may not be increased or renewed.

Section 47
Winding-up procedure

(1) Winding-up is performed by the members of the management board as liquidators, unless other persons have been designated by the memorandum and articles of association or a resolution of the senior representative body. The liquidator may also be a legal person.

(2) If cause exists, the court of registration shall appoint and dismiss liquidators at the request of the supervisory board or a minority of members to be specified in the memorandum and articles of association. Section 146 of the Law on Matters Relating to Voluntary Jurisdiction (Gesetz über die Angelegenheiten der freiwilligen Gerichtsbarkeit) applies accordingly. Any liquidators who have not been appointed by the court may be dismissed by the senior representative body at any time. For claims under the employment contract, the generally applicable rules apply.

(3) Furthermore, section 265 (4), sections 266 to 269, section 270 (1) and (2) sentence 1, sections 272 and 273 of the Stock Corporation Act apply accordingly for winding-up. Notwithstanding to analogous application of section 270 (2) sentence 3 and subsection (3) of the Stock Corporation Act, the provisions applicable to the preparation and auditing of the annual accounts and management report of a mutual society and sections 175, 176 of the Stock Corporation Act and sections 325, 328 of the Commercial Code apply mutatis mutandis to the opening balance sheet, the explanatory report, the annual accounts and management report.

Section 48
Repayment of the initial fund; distribution of assets

(1) The initial fund may not be repaid unless the claims of all the other creditors, in particular the claims of the members under insurance contracts have been met or security has been furnished. Supplementary contributions or cost allocations may not be imposed for repayment purposes.

(2) The assets of the mutual society remaining after the liabilities have been met are to be distributed among the existing members at the time of dissolution. The ratio used is the same as for surplus distribution

(3) The memorandum and articles of association may provide for alternative asset distribution; they may authorise the senior representative body to designate other eligible recipients.

Section 49
Continuation of the society

(1) If a mutual society has been dissolved due to lapse of time or a resolution of the senior representative body, the senior representative body may resolve to continue operation of the society until distribution of the assets among those eligible has commenced. The resolution requires a three-fourths majority of votes cast, unless otherwise set forth in the memorandum and articles of association. It is subject to approval by the Supervisory Authority, which shall inform the court of registration of such approval.

(2) The same applies if the mutual society has been dissolved following the opening of insolvency proceedings, but the proceedings have been discontinued upon petition by the mutual society, or set aside after an insolvency plan intended for the continued operation of the mutual society has been confirmed.

(3) The liquidators shall file an application for registration of the continuation of the society's operations in the commercial register; on filing the application they shall prove that distribution of the assets of the society among those eligible has not yet been started.

(4) The resolution to continue operations does not become effective until it has been entered in the commercial register of the place where the mutual society has its registered office.

Section 50
Requirement to pay contributions during insolvency proceedings

(1) If existing or former members are required to pay contributions by virtue of law or under the memorandum and articles of association (sections 24 to 26), they are liable for the society's debts if insolvency proceedings are opened.

(2) Members who left the society in the year before the petition for insolvency proceedings was filed, or after the filing of such petition are liable for the society's debts as if they were still members.

Section 51
Ranking of creditor claims in insolvency

(1) Any claims for repayment of the initial fund rank after all the other creditor claims. Among these, any claims under insurance contracts of members who were members at the time the insolvency proceedings were opened or who left the society in the year prior to filing of the petition for insolvency proceedings or after such petition was filed rank after the claims of any other creditors.

(2) No supplementary contributions or cost allocations may be imposed for the purpose of repayment of the initial funds.

Section 52
Supplementary contributions and cost allocations in insolvency proceedings

(1) Any supplementary contributions or cost allocations required for the insolvency proceedings shall be fixed and requested by the insolvency administrator. Immediately after the statement of affairs has been filed with the court (section 153 of the German Insolvency Code (Insolvenzordnung)) the insolvency administrator shall calculate the amounts to be advanced by the members to cover the deficit represented in the statement of affairs in accordance with their contribution obligations. For the calculation of any such advance payments and additional payments, section 106 (1), sentence 2, subsections (2) and (3), as well as sections 107 to 113 of the German Cooperative Societies Act (Genossenschaftsgesetz) apply accordingly.

(2) Soon after final distribution has commenced (section 196 Insolvency Code) the insolvency administrator shall calculate the final contributions to be paid by the members. For this calculation and any further measures, section 114 (2) and sections 115 to 118 of the Cooperative Societies Act apply accordingly.

Section 53
Small mutual associations

(1) For mutual societies whose operations are limited to a certain range of business, territory or group of persons (small mutual associations) only sections 15, 16 sentence 2, section 17 (1), section 18 (1), sections 19, 20, 21 (1), sections 22 to 27, 28 (1), sections 37, 38 (1) and (2), section 39 (1) to (3), sections 41 and 42, 43 (1) and (2) sentence 1, and subsection (3), sections 44, 48, and 50 to 52 under part III above apply. Insurance policies with fixed premiums may not be written unless the policyholders become members.

(2) Unless otherwise set forth in subsection (1) above, small mutual associations are subject to the general provisions concerning associations in sections 24 to 53 of the Civil Code. In the cases of sections 29 and 37 (2) of the Civil Code, however, the local court is replaced by the Supervisory Authority.

(3) If the memorandum and articles of association provide for a supervisory board, section 34 (1) and (2) sentence 1, and subsection (6), section 36 (2) and (3) and sections 37 to 40 of the Cooperative Societies Act apply accordingly.

(4) The Supervisory Authority shall decide whether a society is to be considered a small mutual association.

Section 53a
(repealed)

Section 53b
Waiver of initial fund for small mutual associations; loss reserve

Until the end of 31 December 2003, the Supervisory Authority may waive the requirement of an initial fund for small mutual associations intending to operate life insurance if security is otherwise provided by the particular nature of the business or by special arrangements. Until this date, it may also waive the requirement for a loss reserve on the same grounds.

IV. Management of insurance undertakings

1. Capital adequacy requirement, investments

Section 53c
Capital adequacy requirement

(1) To ensure that their liabilities under the insurance contracts may be fulfilled at all times, the insurance undertakings are obliged to maintain own funds free of all foreseeable liabilities in an amount not less than the required solvency margin, which is determined in relation to the total volume of business. One-third of the required solvency margin is deemed to be the guarantee fund.

(2) For the purpose of implementing insurance directives issued by the Council of the European Communities, the Federal Ministry of Finance may, by regulation, issue provisions on the following:

  1. The calculation and the amount of the solvency margin,
  2. The minimum amount of the guarantee fund for the individual classes of insurance,
  3. How the own funds not shown in the balance sheet of life insurance undertakings are to be calculated and to what extent they may be counted towards the solvency margin and the guarantee fund.

(2a) For undertakings carrying on life insurance as death benefit funds, subsection (2) above on securing an adequate solvency applies accordingly.

(3) The following are considered own funds within the meaning of subsection (1) above:

1.

a) For public limited companies, the paid-in share capital, less the amount of own shares,

b) For mutual societies, the paid-in amount of the initial fund,

c) For public law insurance undertakings, the items corresponding to the share capital of public limited companies,

2. The capital reserves and retained earnings,

3. The profit carried forward after dividend distribution,

3a. the capital paid in exchange for participation rights in accordance with subsections (3a) and (3c) below,

3b. the capital paid in due to incurrence of subordinated liabilities in accordance with subsections (3b) and (3c) below,

4. For life insurance undertakings, the provision for bonuses and rebates, if it may be used to cover losses and to the extent that it does not represent any credited bonus amounts,

5. Upon application and with the approval of the Supervisory Authority

a) half of the non-paid-in portion of the share capital, the initial fund or, in the case of public law insurance undertakings, the items equivalent to the share capital of public limited companies, if the paid-in portion amounts to 25 percent of the share capital, the initial fund or, in the case of public law insurance undertakings, the items equivalent to the share capital of public limited companies,
b) for mutual societies and public law insurance undertakings operating on the principle of mutuality, provided they do not carry on life or health insurance, half of the difference between the supplementary contributions permissible under the memorandum and articles of association in a financial year and the actual supplementary contributions called for,
c) any net hidden reserves resulting from the valuation of assets, to the extent that these reserves are not of an exceptional nature,
d) for life insurance undertakings within the meaning of the provisions issued under subsection (2), the value of acquisition costs included in the premium, to the extent that these have not been taken into account for the premium reserve.

Funds in accordance with sentence 1 no. 5 (a) and (b) may only be included in own funds up to a limit of 50 percent of the lower of own funds and the required solvency margin.

The loss carried forward, including dividends to be distributed and the intangible assets recognised in the balance sheet shall be deducted from the sum of the amounts specified in sentence 1 nos. 1 to 5 above, in particular

  1. the capitalised start-up and expansion costs (section 269 of the Commercial Code),
  2. the capitalised goodwill (section 255 (4) of the Commercial Code).

(3a) The capital paid in exchange for participation rights (subsection (3) sentence 1 no. 3a above) shall only be included in own funds pursuant to section (1) above if

  1. it fully participates in losses and the insurance undertaking is obliged in case of loss to defer interest payments,
  2. it has been agreed that in the event that insolvency proceedings are opened or in the event of liquidation of the insurance undertaking, it shall not be repaid until all nonsubordinated creditors have been satisfied,
  3. it has been made available to the insurance undertaking for a period of at least five years and is not subject to early repayment at the request of the creditor; this five-year period need not be observed in the case of early termination of securitised participation rights due to changes in taxation which would result in additional payments to the holder of these securities and if, before repayment, the capital has been replaced by other own funds of at least equivalent value,
  4. it falls due for repayment within a period of not less than two years or may fall due within that period under the terms of the contract, and
  5. the insurance undertaking made explicit reference in text form to the legal consequences named in sentences 2 and 3 at conclusion of the contract.

Any subsequent changes to the participation in losses, subsequent limitation of subordination and subsequent reduction of the periods with respect to term and termination are prohibited. Any early repayment shall be returned to the insurance undertaking, notwithstanding any agreements to the contrary, unless the capital has been replaced by other own funds of at least equivalent value or the Supervisory Authority has agreed to the early repayment; the insurance undertaking may contractually reserve a corresponding right. If securities are issued to represent the participation rights, reference shall be made to the legal consequences pursuant to sentences 2 and 3 in the terms of issue and subscription. The insurance undertaking may not acquire securities representing its own participation rights. The obligation to repay is not deemed a liability within the meaning of subsection (1) sentence 1 above.

(3b) The capital that has been paid in due to the incurrence of subordinated liabilities (subsection (3) sentence 1 no. 3b above) shall only be included in the own funds in accordance with subsection (1) above if

  1. in the event of the opening of insolvency proceedings or liquidation of the insurance undertaking, it is repaid after satisfaction of all non-subordinated creditors,
  2. it has been made available to the insurance undertaking for a period of at least five years and is not subject to early repayment at the request of the creditor; this five-year period need not be observed in the case of early termination of bonds due to changes in taxation which would result in additional payments to the holder of these bonds and if, before repayment, the capital has been replaced by other own funds of at least equivalent value,
  3. setting off of the repayment claim against claims of the insurance undertakings is excluded, and no contractual security is provided by the insurance undertaking or any third parties for the liabilities, and
  4. it falls due for repayment within a period of not less than one year or may fall due within that period under the terms of the contract; if it falls due for repayment within less than two years, or may fall due within that period under the terms of the contract, it may only be included at a rate of two-fifths.

Any subsequent limitation of subordination and subsequent reduction of the periods with respect to term and termination are prohibited. Any early repayment shall be returned to the insurance undertaking, notwithstanding any agreements to the contrary, provided the insurance undertaking was not dissolved, and

  1. the capital has been replaced by other own funds of at least equivalent value, or
  2. the Supervisory Authority has agreed to the early repayment; the insurance undertaking my contractually reserve a corresponding right.

On conclusion of the contract, the insurance undertaking shall make express reference in text form to the legal consequences named in sentences 2 and 3 above; if securities are issued to represent the subordinated liabilities, reference shall be made to the legal consequences only in the terms of issue and subscription. The insurance undertaking may not acquire securities representing its own subordinated liabilities. The obligation to repay is not deemed a liability within the meaning of subsection (1) sentence 1 above.

By way of derogation from sentence 1 number 3, an insurance undertaking may provide subordinated collateral for subordinated liabilities incurred by a subsidiary of the insurance undertaking set up exclusively for the purpose of raising capital.

(3c) The total amount of capital represented by participation rights within the meaning of subsection (3a) and subordinated liabilities within the meaning of subsection (3b) shall only be included in the own funds within the meaning of subsection (1) if it constitutes no more than 50 percent of own funds and 50 percent of the required solvency margin; of this amount, no more than 25 percent may comprise subordinated liabilities with a fixed maturity.

(3d) The following shall be deducted from the sum resulting from subsection (3) sentence 1 nos. 1 to 5 above:

  1. Participating interests held by the insurance undertaking within the meaning of section 104a (2) no. 1 sentence 2 in credit institutions within the meaning of section 1 (1) sentence 2 nos. 1 to 5 and 7 to 11 of the German Banking Act, financial services institutions within the meaning of section 1 (1a) sentence 2 nos. 1 to 4 of the German Banking Act and financial enterprises within the meaning of section 1 (3) of the German Banking Act,
  2. Receivables from participation rights (Genussrechte) within the meaning of subsection (3) sentence 1 no. 3a and receivables from subordinated liabilities within the meaning of subsection (3) sentence 1 no. 3b from the companies set forth in no. 1 in which the insurance undertaking holds a participating interest or together with which it forms a horizontal group (section 104a (2) no. 1 sentence 4).

The Supervisory Authority may, at the request of the insurance undertaking, grant exemptions with regards to the items to be deducted in accordance with sentence 1 if the insurance undertaking temporarily holds a stake in the companies set forth in no. 1 in order to provide financial support to the company in question for reorganisation and rescue. An insurance undertaking is not required to deduct items set forth in sentence 1 from its own funds if it is included in the supplementary calculation of capital requirements at conglomerate level in accordance with the calculation methods detailed in the regulation pursuant to section 104q (1) sentence 2. The Supervisory Authority may, at the request of the insurance undertaking, permit application of calculation methods 1, 2 or 3 stated in Annex I of Directive 2002/87/EC, in lieu of a deduction of the items set forth in sentence 1 (alternative calculation). In such cases, the insurance undertaking is not required to deduct the items set forth in sentence 1 from its own funds. Calculation on the basis of the consolidated accounts (method 1) may only be applied if, and insofar as, the Supervisory Authority deems the scope and quality of the integrated management and the internal control mechanisms with regard to the consolidated companies to be sufficient. The method permitted by sentence 4 must be uniformly and consistently applied.

(3e) Subsection (3d) sentences 1 and 2 are to be applied accordingly to any participating interests and receivables of the insurance undertaking in or from the primary insurance undertakings within the meaning of section 104k no. 2 second half-sentence, reinsurance undertakings within the meaning of sentence 104a (2) no. 3 and insurance holding companies within the meaning of section 104a (2) no.4. An insurance undertaking is not required to deduct the items pursuant to sentence 1 in conjunction with subsection (3d) sentence 1 from its own funds if it is included in the calculation of adjusted solvency in accordance with the methods detailed in the regulation pursuant to section 104g (2).

(4) A calculation of the solvency margin and a statement of own funds shall be submitted annually to the Supervisory Authority, in the form it specifies, together with the annual accounts and management report required by section 341a (1) of the Commercial Code.

Section 53d
Limitation of remuneration in relation to contracts with affiliated non-insurance undertakings

(1) If an insurance undertaking makes use of the services of an affiliated non-insurance undertaking (section 15 of the Stock Corporation Act) under contracts for work or services, a tenancy or lease agreement or contracts of a similar nature, remuneration shall be limited to the amount which a prudent and conscientious manager would also negotiate with a non-affiliated undertaking, taking into account the interests of the insured. The insurance undertaking shall be informed annually about the expenses under these contracts and the way in which these expenses are calculated.

(2) Contracts under subsection (1) above are to be concluded in writing.

(3) Subsections (1) and (2) above apply accordingly to contracts with non-affiliated companies if a majority interest is held in both parties to the contract, either directly or indirectly, by the same person or persons (section 16 of the Stock Corporation Act).

Section 54
Investment rules relating to restricted assets; notification requirements

(1) The guarantee assets (Sicherungsvermögen) (section 66) and the other restricted assets within the meaning of subsection (5) (restricted assets) of an insurance undertaking shall, taking into account the type of insurance business carried on and the structure of the undertaking, be invested in a way that ensures maximum security and profitability, while maintaining the insurance undertaking's liquidity at all times, maintaining an adequate diversification and spread.

(2) The restricted assets may be invested only in

  1. loan receivables, bonds and participation rights (Genussrechte),
  2. debt register claims,
  3. shares,
  4. participating interests,
  5. real property and equivalent rights,
  6. shares or units in undertakings for collective investment in securities and for other investments made in accordance with the principle of risk diversification, if the undertakings are subject to effective public supervision for the protection of the shareholders or unitholders; cash and deposits at credit institutions,
  7. cash and deposits at credit institutions,
  8. any other assets, provided they are permissible under Articles 21 or 22 of the Third Non-Life Insurance Directive, or Articles 23 or 24 of the Third Life Insurance Directive.

The restricted assets may only be invested in assets not mentioned above if permitted in the individual case by the Supervisory Authority upon request in an exceptional situation for a limited period of time and if the interests of the insured are not thereby impaired.

(3) The Federal Government is authorised to issue, by regulation subject to the approval of the Bundesrat, more detailed provisions in accordance with subsection (1) and subsection (2) sentence 1, taking into account the relevant principles and restrictions of Articles 21 and 22 of the Third Non-Life Insurance Directive or Articles 23 and 24 of the Third Life Insurance Directive, in particular quantitative and qualitative requirements regarding the investment of the restricted assets.

(4) Without prejudice to section 54d, the following shall be communicated to the Supervisory Authority:

  1. (to be rescinded)
  2. The acquisition of participating interests; however, if these participating interests consist of shares and other participating interests, only if the interests exceed 10 percent of the nominal capital of the other undertaking; for the purpose of this provision, the interests of several insurance undertakings belonging to a group within the meaning of section 18 of the Stock Corporation Act and of the controlling entity in another undertaking are consolidated,
  3. Investments by an insurance undertaking in an affiliated company within the meaning of section 15 of the Stock Corporation Act,
  4. (to be rescinded)

    The notification shall be submitted by the end of the month following the acquisition or investment.

(5) The balance sheet values of other restricted assets must be at least equivalent to the sum of the technical provisions and the liabilities under insurance contracts, as well as accruals and deferred income, which are not included in the minimum amount of guarantee assets (section 66 (1a)). Balance sheet values are the gross amounts stated for overall insurance business, less the amounts for ceded reinsurance business. For the calculation of the minimum amount of other restricted assets, amounts up to 50 percent of the outstanding premiums that have become due during the last three months from primary insurance business and reduced by the valuation allowance may remain unconsidered. Liabilities and provisions under reinsurance contracts are disregarded for calculation of the minimum amount of other restricted assets if they are matched by claims under the same reinsurance contracts.

Section 54a
Schedule of investments for restricted assets

(rescinded)

Section 54b
Segregated investment portfolio

(1) To the extent that life insurance contracts provide for insurance benefits in

  1. shares or units in a fund managed by a capital investment company,
  2. shares or units issued by an investment company, or
  3. assets, other than cash, eligible for the fund of a capital investment company,

the respective portion of the guarantee assets earmarked for this purpose (segregated investment portfolio) is to be invested in the corresponding assets.

(2) Where the benefits under life insurance contracts are directly linked to a share index or underlyings other than those specified in subsection (1) above, a segregated investment portfolio shall be established for each type of investment. The assets of these segregated portfolios shall be invested in units representing the underlying or, if the portfolio is not divided into units, in assets which correspond to the assets on which the particular underlying is based, and which are sufficiently secure and marketable.

(3) Section 54 is not applicable to the assets of the segregated investment portfolios mentioned in subsections (1) and (2) above. If, however, the insurance benefits mentioned in subsections (1) and (2) above include a guaranteed minimum benefit, section 54 applies to the assets representing the additional technical provisions for this purpose.

(4) The provisions of part C of the Annex shall not apply to the assets mentioned in subsections (1) to (3) above.

Section 54c
Portfolio of contracts covering risks situated abroad

If insurance contracts are part of a separate portfolio of an insurance undertaking in a state that is not a member state or EEA state, sections 54 and 54b shall be applied as appropriate to the restricted assets under these insurance contracts, unless otherwise set forth under foreign law.

Section 54d
Reports to the Supervisory Authority

The insurance undertakings shall report all investments, broken down into new and existing investments, in the forms and within the periods required by the Supervisory Authority. This is without prejudice to the obligations under section 66 (6) sentence 6.

1a. Accounting, auditing

Section 55
Accounting of public law insurance undertakings; requirements for submissions and provision of information

(1) The provisions of the second subpart of the fourth part in conjunction with the provisions of the first and second parts of the third book of the Commercial Code apply accordingly to undertakings under public law which carry on insurance business and are not social insurance institutions.

(2) Insurance undertakings shall immediately submit to the Supervisory Authority the annual accounts prepared by the legal representatives and later the approved annual accounts and management report. Insurance undertakings that prepare consolidated annual accounts or a consolidated management report shall submit these documents to the Supervisory Authority immediately.

(3) Insurance undertakings shall send every insured, on request, the annual accounts and management report in the financial year following the reporting year.

(4) The provisions under subsections (2) and (3) shall also apply to separate financial statements within the meaning of section 325 (2a) of the Commercial Code.

Section 55a
Internal accounting

(1) The Federal Ministry of Finance is authorised to issue, by regulation not requiring approval by the Bundesrat, provisions for insurance undertakings not subject to supervision by the supervisory authorities of the individual federal states with respect to

1. bookkeeping, the contents, form and number of copies of the internal report to be submitted to the Supervisory Authority, comprising the balance sheet, broken down for supervisory purposes, profit and loss account broken down by classes and types of insurance and special explanatory notes to the balance sheet and profit and loss account if required for supervisory purposes in accordance with this Act;

1a. the contents, form and number of copies of the internal interim report to be submitted to the Supervisory Authority quarterly, comprising a compilation of the latest accounting and portfolio data and information about the number of claims, if required for supervisory purposes in accordance with this Act;

1b. the transactions that are to be reported pursuant to section 104e, as well as the criteria by which intra-group transactions are to be deemed important, as well as the type, scope, time and form of the information and the media and transmission channels to be used;

2. the deadlines for the submission of the internal reports to the Supervisory Authority,

3. the content of the audit reports pursuant to section 341k of the Commercial Code, if required for supervisory purposes in accordance with this Act;

4. the auditing by an independent expert of the annual accounts and management report of insurance undertakings not subject to section 341k of the Commercial Code, as well as the contents and the deadlines for the report’s submission if required for supervisory purposes in accordance with this Act.

The authorisation referred to in sentence 1 may be delegated wholly or partly by regulation not requiring approval by the Bundesrat, to the Supervisory Authority in relation to insurance undertakings subject to its supervision.

(2) Rules in accordance with subsection (1) above for insurance undertakings subject to supervision by the Supervisory Authority are issued in consultation with the supervisory authorities of the individual federal states; the Insurance Advisory Council (Versicherungsbeirat) shall be consulted before the rules are issued.

(3) The governments of the individual federal states may, in consultation with the Supervisory Authority, issue regulations establishing rules in accordance with subsection (1) above, which are applicable to insurance undertakings subject to supervision by the supervisory authorities of the individual federal states. They may delegate this power by regulation to the supervisory authority of the individual state.

Section 55b
Projections

The Supervisory Authority may require the presentation of projections, in particular relating to the following:

  1. The expected business results to the end of the current financial year; for life insurance undertakings together with a statement of bonuses for the financial year following the reporting year,
  2. The projected solvency margin to the end of the current financial year,
  3. The projected valuation reserves to the end of the current financial year,
  4. The insurance undertaking’s risk-bearing capacity in adverse situations.

In such cases, the Supervisory Authority shall set the parameters, relevant dates and calculation methods, as well as the form and the deadline for the forecasts. The Supervisory Authority permits the insurance undertaking to use its own methods of calculation, provided these do not hinder assessment of the undertaking or the insurance market. It may require the calculations to be based on certain assumptions.

Section 56
(repealed)

Section 56a
Provision for bonuses and rebates

In the case of public limited insurance companies, the management board, with the consent of the supervisory board, sets the amounts to be allocated to the provision for policyholder bonuses. However, allocations to the provision not based on a legal claim by the insured may only be earmarked for bonuses if at least 4 percent of share capital can still be distributed out of the remaining unappropriated surplus. The amounts earmarked for policyholder bonuses, provided they have not been directly allocated to the insured, shall be recognised under a provision for bonuses and rebates. The amounts allocated to the provision for bonuses and rebates may only be used for the purpose of policyholder bonuses. With the consent of the Supervisory Authority, however, the insurance undertaking is entitled to use the provision for bonuses and rebates in exceptional cases to avoid an emergency situation in the interest of the insured, to the extent that such amounts have not already been earmarked for bonuses.

Section 56b
(repealed)

Section 57
Scope of audit

(1) When auditing the annual accounts, the auditor shall ascertain if the insurance undertaking has complied with the notification requirements under section 13b (1) and (4), section 13c (1) and (4), section 13d nos. 1 to 5, section 13e, the requirements pursuant to sections 104d and 104g (1), section 104q (1) sentence 1, subsection (2) sentences 2 to 4 and subsections (3) to (9), as well as section 104r (1), (3) and (4), each also in conjunction with a regulation pursuant to section 104g (2), section 104q (1) sentence 2 and section 104r (2), as well as the requirements pursuant to section 14 of the German Money Laundering Act (Geldwäschegesetz). The result shall be included in the audit report. The auditing requirement pursuant to section 317 (4) of the Commercial Code applies to all insurance undertakings subject to section 91 (2) of the Stock Corporation Act. An auditor who audits an undertaking that has a close link with the primary insurance undertaking resulting from a control relationship pursuant to section 8 (1) sentence 4 no. 2, and who also audits the primary insurance undertaking shall inform the Supervisory Authority of any facts pursuant to section 321 (1) sentence 3 of the Commercial Code found in relation to the affiliated undertaking, if such facts are liable to have a considerable negative effect on the activities of the insurance undertaking. At the request of the Supervisory Authority, the auditor shall provide information about any other facts which have become known during the audit and which indicate that the business of the primary insurance undertaking is not being conducted properly.

(2) The Federal Ministry of Finance is authorised to issue by regulation more detailed provisions about the contents of the audit reports pursuant to subsection (1) sentence 1, if required by the Supervisory Authority to fulfil its duties, in particular to obtain standardised records to judge the insurance business conducted by the insurance undertakings. This power may be delegated by regulation to the Supervisory Authority. The latter shall issue the rules in consultation with the supervisory authorities of the individual federal states; the Insurance Advisory Council is to be consulted before the regulations are issued.

Section 58
Notification by auditor to the Supervisory Authority; appointment of the auditor

(1) (rescinded)

(2) The management board shall immediately notify the Supervisory Authority as to the auditor appointed by the supervisory board. The Supervisory Authority may, if it has any objections to the auditor of the annual accounts, require that a different auditor be appointed within a reasonable period of time. If no new appointment is made or if the Supervisor Authority also has objections to the newly appointed auditor, it shall itself appoint an auditor. In this case, section 318 (1) sentence 4 of the Commercial Code applies, with the proviso that the legal representatives shall immediately require the auditor appointed by the Supervisory Authority to proceed with the audit.

(3) (rescinded)

Section 59
Submission of audit report to the Supervisory Authority

Immediately after the audit report has been adopted, the management board shall submit a copy of the report, with the notes and remarks of the management and supervisory boards, to the Supervisory Authority. The latter may discuss the report with the auditor and, if necessary, require additional audits and supplements to the report at the expense of the insurance undertaking.

Section 60
Auditing of public law insurance undertakings

Sections 58 and 59 do not apply to public law insurance undertakings established under the laws of the individual federal states and subject to their supervision, for which additional requirements with respect to the auditing of the annual accounts in accordance with section 341k of the Commercial Code have been imposed under the laws of the individual federal states.

Section 61
(repealed)

Section 62
(repealed)

Section 63
(repealed)

Section 64
Auditing of the annual accounts of small mutual associations

If pursuant to section 330 (1), (3) and (4) of the Commercial Code and the regulation issued pursuant to this authorisation, insurance undertakings are not subject to the requirement to have their annual accounts audited, sections 58 and 59 of this Act shall not be applicable.

2. Special provisions on the premium reserve and guarantee assets in life insurance

Section 65
Premium reserve

(1) The Federal Ministry of Finance is authorised to issue by regulation rules for the calculation of the premium reserve in accordance with German Accepted Accounting Principles in relation to

  1. insurance contracts with guaranteed interest rate, one or several maximum technical interest rates on the basis of

    1. the interest rate paid on the bonds issued by the government of the country in whose currency the contract is denominated, which shall not exceed 60 percent; unit-linked contracts, single-premium contracts with terms of up to eight years, without-profits contracts and annuity contracts with no surrender value may be excluded or higher maximum rates may be set for them, or
    2. the income from the assets currently held by the life insurance undertaking and the expected income from future assets, after adequate safety loadings,
  2. the maximum amounts for zillmerisation,
  3. the actuarial bases for the calculation of the premium reserve, if required for the implementation of directives of the Council of the European Communities.

This power may be delegated by regulation to the Supervisory Authority. The latter shall issue the rules in consultation with the supervisory authorities of the individual federal states.

(2) The regulations pursuant to subsection (1) above shall be issued in agreement with the Federal Ministry of Justice.

(3) Before a maximum interest rate is set in accordance with subsection (1) sentence 1 no. 1 (a) above, and if the contracts are denominated in the currency of another member state or EEA state, the supervisory authority of this state shall be consulted.

(4) Subsections (1) to (3) shall apply accordingly for accident insurance as defined in section 11d, as well as for benefits paid on the classes of insurance named in section 11e.

Section 66
Guarantee assets

(1) During the financial year, the management board of the undertaking shall allocate to the guarantee assets and properly invest amounts equivalent to the expected increase of the minimum guarantee assets in accordance with subsection (1a) below. The Supervisory Authority may issue more detailed rules in this regard.

(1a) The amount of guarantee assets must be at least equivalent to the balance sheet values of

  1. the unearned premiums,
  2. the premium reserve,
  3. the provision

    1. for outstanding claims and surrenders,
    2. for rebates,
    3. for unused premiums from suspended insurance contracts,
  4. the portions of the provision for bonuses attributable to amounts earmarked, but not yet allocated for bonuses,
  5. the creditors arising out of direct insurance business, and
  6. the premium income to be refunded by an insurance undertaking in the event of cancellation or rescission of an insurance contract or a transaction defined in section 1 (4).

Balance sheet values within the meaning of sentence 1 are the gross amounts for direct business before deduction of the amounts for ceded reinsurance business.

(2) If guarantee assets do not meet the minimum requirement under subsection (1a) above, the management board shall immediately make up for the deficiency.

(3) The Supervisory Authority may require that further allocations be made to the guarantee assets in addition to the minimum requirement under subsection (1a) above, if this is deemed necessary to safeguard the interests of the insured. Such allocation may be necessary considering, in particular, the lower current values of the guarantee assets.

(3a) For the purpose of the guarantee assets, unencumbered real property and equivalent rights shall be included at their balance sheet value. If the balance sheet value is higher than the market value, the latter shall be used. The Supervisory Authority may permit a reasonable increase in this value, if and insofar as it has been documented by an expert opinion that the market value exceeds the balance sheet value by at least 100 percent. In the case of encumbered real property and equivalent rights, the Supervisory Authority shall determine the value on a case-by-case basis. The Supervisory Authority shall be informed about the values used as part of reporting under section 54d.

(3b) For the purpose of securing the liquidity of the insurance undertaking and safeguarding the interests of the insured, the Federal Ministry of Finance is authorised to issue by regulation more detailed rules with respect to the contents of the annual accounts for the purpose of internal accounting, as detailed in section 55a (1) no. 1 regarding the allocation of investments within the meaning of section 341b (2) sentence 1 of the Commercial Code to fixed or current assets, and may require submission of a cash flow statement drawn up in accordance with German Accepted Accounting Principles. Further details on the cash flow statement may be required by regulation in accordance with sentence 1, if required for the purposes of insurance supervision. This power may be delegated by regulation to the Supervisory Authority. The latter shall issue the rules in consultation with the supervisory authorities of the individual federal states. The regulations pursuant to sentences 1 to 4 above shall be issued in agreement with the Federal Ministry of Justice; they shall not be subject to approval of the Bundesrat.

(4) Allocation to the guarantee assets must be made, except in cases where a special security deposit must be made out of premium income for certain business abroad.

(5) The guarantee assets shall be maintained at the place where the undertaking has its registered office and segregated from all other assets. The Supervisory Authority shall be informed about the manner in which they are maintained. It may permit the guarantee assets to be kept at a different location.

(6) The guarantee assets shall be entered individually into a register. The rules relating to the guarantee assets shall apply to all assets registered assets. Any usufruct attached to individual assets within the guarantee assets shall be deemed part of the guarantee assets, even if not registered. Any claims from advances or loans on the undertaking’s own insurance policies may, to the extent that they are part of the guarantee assets, be registered in an aggregate amount. As regards claims secured by an encumbrance on real property and repayable in instalments, the register shall be amended as prescribed by the Supervisory Authority; the same applies to encumbrances on real property not securing any personal claim. At the end of the financial year, a copy of the entries made during that year shall be submitted to the Supervisory Authority; the management board shall certify the accuracy of the copy. The Supervisory Authority shall retain the copy.

(6a) Reinsurers’ shares of the gross technical provisions for direct business shall be deemed to be part of the guarantee assets, even if not registered. This does not apply to life insurance, health insurance of the type mentioned in section 12, private compulsory long-term care insurance in accordance with section 12f and the insurance classes referred to in section 65 (4).

(7) Separate accounts may be established within the guarantee assets with the approval of the Supervisory Authority. The rules relating to the guarantee assets and any rights attached then apply accordingly to each of the separate accounts.

Section 67
Guarantee assets in reinsurance

For the cases set forth in section 66 (6a) sentence 2, the undertaking shall also maintain and administer the portion of guarantee assets within the meaning of section 66 relating to ceded reinsurance business.

Section 68
(repealed)

Section 69
(repealed)

Section 70
Guarantee asset trustee

A trustee and a deputy trustee shall be appointed to monitor the guarantee assets. This shall only apply to small mutual associations (section 53) if so ordered by the Supervisory Authority.

Section 71
Appointment and qualification of the trustee

(1) The trustee is appointed by the supervisory board. If a small mutual association (section 53) does not have a supervisory board, the trustee is appointed by the management board.

(2) Before appointment, the Supervisory Authority must be informed as to the name of the designated trustee. If it has objections to the appointment, the Supervisory Authority may require that another person be designated within a reasonable period of time. If this requirement is not met or if the Supervisory Authority also has objections to the newly proposed trustee, it may itself appoint the trustee.

(3) Subsection (2) sentences 2 and 3 are also applicable if the Supervisory Authority has objections to an appointed trustee continuing in office.

Section 72
Securing the guarantee assets

(1) The guarantee assets shall be secured in such a way that disposition is possible only with the consent of the trustee; any further details are set forth by the Supervisory Authority.

(2) The trustee shall, in particular, maintain the guarantee assets in joint custody with the insurance undertaking. Assets may only be released by the trustee if permitted under this Act; section 9 (2) and (3) in conjunction with section 5 (1) sentence 3 of the German Mortgage Bond Act (Pfandbriefgesetz) applies accordingly.

(3) The trustee may approve any disposition in writing only; if an item is to be deleted from the register of assets, it is sufficient for the trustee to write his name beside or underneath the deletion annotation.

Section 73
Certification by the trustee

The trustee shall certify at the end of the balance sheet that the guarantee assets have been invested and maintained in compliance with the applicable rules, without this requirement affecting the responsibility of the bodies representing the undertaking.

Section 74
Trustee's right of inspection

The trustee shall be authorised to inspect the books and records of the undertaking at any time, insofar as they relate to the guarantee assets.

Section 75
Decisions on disputes

The Supervisory Authority decides disputes between the trustee and the insurance undertaking concerning the trustee's duties.

Section 76
Deputy trustee

Sections 71 to 75 above are also applicable to the deputy trustee.

Section 77
Withdrawals from the guarantee assets

(1) In addition to the funds required for investments or changes in investments, only such amounts released upon occurrence or settlement of an insured event, a surrender or any other termination of an insurance contract or changes to the operating plan may be withdrawn from the guarantee assets.

(2) Execution or attachment of guarantee assets shall only be permitted to the extent that allocations to the guarantee assets have been prescribed (section 66 (1) to (4) and (6a)) and actually been made with respect to the claim for the purpose of which any such disposition is to be made.

Section 77a
Treatment of insurance-related claims

(1) In the case of satisfaction out of the guarantee assets (section 66 (6) and (6a)),

  1. the claims of the insured, policyholders, beneficiaries or injured third parties with a direct claim against the insurance undertaking, and
  2. premium refund claims, provided the insurance contract was cancelled or rescinded before the opening of insolvency proceedings,

rank prior to the claims of the remaining insolvency creditors in the amount of the share of guarantee assets pursuant to section 66 (1a). The guarantee assets shall be drawn on only to the extent that allocations to the guarantee assets are prescribed (section 66 (1) to (4) and (6a)).

(2) All claims privileged in accordance with subsection (1) rank pari passu.

Section 77b
Expiry of certain insurance contracts

Life insurance, health insurance of the type mentioned in section 12, private compulsory long-term care insurance in accordance with section 12f and the classes of insurance referred to in section 65 (4) expire upon the opening of insolvency proceedings. The insurance creditors can claim the proportion of the minimum guarantee assets in accordance with section 66 (1a) to which they are entitled as at the date on which insolvency proceedings are opened. Section 77 (1) sentence 2 and subsection (2) apply accordingly.

Section 78
Guardian in insolvency

(1) The insolvency court shall appoint a guardian for the insured to protect their rights in accordance with sections 77a and 77b. For the purpose of guardianship, the insolvency court takes the place of the guardianship court.

(2) The guardian shall determine the amount of the existing guarantee assets and determine and register the claims on behalf of the insured.

(3) To the extent feasible, the guardian shall consult the insured before, and notify them after, registering a claim and inform them, on request, about any facts relevant to their claims. The right of individual insured persons to register claims on their own behalf is not affected. If there is a difference between the claim filed by the insured and the claim filed by the guardian, the filing which is more favourable to the insured shall prevail until the difference has been eliminated.

(4) The insolvency administrator shall permit the guardian to inspect all books and records of the debtor, and on request document all the assets included in the guarantee assets.

(5) The guardian may request a reasonable remuneration for the discharge of these duties. The recoverable expenses and remuneration of the guardian are charged to the guarantee assets.

(6) The Supervisory Authority shall be consulted prior to the appointment of the guardian and the setting of his remuneration.

Section 79
Scope of application for sections 70 to 76

Sections 70 to 76 apply only to life insurance, health insurance of the type mentioned in section 12 and private compulsory long-term care insurance in accordance with section 12f.

Section 79a
Public law insurance undertakings

Sections 70 to 76 do not apply to public law insurance undertakings.

3. Cooperation with insurance intermediaries

Section 80
Qualifications required of persons engaged in the sale of insurance products

(1) Insurance undertakings are required to cooperate only with professional insurance intermediaries who

  1. are authorised under section 34d (1) of the German Industrial Code (Gewerbeordnung), are exempted from the authorisation requirement in accordance with section 34d (3) of the Industrial Code or are not subject to the authorisation requirement pursuant to section 34d (4) or (9) of the Industrial Code and
  2. are entitled to receive assets from or for the benefit of the policyholder or can provide proof of a financial guarantee, if such a guarantee is required by regulation pursuant to section 34d (8) no. 1 (b) of the Industrial Code.

(2) Insurance undertakings may cooperate with professional insurance intermediaries who

  1. are not subject to the authorisation requirement pursuant to section 34d (4) of the Industrial Code or
  2. are exempted from the authorisation requirement in accordance with section 34d (3) of the Industrial Code and carry on their insurance mediation activities on behalf of one or more insurance undertakings

only if the intermediaries are reliable and have well-ordered finances as set forth in section 34d (2) nos. 1 and 2 of the Industrial Code, and if the insurance undertakings ensure that the intermediaries are sufficiently qualified to mediate the specific insurance product.

(3) At the initiative of an insurance intermediary under section 34d (4) of the Industrial Code, the insurance undertaking or undertakings on whose behalf the insurance intermediary acts on an exclusive basis must communicate to the registration authority the data required to be recorded under section 11a (1) of the Industrial Code. The insurance undertaking or undertakings must ensure that the requirements set forth in section 34d (4) of the Industrial Code have been met.

(4) The insurance undertakings shall inform the registration authority pursuant to section 11a (1) of the Industrial Code without delay of the termination of cooperation with an insurance intermediary not subject to the authorisation requirement under section 34d (4) of the Industrial Code and request that the intermediary concerned be deleted from the register.

Section 80a
Complaints about insurance intermediaries

Insurance undertakings must respond to complaints about insurance intermediaries who mediate their insurance products. They must inform the competent authority under section 34d (1) of the Industrial Code of repeated complaints that can be of significant importance for assessing the reliability of an intermediary.

Section 80b
Transitional provisions

Until 1 January 2009 insurance undertakings may also cooperate with insurance intermediaries within the meaning of section 156 (1) sentence 1 of the Industrial Code, provided the insurance intermediary can produce evidence of a professional indemnity insurance as stipulated in section 34d (2) no. 3 of the Industrial Code or, if section 34d (4) of the Industrial Code applies, the insurance undertaking or undertakings on whose behalf the insurance intermediary acts on an exclusive basis has or have accepted full liability. The insurance undertaking must verify this.

V. Supervision of insurance undertakings

1. Duties and powers of the supervisory authorities

Section 81
Legal and financial supervision

(1)The Supervisory Authority monitors all business operations of insurance undertakings within the framework of general legal supervision and specific financial supervision. It ensures that the interests of the insured are adequately safeguarded and the laws applicable to the operation of insurance business are observed. It performs the duties assigned to it under this Act and other laws only in the public interest. The objective of legal supervision is the proper operation of insurance business, including observance of the rules governing supervision, insurance contracts and any other provisions concerning the insured as well as of the legal foundations for the operating plan. Within the framework of financial supervision, the Supervisory Authority shall ensure that the liabilities under the insurance contracts may be fulfilled at all times and in particular, that adequate technical provisions are established and invested in appropriate assets, that the principles of good business practice, including sound administrative and accounting procedures and adequate internal control mechanisms are observed, that the undertakings are solvent and that the other financial principles in the operating plan are complied with.

(2) The Supervisory Authority may issue any orders with respect to the undertakings, the members of their management boards and other managers, or persons controlling the undertaking, which are appropriate and necessary to prevent or remedy irregularities. An irregularity is any conduct by an insurance undertaking which conflicts with the supervisory objectives under subsection (1) above. In particular, the Supervisory Authority may prohibit combinations of loan transactions and insurance contracts if the sum insured exceeds the loan. It may also prohibit insurance undertakings or insurance intermediaries, either generally or for individual classes of insurance, from granting policyholders any special allowances in any form; it may also prohibit insurance undertakings, either generally or for individual classes of insurance, from concluding and renewing preferential contracts. The Supervisory Authority may also prohibit intermediaries from referring or concluding insurance contracts in Germany on behalf of an undertaking that does not hold the necessary authorisation to carry on the relevant class of insurance business, or that has commenced operations in violation of section 105 (2) or section 110a (2), or continued operations in violation of section 111b (2) sentence 2 or 3. The orders in accordance with sentence 4 become effective one month from their publication in the electronic Federal Gazette. The power to issue orders in accordance with sentence 1 also applies with respect to insurance holding companies within the meaning of section 104a (2) no. 4, mixed financial holding companies within the meaning of section 104k no. 3 and the persons who effectively direct the business of such companies.

(2a) (rescinded)

(3) (rescinded)

(4) The Supervisory Authority may also issue orders in accordance with subsection (2) sentence 1 directly to other undertakings if they

  • a) carry on activities, which could be the subject of an outsourcing contract (section 5 (3) no. 4), or
  • b) provide services under contracts referred to in section 53d

on behalf of an insurance undertaking.

The Supervisory Authority has the same power with respect to publishing companies that have taken out insurance with an insurance undertaking to cover the subscribers of newspapers or magazines published by them.

Section 81a
Amendment of the operating plan

The Supervisory Authority may require amendment of the operating plan before the conclusion of new insurance contracts. The Supervisory Authority may amend or annul an operating plan with effect on existing insurance contracts or terminated contracts with outstanding claims, if this is deemed necessary to safeguard the interests of the insured.

Section 81b
Solvency plan; financing plan, recovery plan

(1) If the own funds of an insurance undertaking fall, or threaten to fall, below the solvency margin, the insurance undertaking shall, upon request, submit to the Supervisory Authority for approval a plan for the restoration of a sound financial position (solvency plan). If there are any indications that the financial position will continue to deteriorate, notwithstanding the measures permitted under section 81 (2), the Supervisory Authority may, under exceptional circumstances, restrict or prohibit free disposal of the assets of the undertaking.

(2) If the own funds of an insurance undertaking fall below the amount of the guarantee fund or are not eligible for inclusion in this fund in the required amount, the undertaking shall, upon request, submit to the Supervisory Authority for approval a plan for the short-term procurement of the necessary own funds (financing plan). Additionally, the Supervisory Authority may, notwithstanding the measures permitted under section 81 (2), restrict or prohibit free disposal of the undertaking’s assets.

(2a) In the event that the conditions set forth in subsections (1) and (2) above are not fulfilled, and if there is evidence to suggest that the undertaking may not be able to fulfil its liabilities under the insurance contracts at all times, the undertaking shall, upon request, submit to the Supervisory Authority a plan detailing how it intends to improve its financial position (financial recovery plan). The plan must explain how the undertaking intends to ensure its ability to meet the solvency requirements in the near future. The financial recovery plan must, at the very least, contain the following information with regard to the subsequent three financial years:

  1. Estimates of operating costs, in particular current general expenses and commissions,
  2. A detailed list of estimated income and expenditures for primary insurance business as well as for inward and outward reinsurance business,
  3. A projected balance sheet,
  4. Estimates of the financial resources that will be available to cover insurance liabilities and the required solvency margin,
  5. The undertaking’s general policies with regard to reinsurance.

The Supervisory Authority’s right to demand further information remains unaffected. If an assessment of the financial recovery plan reveals that the rights of the policyholders are at risk because the financial situation of the insurance undertaking is deteriorating, the Supervisory Authority may, in order to ensure that the undertaking will be able to meet the solvency requirements in the near future, require that the undertaking maintain a greater amount of own funds than is called for in the regulation pursuant to section 53c (2). The financial recovery plan shall form the basis for calculating the higher required solvency margin.

(2b) In order to safeguard the interests of the insured, the Supervisory Authority may require that the value of all assets eligible as own funds be adjusted, in particular if their market value has changed considerably since the end of the preceding financial year.

(2c) In the event that the type or quality of reinsurance policies has changed considerably since the preceding financial year, or if the reinsurance contracts result in no or an insignificant transfer of risk, the Supervisory Authority may limit the reduction of the required solvency margin based on reinsurance in accordance with the regulation pursuant to section 53c (2), in order to adequately account for these circumstances.

(3) If there is a risk of an investment jeopardising the solvency of the insurance undertaking, the Supervisory Authority may also issue orders in cases where the investment is not part of the restricted assets.

(4) Subsection 2 sentence 2 applies accordingly if an insurance undertaking does not establish adequate technical provisions, fails to provide adequate coverage for its technical provisions, or deviates without the permission of the Supervisory Authority from the requirements pertaining to the location of the assets in accordance with any regulation issued pursuant to section 54 (3).

Section 81c
Irregularities in life insurance

(1) In life insurance, an irregularity jeopardising the interests of the insured is also deemed to exist if no adequate allocations are made to the provision for bonuses and rebates for the purpose of with-profits policies. This shall be assumed to be the case, in particular, if the allocations to the provision for bonuses and rebates of a life insurance undertaking, taking into account direct credit and the technical interest rate, do not meet the minimum allocation requirement subject to investment income as defined by regulation in accordance with subsection (3) below. Development of the mortality risk and the solvency need of the life insurance undertakings shall be taken into account for this purpose. Notwithstanding the measures permitted under section 81 (2) sentence 1 and section 87, the Supervisory Authority may require the life insurance undertaking to submit a plan to ensure that adequate allocations are made to the provision for bonuses and rebates (allocation plan) if the allocations to the provision do not comply with the minimum requirements pursuant to regulation.

(2) As regards life insurance written before 29 July 1994 (old policies), an irregularity jeopardising the interests of the insured shall in particular be deemed to exist, notwithstanding subsection (1) sentence 2, if the average refund rate of a life insurance undertaking in the preceding three financial years does not correspond with the standard refund rate on the basis of the average rate for all life insurance undertakings. Notwithstanding the measures permitted under section 81 (2) sentence 1 and section 87, the Supervisory Authority may, in this case, require the undertaking to submit for approval a plan to ensure that adequate allocations are made to the provision for bonuses and rebates (refund plan). The refund rate corresponds to the percentage ratio of the sum of the technical interest rate, directly credited bonuses and allocations to the provision for bonuses and rebates to the sum of the biometric risk result (Normrisikoüberschuss) and adjusted interest income.

(3) For the purpose of safeguarding the interests of the insured, the Federal Ministry of Finance is authorised, taking into account the market conditions, to issue by regulation provisions with respect to subsection (1) above concerning allocations to the provision for bonuses and rebates, in particular the minimum allocations subject to investment returns, and with respect to subsection (2) to set the amount of the standard refund rate and issue provisions concerning the calculation of the adjusted biometric risk result and adjusted interest income. This power may be delegated by regulation to the Supervisory Authority. The latter shall issue the rules in consultation with the supervisory authorities of the individual federal states.

(4) Subsections (1) to (3) shall not apply to death benefit funds.

Section 81d
Irregularities in health insurance

(1) An irregularity jeopardising the interests of the insured is also deemed to exist in health insurance operated in accordance to the technical principles of life insurance if no adequate allocations are made to the provision for bonuses. This shall, in particular, be deemed to be the case, unless there is no surplus participation due to the type of business operated, if the allocations to the provision for bonuses of a health insurance undertaking do not comply with the rate stipulated for allocations by regulation in accordance with subsection (3) below. A percentage of the sum of the annual surplus and expenses for bonuses is to be set separately for health insurance within the meaning of section 12 (1) sentence 1, and private compulsory long-term care insurance within the meaning of section 12f. For this purpose, any direct crediting and the average solvency need of the health insurance undertakings shall be taken into account.

(2) Notwithstanding the measures permitted under section 81 (2) sentence 1 and section 87, the Supervisory Authority may require the health insurance undertaking to submit a plan which will ensure adequate allocations to the provision for bonuses (allocation plan) if the allocations to the provision do not comply with the minimum requirement in accordance with any regulation pursuant to subsection (3) below.

(3) For the purpose of safeguarding the interests of the insured, the Federal Ministry of Finance is authorised to issue by regulation provisions concerning the minimum allocation to the provisions for bonuses, in particular the amount and calculation of such allocations. This power may be delegated by regulation to the Supervisory Authority. The latter shall issue the rules in consultation with the supervisory authorities of the individual federal states.

Section 81e
Discrimination

Premium rate terms and premium calculations made based on the nationality or ethnicity of the policyholders or insured persons are also deemed to be irregularities within the meaning of section 81 (2).

Section 82
Prohibition of participating interests

(1) If an insurance undertaking holds a participating interest in another undertaking that is not subject to supervision and if the nature or size of the participating interest carries the potential to imperil the insurance undertaking, the Supervisory Authority may prohibit the insurance undertaking from maintaining its participating interest or permit it to be to maintained only on condition that the undertaking consents to an audit at its own expense or at the expense of the insurance undertaking in accordance with section 341k of the Commercial Code and sections 58 and 59 of this Act. If the undertaking refuses to be audited or if the audit gives rise to any objections against the participating interest, the Supervisory Authority shall prohibit the insurance undertaking from maintaining its participating interest.

(2) A participating interest within the meaning of subsection (1) above is also deemed to exist if a member of the management or supervisory board of the insurance undertaking exercises or is in a position to exercise a significant influence on the management of another undertaking.

Section 83
Powers of the Supervisory Authority

(1) The Supervisory Authority shall be authorised

1. to require the insurance undertakings, the members of their management boards and other managers or persons controlling the undertakings to provide information about all business matters and submit or forward all business documents, such as, in particular, the general policy conditions, premium rate terms, forms and other printed documents, which an insurance undertaking uses in its dealings with policyholders, as well as enterprise agreements and outsourcing contracts (section 5 (3) nos 3 and 4),

1a. to require that primary insurance undertakings that are subject to supplementary supervision in accordance with section 104a (1) and the persons specified in no. 1 provide information and submit documents relating to business matters that are relevant to supplementary supervision; if the insurance undertaking fails to provide these documents despite a request, the Supervisory Authority may also require that those undertakings within the meaning of section 104b (2) provide information or forward or submit these documents,

1b. to require that primary insurance undertakings that are subject to supplementary supervision in accordance with part Vc and the persons specified in no. 1 provide information and submit documents relating to business matters that are relevant to supplementary supervision; if the primary insurance undertaking fails to provide this information despite a request, the Supervisory Authority may also require that a mixed financial holding company within the meaning of section 104k no. 3 provide information or forward or submit these documents; if the Supervisory Authority requires information which has already been submitted to another competent authority in accordance with the regulations relating to the undertakings included in supplementary supervision, the Supervisory Authority shall contact the authority in question,

2. to audit the business operations of the insurance undertakings on their premises, even without specific cause; within the framework of supplementary supervision in accordance with sections 104a to 104h, the Supervisory Authority may also assess the information pursuant to no. 1a above with affiliated companies, participating undertakings and their affiliated companies of the insurance undertaking that is subject to supplementary supervision; within the framework of supplementary supervision in accordance with part Vc, the Supervisory Authority may also assess the information pursuant to no. 1b above with affiliated companies, the participating undertakings and their affiliated companies of the insurance undertaking that is subject to supplementary supervision, as well as with the mixed financial holding company,

3. to conduct audits, also by way of taking part in an audit of the insurance undertaking in accordance with section 341k of the Commercial Code and itself make the determinations it deems necessary; this does not apply to insurance undertakings recognised as small mutual associations (section 53),

4. to have persons take part in the audits performed by itself in accordance with nos. 2 and 3 above, who may be appointed as auditors pursuant to section 341k in conjunction with section 319 of the Commercial Code, or to commission such persons to perform audits in accordance with nos. 2 and 3; the provisions of section 323 of the Commercial Code regarding auditors shall apply accordingly to these persons,

5. to dispatch to meetings of the supervisory board and shareholders’ meetings or meetings of the senior representative body representatives who shall be granted the right to speak on request,

6. to require that the meetings under no. 5 above are convened and certain subjects are included in the agenda for resolution.

The undertakings shall tolerate measures taken in accordance with sentence 1 nos. 2 to 4.

(2) If there is reason to assume that a person is carrying on insurance business without authorisation, the Supervisory Authority may, to clarify the matter, require that any such person and in case of a legal person, also the members of its corporate bodies provide information and submit documents relating to business matters. In these cases it may, to clarify the matter, also conduct audits on the premises where the relevant activities are assumed to be occurring.

(3) The staff of the Supervisory Authority and any persons in accordance with subsection (1) sentence 1 no. 4 above are permitted access to the premises of the insurance undertaking to perform the audits pursuant to subsection (1) sentence 1 nos. 2 and 3 above, and in the cases mentioned in subsection (1) sentence 1 no. 5 above. The fundamental right granted by Article 13 of the German Basic Law (Grundgesetz) is, to this extent, restricted. Those concerned shall tolerate measures taken in accordance with sentence 1 above.

(4) The staff of the Supervisory Authority are permitted access to the premises referred to in subsection (2) sentence 2, to perform the audits in accordance with subsection (2). Subsection (3) sentences 2 and 3 apply accordingly. If the premises mentioned in sentence 1 are also used for residential purposes, a judicial search warrant is required. This warrant is issued by the local court with competent jurisdiction for the district in which the premises to be searched are located. Sentences 3 and 4 also apply to the audits under subsection (3) above, if the premises are also used for residential purposes or if the business documents are located at other premises which are used for residential purposes by persons required to provide information pursuant to subsection (1) sentence 1 no. 1 above.

(5) If a person

  1. intermediates or has intermediated insurance contracts for an insurance undertaking in a capacity as insurance agent or insurance broker, or
  2. carries on activities for an insurance undertaking, which could be the subject of an outsourcing contract (section 5 (3) no. 4, section 119 (2) no. 6), or
  3. provides services under contracts in accordance with section 53d, subsection (1) sentence 1 nos. 1, 2, and 4, subsection (3) and subsection (4) sentences 3 and 4 apply accordingly. As regards the cases under no. 1, this applies only insofar as it is important for the assessment of the business operations and financial position of the insurance undertaking, and compliance with the anti-money-laundering obligations by insurance brokers within the meaning of section 1 (4) sentence 2 of the Money Laundering Act of 25 October 1993 (BGBl. I p. 1770), last amended by Article 11 of the law of 15 December 2003 (BGBl. I p. 2676). If a person intermediates or has intermediated insurance contracts for an undertaking that is not authorised to carry on insurance business, subsection (2) and subsection (4) sentences 1 to 4 apply accordingly.

(5a) The powers of the Supervisory Authority as specified in subsection (1) sentence 1 nos. 1, 2 and 4, subsection (3) and section 104 (1) sentence 2 second half-sentence also extend to

  1. persons and undertakings who have communicated the intention to acquire participating interests pursuant to section 104 (1) or who are specified in an application for authorisation pursuant to section 5 (2) as holders of qualified participating interests,
  2. the holders of qualified participating interests in an insurance undertaking and in undertakings controlled by the insurance undertaking,
  3. persons and undertakings in relation to whom there is evidence to suggest that these are persons or undertakings within the meaning of no. 2 above, and
  4. persons and undertakings who are affiliated with a person or an undertaking within the meaning of numbers 1 to 3 pursuant to section 15 of the Stock Corporation Act.

(5b) The Supervisory Authority may take measures in accordance with subsection (1) sentence 1 nos. 5 and 6 above in relation to the persons and undertakings specified in subsection (5a) above if there is evidence of grounds for a prohibition pursuant to section 104 (1a) sentence 1 nos. 1 to 3. Those concerned shall tolerate these measures.

(6) Any persons required to provide information in accordance with subsections (1), (2), (5), (5a) or (5b) above may refuse to answer any questions which would subject them or any of their relatives in accordance with section 383 (1) nos. 1 to 3 of the Code of Civil Procedure (Zivilprozessordnung) to the risk of criminal prosecution or of proceedings under the German Regulatory Offences Act (Gesetz über Ordnungswidrigkeiten).

Section 83a
Special commissioner

(1) The Supervisory Authority may fully or partially transfer the powers held by the bodies of an insurance undertaking by virtue of law, or in accordance with the memorandum and articles of association or rules of procedure to a special commissioner, if

  1. there is evidence to suggest that one or more managers do not fulfil the requirements of section 7a (1), or
  2. the insurance undertaking has consistently violated provisions of this Act or the regulations or orders issued to implement this Act, or
  3. there is evidence to suggest that the ability of the undertaking to at all times fulfil its liabilities under the insurance contracts is under threat.

(2) The insurance undertaking is charged with any costs arising from the appointment of the special commissioner, including the remuneration to be paid. The amount of this remuneration is set by the Supervisory Authority. If the insurance undertaking is temporarily not in a position to pay this remuneration, the Supervisory Authority may make advance payments to the special commissioner.

Section 84
Secrecy

(1) Persons employed or commissioned by the insurance supervisory authorities and the members of the Insurance Advisory Council (section 92) may not pass on any confidential information obtained in connection with their activities to any other person or authority. This also applies to any other persons who gain access to the information mentioned in sentence 1 by way of official reporting. Sentences 1 and 2 do not apply to information passed on in summary or aggregate form, by which it is impossible to identify the individual insurance undertakings.

(2) The secrecy requirement in accordance with subsection (1) sentence 1 above, shall not prohibit the exchange of information with the competent authorities of other member states and EEA states and the Commission in compliance with the directives of the Council of the European Communities applicable to the insurance undertakings. The information obtained through such exchange is subject to the secrecy requirement of subsection (1) sentence 1. An exchange of information with the competent authorities of non-member states within the meaning of section 105 (1) sentences 2 and 3 is only permitted if these authorities and the persons commissioned by them are subject to a secrecy requirement in accordance with subsection (1) sentence 1 above.

(3) The supervisory authorities may use information obtained by virtue of subsections (1) and (2) above only for the following purposes:

  1. For the examination of an application by an insurance undertaking for the granting of authorisation,
  2. For the monitoring of the activities of an insurance undertaking,
  3. For orders by the supervisory authority and for prosecution and punishment by the supervisory authority of administrative offences,
  4. Within the framework of an administrative procedure concerning remedies against a decision by the supervisory authorities,
  5. Within the framework of proceedings in administrative courts, insolvency courts, criminal prosecuting authorities or courts having competent jurisdiction for administrative fines and criminal matters.

(4) The secrecy requirement in accordance with subsection (1) sentence 1 does not prohibit, in particular, the passing-on of information to

1. criminal prosecuting authorities or courts having competent jurisdiction for administrative fines and criminal matters or,

2. bodies, and persons commissioned by such bodies entrusted by law or by order of public authorities with the supervision of insurance undertakings, insurance intermediaries, credit institutions, financial services institutions, investment companies, other financial institutions, the financial markets or the payments system,

2a. central banks,

3. agencies handling the liquidation or insolvency of an insurance undertaking, credit institution, a financial services institution, an investment company or other financial institution,

4. persons responsible for the statutory auditing of the accounts of insurance undertakings, credit institutions, financial services institutions, investment companies or other financial institutions, as well as agencies supervising these auditors, or

5. institutions for the management of guarantee schemes,

provided these bodies require the information for the performance of their functions. The obligation to observe secrecy as specified in subsection (1) sentence 1 shall apply accordingly to persons employed by such bodies. If the agency or institution in question is situated in another country, the information may not be passed on, unless the body in question and the persons commissioned by it are subject to a secrecy requirement in accordance with subsection (1) sentence 1. Agencies situated in a non-member state within the meaning of section 105 (1) sentences 2 and 3 shall be informed that the information forwarded may be used solely for the purpose for which it was passed on. Information obtained from other countries may only be passed on with the express permission of the competent agencies that have forwarded the information, and only for purposes approved by these agencies.

(4a) The provisions of sections 93, 97 and 105 (1), 111 (5) in conjunction with section 105 (1) and section 116 (1) of the German Fiscal Code (Abgabenordnung) shall not apply to the persons referred to in subsection (1), to the extent that they are acting in a capacity to implement this Act. This does not apply if the fiscal authorities require the information for criminal proceedings and any associated tax assessment.

(5) Confidential information received by the Supervisory Authority from the bodies mentioned in subsection (2) sentence 1, and subsection (4) nos. 2 to 4 may not be passed on by way of official reporting (subsection (1) sentence 2 above) without approval of the competent authority which has given the information. The same applies to information obtained during an on-site inspection of a branch in another member state or EEA state (section 13b); in this case, approval by the competent authority of the member state or EEA state where the inspection was carried out is required.

(6) This is without prejudice to the provisions of the German Federal Data Protection Act (Bundesdatenschutzgesetz).

Section 85
Supervision of business conducted abroad

Supervision is not limited to business carried on in Germany, but also covers business conducted in other member states of the European Community and other signatories to the EEA Agreement via branches or cross-border provision of services. While financial supervision is the sole responsibility of the Supervisory Authority, any supervisory function other than financial supervision is performed in cooperation with the supervisory authority of the other member state or EEA state.

Section 85a
Consumer information concerning business conducted abroad

For insurance business conducted in the member states of the European Community and the other signatories to the EEA Agreement, sections 10 and 10a apply if the insurance contracts are subject to German law.

Section 86
Supervision of liquidation and run-off

Supervision shall also extend to the liquidation of an undertaking and the run-off of existing insurance contracts if business operations are prohibited or voluntarily discontinued or if the authorisation to carry on business is revoked.

Section 87
Revocation of authorisation, dismissal of managers

(1) The Supervisory Authority may revoke the authorisation for certain classes of insurance or for the whole of business operations if

  1. the undertaking no longer satisfies the requirements for authorisation,
  2. the undertaking seriously breaches its obligations under the law or the operating plan, or
  3. there is evidence of irregularities so serious that continuation of business will jeopardise the interests of the insured.

(2) The Supervisory Authority may revoke the authorisation for the whole of business operations if the undertaking is unable to carry out the measures set forth in the solvency plan or financing plan pursuant to section 81b (1) or (2), within the prescribed period.

(2a) The authorisation shall be revoked upon opening of insolvency proceedings. Revocation of the authorisation shall not bear upon actions of the insurance undertaking legally required as part of the insolvency proceedings.

(3) Revocation of the authorisation means that the undertaking is prohibited from writing new business, increasing or renewing existing policies.

(4) If the authorisation is revoked, the Supervisory Authority shall take all appropriate measures to safeguard the interests of the insured. It may, in particular, restrict or prohibit free disposal of the assets of the undertaking and appoint qualified persons to manage the assets.

(5) For mutual societies, a revocation of authorisation for the whole of business operations has the same effect as a dissolution resolution. The revocation of authorisation is to be entered in the commercial register upon notification by the Supervisory Authority.

(6) The Supervisory Authority may require the dismissal of managers, and prohibit these managers from performing their duties if

  1. evidence becomes known, which would also justify the refusal of an authorisation in accordance with section 8 (1) sentence 1 no. 1,
  2. the managers intentionally or negligently violate the provisions of this Act, regulations issued to implement this Act, or orders of the Supervisory Authority, and persist in this conduct despite a warning from the Supervisory Authority.

(7) If the Supervisory Authority should become aware of evidence that a person who effectively directs the business of an insurance holding company within the meaning of section 104a (2) no. 4 is not reliable or is not adequately qualified to manage the business, section 104u (1) no. 2 in conjunction with subsections (2) to (4) applies accordingly.

Section 87a
Abuse in co-insurance

If an insurance undertaking abuses of the possibility under section 111 (2) as lead insurer to have insurance undertakings from other member states of the European Community or other signatories to the EEA Agreement participate in co-insurance contracts, the Supervisory Authority may give any order necessary to remedy the abuse with respect to this insurance undertaking. In serious cases, the Supervisory Authority may also prohibit the insurance undertaking from concluding such co-insurance contracts or take the measures specified under section 87 (1). Section 87 (3) to (5) above apply accordingly. Abuse, in particular, shall be deemed to exist in cases where an insurance undertaking does not fulfil the duties generally attributable to a lead insurer or where it invites insurance undertakings that are not authorised to do so in accordance with section 111 (2) to participate in the contract.

Section 88
Petition for the opening of insolvency proceedings; notification by the management board

(1) A petition for the opening of insolvency proceedings against the insurance undertaking may only be filed by the Supervisory Authority.

(1a) Only the authorities of the home member state may open insolvency proceedings against an insurance undertaking from the European Economic Area. If insolvency proceedings are opened against an insurance undertaking in a member state or EEA state, the proceedings shall be recognised notwithstanding the requirements pursuant to section 343 (1) of the Insolvency Code.

(1b) Secondary insolvency proceedings or other territorial proceedings relating to the insurance undertaking domiciled in another member state or EEA state are prohibited. This does not apply to branches of insurance undertakings from non-member states within the meaning of 105 (1) and (2), or in the cases referred to in section 110d.

(2) The management board shall notify the Supervisory Authority as soon as the insurance undertaking has become insolvent. This shall apply accordingly if the assets of the insurance undertaking are no longer sufficient to cover its liabilities. This notification requirement shall replace the duty of the management board in accordance with other statutory requirements to file a petition for the opening of insolvency proceedings in the case of insolvency or overindebtedness. If in the case of mutual societies and public law insurance undertakings operating on the principle of mutuality which impose supplementary contributions or cost allocations, any called-for payments of supplementary contributions or cost allocations have been outstanding for five months after their due date, the management board shall determine whether the undertaking would be overindebted if the supplementary contributions or cost allocations not paid in cash are disregarded; if this is the case, the board shall inform the Supervisory Authority within one month after expiry of the specified period. Liquidators shall be subject to the same duties.

(3) The insolvency court must immediately forward the order to open insolvency proceedings to the Supervisory Authority, which shall, in turn, immediately inform the supervisory authorities of the other member states and EEA states. If the Supervisory Authority receives a notification of this nature from the supervisory authorities of another member state or EEA state, it is entitled to publish this decision. Notwithstanding the publication provided for in section 30 of the Insolvency Code, the insolvency court must publish excerpts from the order to open insolvency proceedings in the Official Journal of the European Union. The publication pursuant to section 30 of the Insolvency Code and the publication in the Official Journal of the European Union must include information of the court having competent jurisdiction, the governing law and the appointed insolvency administrator.

(4) The Supervisory Authority can demand information on the status of proceedings from the insolvency court and the insolvency administrator at any time. The Supervisory Authority is obliged to inform the supervisory authority of another member state or EEA state upon request concerning the status of the insolvency proceedings.

(5) If the Supervisory Authority petitions for the opening of insolvency proceedings against a branch of an insurance undertaking in a non-member state within the meaning of section 105 (1) sentence 1, it shall immediately inform the supervisory authorities of the other member state or EEA states in which the insurance undertaking also has a branch. The individuals and authorities involved shall endeavour to coordinate with each other.

Section 88a
Provision of information to creditors

(1) When the court has entered the order opening insolvency proceedings, the creditors shall be sent a form bearing the title “Invitation to lodge a claim and submit observations relating to a claim; time limits to be observed!” in all official languages of the European Community and the other signatories to the EEA Agreement. This form shall be published in the electronic Federal Gazette by the Federal Ministry of Justice and shall contain, in particular, the following information:

  1. The time limits to be observed and the penalties laid down with regard to those time limits;
  2. Who is empowered to accept the lodgement of claims or observations relating to claims;
  3. Any other measures laid down;
  4. The importance that the lodging of claims has for creditors whose claims are preferential or those whose claims are secured in rem and the extent to which these creditors must lodge their claims;
  5. The general effects of the insolvency proceedings on the insurance contracts,
  6. The date on which the insurance contracts or operations are no longer legally valid, and
  7. The rights and duties of the insured with regard to the contract or operation in question.

(2) If a known creditor who has his habitual residence, domicile or head office in another member state or EEA state is the owner of a claim as a policyholder, insured, beneficiary or injured third party with a direct claim against the insurance undertaking, he must be informed in the official language of the member state or EEA state where he has his habitual residence, domicile or registered office.

(3) Creditors who have their habitual residence, domicile or registered office in another member state or EEA state can lodge their claims in an official language of the country in question. In such cases, the claim must bear the German title “Anmeldung und Erläuterung einer Forderung” (Lodgement of claim and observations relating to a claim).

(4) The insolvency administrator shall inform the creditors concerning the progress of the insolvency proceedings on a regular basis and in an appropriate form.

Section 89
Prohibition of payments; reduction of benefits

(1) If an audit of the management and financial position of an undertaking finds that the undertaking will no longer be able to permanently meet its liabilities, but that it seems to be in the best interest of the insured to avoid insolvency proceedings, the Supervisory Authority may issue the necessary orders and require the representatives of the undertaking to change the bases for the operating principles within a certain period, or to otherwise remedy the deficiencies. All kinds of payments, in particular the payment of insurance benefits, profit distributions and, for life insurance, surrenders or policy loans or advances may be temporarily prohibited. The provisions of the Insolvency Code relating to the protection of payment and securities settlement, of collateral security held by central banks and of financial collateral arrangements shall apply accordingly.

(2) Subject to subsection (1) sentence 1 above, the Supervisory Authority may, if necessary, reduce the liabilities of a life insurance undertaking under its insurance contracts in accordance with its financial situation. The reductions required by the Supervisory Authority may be differentiated if this is justified by the circumstances, in particular if in the case of several insurance lines the individual lines have contributed differently to the emergency situation of the undertaking. For the purpose of the reductions, in cases where the premium reserve is established for the individual insurance contracts, these are initially reduced, after which the sums insured are re-determined, while in the absence of such provisions the sums insured are reduced directly. The obligation of the policyholders to continue payment of the agreed premiums is not affected by the reduction.

(3) The measures in accordance with subsections (1) and (2) above may be restricted to a separate account within the guarantee assets (section 66 (7)).

Section 89a
No suspensive effect

Objections to and actions to annul measures taken in accordance with section 1b (4) sentence 1 and subsection (5), section 58, section 66 (3), section 81 (2) in conjunction with section 5 (1) or section 7 (2), section 81b (1) sentence 2, subsection (2) sentence 2, subsection (2a) sentence 5, subsections (2b), (2c) and (4), sections 83, 83a, 87 (1) nos. 2 and 3, subsections (4) and (6), sections 88, 89, 104 (1a) sentence 1, subsection (2) sentences 1 to 3 and subsection (4), section 104r (4) sentence 5, section 104t, section 104u (1), section 121a (1) in conjunction with section 81b (1) sentence 2, subsection (2) sentence 2 and subsection (4), sections 83, 83a (1) and (2), section 104 (1a) sentence 1, subsection (2) sentences 1 to 3, section 121a (3), section 121c (5) have no suspensive effect.

Section 89b
Notification of the supervisory authorities about restructuring measures, publication of orders by the Supervisory Authority

(1) Prior to issuing an order restricting free disposal in accordance with section 81b (4), the Supervisory Authority shall inform the supervisory authorities of all member states and EEA states; it shall also inform these authorities of the specific consequences of such measures. This also applies to measures taken in accordance with section 81 (2) sentence 1, section 83a, section 87 (4) sentence 2, sections 87a and 89, also in conjunction with sections 104h, 105 (3), section 110d (2) and (3), section 111b (4) and (5), as well as section 113 which describe restructuring measures (subsection (3) below); if the notification specified above cannot be made in such cases, the supervisory authorities must be immediately informed as soon as the measure has been ordered.

(2) Measures taken in accordance with the provisions under subsection (1) above, against which remedies may be sought, must also be published in the Official Journal of the European Communities, without the section stating the grounds for the measures in question. This publication must include information as to where the grounds for the measures in question can be accessed, and the applicable law. The measures need not be published in order to take effect.

(3) Restructuring measures within the meaning of subsections (1) and (2) are all measures intended to secure or restore the financial position of the insurance undertaking and which impair existing third party rights. This also includes measures which allow the suspension of payment, the suspension of enforcement measures or a reduction of claims. In respect of the restructuring measures, sections 336, 337, 338, 340 and 351 (2) of the Insolvency Code shall apply accordingly to contracts to use or acquire immoveable property, employment relationships and contracts, set-offs, repurchase agreements within the meaning of section 340b of the Commercial Code, to novation and netting agreements and to third party rights in rem, unless otherwise set forth in this Act.

(4) Subsections (1) and (2) shall not apply if and to the extent that only the rights of shareholders, members or employees of an insurance undertaking could be impaired in one of these respects. Small mutual associations (section 53) and undertakings that are not involved in cross-border business are not subject to the publication and notification requirements under subsections (1) and (2); this does not apply if the undertaking in question offers motor third party liability insurance.

Section 90
(rescinded)

Section 91
(repealed)

Section 92
Insurance Advisory Council

(1) An Insurance Advisory Council within the Supervisory Authority composed of insurance experts assists in the exercise of supervision.

(2) The Insurance Advisory Council comprises eight members equally representing the different insurance classes of the insurance industry, of which two represent insurance sales, as well as eight policyholder representatives and eight representatives from actuarial sciences and actuarial associations. The policyholder representatives include four representatives of consumer protection organisations, as well as one representative each for insurance brokers, industry, mid-range societies and labour unions.

(3) The members of the Insurance Advisory Council are appointed by the Federal Ministry of Finance for a period of five years. They may be reappointed once.

(4) The members serve in an honorary capacity without remuneration; for attendance of the meetings, they receive daily allowances and reimbursement of their travel expenses, the rates of which are set by the Federal Ministry of Finance.

(5) The Federal Ministry of Finance issues, by regulation not subject to approval by the Bundesrat, further details about the procedures of the Insurance Advisory Council. This power may be delegated by regulation to the Supervisory Authority.

Section 93
(rescinded; see section 17 of the Act Establishing the Federal Financial Supervisory Authority (Finanzdienstleistungsaufsichtsgesetz)

Section 94
(repealed)

Section 95
(repealed)

Section 96
(repealed)

Section 97
(repealed)

Section 98
(repealed)

Section 99
(repealed)

Section 100
(repealed)

Section 101
Costs of supervision

(1) The costs incurred by the Federal Insurance Supervisory Office (Bundesaufsichtsamt für das Versicherungswesen) and for proceedings before it shall be reimbursed to the Federal Government by the insurance undertakings subject to its supervision through the payment of fees in accordance with subsection (2) below; the costs also include the expenses from the commissioning of auditors in accordance with section 83 (1) no. 4. To the costs shall be added any fees which were not received in the preceding year.

(2) The total amount of the fees shall equal nine-tenths of the costs under subsection (1) above. A rate of one one-thousandth of the premium income subject to fee payment shall not be exceeded. The fees are determined based on the gross income (gross premiums, contributions, advance and supplementary contributions, cost allocations) realised by the primary insurance undertakings in the previous financial year under insurance contracts concluded in the member states of the European Community and other signatories to the EEA Agreement and which undertakings exclusively operating reinsurance business realised under insurance policies written in Germany, but after deduction of any refunded surplus or profit participation.

(3) The Federal Insurance Supervisory Office determines annually a fee rate expressed as a thousandth quotient of premium income subject to fee payment. In doing so it may round down the income subject to fees and the fees in accordance with principles to be approved by the Federal Ministry of Finance. The Federal Ministry of Finance may set a minimum fee.

(4) The fees are determined by the Federal Insurance Supervisory Office; it sends to the undertakings an overview of the fee distribution and requires them to pay their fees to the Federal Chief Cash Office (Bundeshauptkasse) within a period of one month. After expiry of this period, any amounts due may be collected in the same manner as public levies.

(5) For the period until 30 April 2002, the version of subsections (1) to (4) valid until the day before entry into force of the Act Establishing the Federal Financial Supervisory Authority of 22 April 2002 (BGBl. I p. 1310) shall apply to the expenses incurred by the Federal Insurance Supervisory Office.

Section 102
Reimbursement of cash expenses

(rescinded)

Section 103
Publications

(1) The Supervisory Authority annually publishes information about the state of affairs of the insurance undertakings subject to its supervision and its observations with respect to the insurance sector.

(2) It also regularly publishes its legal and administrative principles.

(3) The publications pursuant to subsections (1) and (2) above may be made via an electronic informational media.

Section 103a
Statistical data in health insurance

(1) As of 1 January 1996 at the latest, the Supervisory Authority shall publish general probability tables not related to specific premium scales, as well as other relevant statistical data for health insurance within the meaning of section 12 (1). Section 103 (3) applies accordingly.

(2) Insurance undertakings domiciled in Germany that carry on health insurance are required to annually communicate to the Supervisory Authority the data required for the publication pursuant to subsection (1) above on the basis of data from their insurance portfolios. The insurance portfolios and data to be taken into account shall be set forth in the regulation referred to in section 12c.

Va. Supervision of the holders of qualified participating interests in insurance undertakings

Section 104
Scope of supervision of holders of qualified participating interests

(1) Any person who intends to hold a qualified participating interest (section 7a (2) sentence 3) in a primary insurance undertaking shall immediately notify the Supervisory Authority of the amount of the intended qualified participating interest. In this notification, the person shall indicate all the facts necessary to assess the reliability of the person and the names of the persons or undertakings from whom the participating interest is to be acquired; the documents mentioned under section 5 (5) no. 6 (c) and (d) shall be submitted to the Supervisory Authority on its request and audited by a certified public accountant to be designated by the Supervisory Authority at the expense of the prospective holder. If the acquirer is a legal person or partnership, the holder of a qualified participating interest shall immediately give notice of every newly appointed legal representative or representative according to the memorandum and articles of association or new personally liable partners, including all the facts necessary to assess their reliability. Furthermore, the holder of a qualified participating interest shall immediately notify the Supervisory Authority of any intention to increase the amount of the qualified participating interest to the extent that the thresholds of 20 percent, 33 percent or 50 percent of the voting rights or nominal capital are reached or exceeded, or to the extent that the insurance undertaking becomes a controlled undertaking (section 7a (2) sentence 8).

(1a) Within three months of the receipt of the full notification, the Supervisory Authority may prohibit the intended acquisition of or increase in the qualified participating interest if there is evidence to suggest that

  1. the notifying party or, if the notifying party is a legal person, a legal representative or representative according to the memorandum and articles of association or, if the notifying party is a partnership, a partner, is not reliable or for any other reason does not meet the demands required in the interest of ensuring a sound and prudent management of the primary insurance undertaking; this shall also apply if the acquirer of the qualified participating interest is unable to provide evidence of suitable and adequate funding for the implementation of its plans for the continuation and development of the business of the primary insurance undertaking, and that the interests of the insured are adequately safeguarded; moreover, section 8 (1) sentence 1 no. 2 second half-sentence shall apply accordingly;
  2. the acquisition of or increase in the qualified participating interest would result in integration of the primary insurance undertaking into a group structure with the holder of the qualified participating interest, which would hinder effective supervision of the insurance undertaking, due to the ownership structure or poor economic transparency; or
  3. the acquisition of or increase in the qualified participating interest would make the primary insurance undertaking a subsidiary of an insurance undertaking domiciled in a non-member state within the meaning of section 105 (1) sentences 2 and 3, which is not effectively supervised in the country where it has its registered office or head office or whose competent supervisory body is not willing to cooperate satisfactorily.

If the acquisition is not prohibited, the Supervisory Authority may set a time limit after which the person or partnership who has submitted the notification pursuant to subsection (1) sentence 1 or 4 above shall notify the Supervisory Authority as to whether or not the intended acquisition has been carried out. The person or partnership shall submit the notification to the Supervisory Authority immediately after the relevant period has expired.

(1b) The Supervisory Authority is also entitled to require the submission of information and documents pursuant to subsection (1) sentences 2 to 4 even after expiry of the period pursuant to subsection (1a) sentence 1.

(2) To the extent that there is evidence to suggest that the holder of a qualified participating interest does not meet the requirements under section 7a (2) sentences 1 and 2, or that the affiliation with other persons or companies would hinder effective supervision of the primary insurance undertaking, due to the ownership structure or poor economic transparency, the Supervisory Authority may impose the measures permitted under subsection (1) sentence 2 second half-sentence. The Supervisory Authority may prohibit the holder of a qualified participating interest, as well as the undertakings controlled by it, from exercising its voting rights and stipulate that disposition of the shares is subject to the approval of the Supervisory Authority if

  1. the prerequisites exist for a prohibition pursuant to subsection (1a) sentence 1 above,
  2. the holder of the qualified participating interest has not fulfilled the duty pursuant to subsection (1) sentences 1 and 4 to notify the Supervisory Authority beforehand and has not subsequently made such notification within a period of time set by the Supervisory Authority, or
  3. if the participating interest has been acquired or increased in violation of subsection (1a) sentence 3, or despite an enforceable prohibition pursuant to subsection (1a) sentence 1 above.

In the cases of sentence 2, exercise of the voting rights may be transferred to a trustee. In exercising the voting rights, the trustee shall take into account the need to ensure sound and prudent management of the insurance undertaking. In the cases specified in sentence 2, the Supervisory Authority may, over and above the measures specified in sentence 2, commission a trustee to sell the shares, to the extent that they constitute a qualified participating interest, if the holder of the qualified participating interest does not provide proof of a reliable buyer to the Supervisory Authority within an appropriate period to be set by the latter; the holders of the shares shall cooperate in the sale to the extent necessary. The trustee is appointed by the competent court of the place where the insurance undertaking has its registered office, at the request of the insurance undertaking, a holder in the undertaking or the Supervisory Authority. If sentence 2 no longer applies, the Supervisory Authority shall file for a recall of the trustee. The trustee is entitled to be refunded for reasonable expenses and to remuneration for services rendered. The court determines the amount of the expenses and remuneration at the request of the trustee; no further appeal shall be permissible. The Federal Government advances the expenses and remuneration; the holder of the qualified participating interest and the insurance undertaking are jointly and severally liable for the payments made by the Federal Government.

(2a) The Supervisory Authority shall consult with the competent authorities of the other member states or EEA states before imposing measures in accordance with subsection (1a) sentence 1 above, if the acquirer of the qualified participating interest is

  1. a primary insurance undertaking within the meaning of section 104k no. 2 (a) second half-sentence, a deposit-taking credit institution within the meaning of section 1 (3d) sentence 1 of the Banking Act, an e-money institution within the meaning of section 1 (3d) sentence 4 of the Banking Act or a securities trading firm within the meaning of section 1 (3d) sentence 2 of the Banking Act, which is authorised to carry on business in another member state or EEA state
  2. the parent of a primary insurance undertaking within the meaning of section 104k no. 2 (a) second half-sentence, a deposit-taking credit institution within the meaning of section 1 (3d) sentence 1 of the Banking Act, an e-money institution within the meaning of section 1 (3d) sentence 4 of the Banking Act or a securities trading firm within the meaning of section 1 (3d) sentence 2 of the Banking Act, which is authorised to carry on business in another member state or EEA state, or
  3. a person who controls a primary insurance undertaking within the meaning of section 104k no. 2 (a) second half-sentence, a deposit-taking credit institution within the meaning of section 1 (3d) sentence 1 of the Banking Act, an e-money institution within the meaning of section 1 (3d) sentence 4 of the Banking Act or a securities trading firm within the meaning of section 1 (3d) sentence 2 of the Banking Act, which is authorised to carry on business in another member state or EEA state,

and provided that the primary insurance undertaking within the meaning of section 104k no. 2 (a) second half-sentence, deposit-taking credit institution within the meaning of section 1 (3d) sentence 1 of the Banking Act, e-money institution within the meaning of section 1 (3d) sentence 4 of the Banking Act or securities trading firm within the meaning of section 1 (3d) sentence 2 of the Banking Act, in which the acquirer intends to hold a participating interest, would come under the control of this acquirer as a result of the acquisition. The Supervisory Authority shall inform the competent authorities of the other country of any measures taken in accordance with subsection (2) sentence 1 in relation to acquirers within the meaning of sentence 1; if there is no reason to believe that such delay will negate or significantly impair the efficacy of the measure, it shall consult them beforehand.

(3) Anyone intending to give up a qualified participating interest in a primary insurance undertaking or to reduce the amount of a qualified participating interest beyond the thresholds of 20 percent, 33 percent or 50 percent of the voting rights or the capital, or to change the participating interest in such a way that the primary insurance undertaking is no longer a controlled undertaking, shall immediately notify the Supervisory Authority. This notification shall include the remaining amount of the participating interest. The Supervisory Authority may set a time limit after which the person or partnership who has submitted the notification pursuant to sentence 1 must inform the Supervisory Authority as to whether or not the shareholding has been reduced or changed as intended. The person or partnership who has submitted the notification pursuant to sentence 1 to the Supervisory shall submit that information to the Supervisory Authority immediately after the relevant period has expired.

(4) The Supervisory Authority shall temporarily prohibit or limit the acquisition of a direct or indirect participating interest in a primary insurance undertaking as a result of which the primary insurance undertaking would become the subsidiary of an undertaking from a non-member state within the meaning of section 105 (1) sentences 2 and 3, if a decision by the Commission or Council of the European Communities to this effect is made in accordance with Article 29b (4) of Directive 73/239/EEC or Article 59 (4) of the Life Insurance Directive. The temporary prohibition or limitation must not exceed a period of three months from the date of the resolution. If the Council of the European Communities decides to extend the period pursuant to sentence 2, the Supervisory Authority shall take due account of such extension and prolong the temporary prohibition or limitation accordingly.

(5) Section 5a, regarding consultation with the competent authorities of another member state or EEA state applies accordingly.

(6) The Federal Ministry of Finance is authorised to issue by regulation provisions with respect to the nature, extent, and date of submission of the information to be provided in accordance with subsections (1) and (3) above, if this is required for the Supervisory Authority to fulfil its duties. This power may be delegated by regulation to the Supervisory Authority. The latter issues the rules in consultation with the supervisory authorities of the individual federal states.

Vb. Supplementary supervision of insurance undertakings that are part of an insurance group

Section 104a
Definitions

(1) The following primary insurance undertakings are subject to supplementary supervision:

  1. The participating undertakings of at least one primary insurance undertaking, reinsurance undertaking or insurance undertaking from a non-member state (participating primary insurance undertakings),
  2. The subsidiaries of an insurance holding company, a reinsurance undertaking or an insurance undertaking from a non-member state,
  3. The subsidiaries of a mixed insurance holding company.

(2) Pursuant to subsection (1)

  1. participating undertakings are: Undertakings that are parents that hold a participating interest or that are members of a horizontal group. Participating interests in this sense are shares held in other undertakings in accordance with section 271 (1) sentence 1 of the Commercial Code, or at least the direct or indirect holding of 20 % or more of the voting rights or capital of an undertaking. Parent undertakings are defined as undertakings which are parent companies within the meaning of section 290 of the Commercial Code or which effectively exercise a dominating influence over another undertaking, irrespective of their legal form or place of registered office. A horizontal group is defined as a group in which an undertaking is affiliated to one or more other undertakings in a way that

    1. subjects all of them to common control, based on a provision in the memorandum and articles of association or a contract, or
    2. their administrative, management and supervisory bodies are composed primarily of the same persons, who hold their posts during the financial year, and for the time periods set forth in section 290 (1) of the Commercial Code, provided the undertakings are or would be required to prepare consolidated financial accounts,
  2. subsidiaries are: undertakings which are defined as subsidiaries within the meaning of section 290 of the Commercial Code or undertakings over which a parent company effectively exercises a dominant influence, irrespective of their legal form or place of registered office; every subsidiary of a subsidiary is also considered to be a subsidiary of the parent,
  3. reinsurance undertakings are: undertakings whose business is accepting risks ceded by a primary insurance undertaking or another reinsurance undertaking, and which are neither primary insurance undertakings, nor primary insurance undertakings from a non-member state within the meaning of section 105 (1) sentences 2 and 3,
  4. insurance holding companies are: parent undertakings which are not mixed financial holding companies within the meaning of section 104k no. 3, whose business centres on the acquisition and holding of participating interests in subsidiaries that are exclusively or mainly primary insurance undertakings, reinsurance undertakings or insurance undertakings from non-member states within the meaning of section 105 (1) sentences 2 and 3, at least one of which is a primary insurance undertaking,
  5. mixed insurance holding companies are: parent undertakings other than primary insurance undertakings or insurance undertakings from non-member states within the meaning of section 105 (1) sentences 2 and 3, and other than reinsurance undertakings, insurance holding companies or mixed financial holding companies within the meaning of section 104k no. 3, the subsidiaries of which include at least one primary insurance undertaking,
  6. insurance undertakings from a non-member state are: undertakings pursuant to section 105 (1).

Section 104b
Included undertakings

(1) Sections 104c to 104h above apply to primary insurance undertakings that are subject to supplementary supervision.

(2) The following are included in the supplementary supervision:

  1. Affiliated companies of the primary insurance undertaking,
  2. Participating undertakings in the primary insurance undertaking,
  3. Affiliated companies of a participating undertaking in the primary insurance undertaking.

Affiliated companies in this sense are members of a horizontal group within the meaning of section 104a (2) no. 1 sentence 4, subsidiaries within the meaning of section 104a (2) no. 2 or other undertakings in which a participating interest within the meaning of section 104a (2) no. 1 sentence 2 is held.

(3) Subject to the approval of the Federal Ministry of Finance, the Supervisory Authority may arrange with the competent authority of a member state of the European Community or a signatory to the EEA Agreement in the cases referred to in Article 4 (2) of Directive 98/78/EC of the European Parliament and of the Council of 27 October 1998 on the supplementary supervision of insurance undertakings in an insurance group (OJ L 330, p. 1) for the supplementary supervision of a primary insurance undertaking to be carried out by such authority. If such an arrangement has been made, supplementary supervision by the Supervisory Authority shall not be required.

(4) The Supervisory Authority may exempt insurance undertakings that are subject to supplementary supervision from the requirements under sections 104d to 104h with respect to individual parent undertakings and subsidiaries as well as participating interests, if these undertakings are irrelevant for supplementary supervision. Individual undertakings that are part of the group may also be exempted if, in the view of the Supervisory Authority, it would be inappropriate or misleading to include the financial situation of these undertakings in the supervision. Such an exemption is also possible with respect to participating interests and subsidiaries or parent undertakings in non-member states within the meaning of section 105 (1) sentences 2 and 3, if the Supervisory Authority sees legal impediments to the transfer of the necessary information.

Section 104c
Instruments of supplementary supervision

(1) Supplementary supervision comprises one or more of the following measures:

  1. Disclosure and monitoring of information (section 104d),
  2. Supervision of intra-group transactions (section 104e),
  3. Monitoring of adjusted solvency (sections 104g to 104h).

(2) The following apply with respect to undertakings within the meaning of:

  1. Section 104a (1), the provisions concerning the supervision of intra-group transactions pursuant to section 104e as well as section 83 (1) sentence 1 nos. 1a and 2 sentence 2,
  2. Section 104 (1) nos. 1 and 2, the provisions on the calculation of adjusted solvency pursuant to sections 104g and 104h,
  3. Section 104a (1) no. 1, special control requirements pursuant to section 104d.

Section 104d
Control procedures

Insurance undertakings within the meaning of section 104a (1) no. 1 must have in place adequate internal control mechanisms for the submission of information relevant for the purposes of supplementary supervision of the participating insurance undertaking.

Section 104e
Transactions subject to insurance supervision

(1) Subject to insurance supervision are transactions between a primary insurance undertaking that is subject to supplementary supervision (section 104a (1)) and its participating undertakings (section 104a (2) no. 1 sentence 1), its affiliated companies (section 104b (2) sentence 2), the affiliated companies of one of is participating undertakings or a natural person who holds a participating interest (section 104a (2) no. 1 sentence 2) in the undertaking itself, in one of its participating undertakings or in an affiliated company of one of its participating undertakings. Such transactions shall be carried out in accordance with the principles of a prudent and conscientious manager, taking into account the interests of the insured.

(2) Transactions within the meaning of subsection (1) above are specifically:

  1. Loans,
  2. Guarantees and off-balance-sheet transactions,
  3. Own funds within the meaning of section 53c,
  4. Investments,
  5. Reinsurance business, and
  6. Cost-sharing agreements.

(3) The insurance undertaking that is subject to supplementary supervision shall annually submit to the Supervisory Authority a report on important transactions within the meaning of subsection (1) above. The undertaking shall immediately report to Supervisory Authority any transactions within the meaning of subsection (1), which threaten the solvency of the insurance undertaking

(4) An insurance undertaking that is subject to supplementary supervision must have in place risk management and control mechanisms, including proper reporting systems and accounting standards, adequate to suitably document, quantify and monitor the transactions specified in subsection (2).

Section 104f
Transfer of data

Provisions that restrict the transfer of data shall not apply to the transfer of data between insurance undertakings that are subject to supplementary supervision pursuant to section 104a above, and between them and their participating undertakings and affiliated companies (section 104b (2) sentence 2), if such data transfer is necessary for compliance with the prudential rules pursuant to Directive 98/78/EC applicable to the undertaking domiciled abroad. The Supervisory Authority may prohibit an insurance undertaking from transferring data to a non-member state within the meaning of section 105 (1) sentences 2 and 3.

Section 104g
Enabling provision

(1) For primary insurance undertakings that are subject to supplementary supervision in accordance with section 104a (1) no. 1 or 2, a calculation of adjusted solvency is carried out in addition to the calculation of the solvency margin pursuant to section 53c.

(2) The Federal Ministry of Finance is authorised to issue by regulation, subject to the approval of the Bundesrat, more detailed provisions for the purpose of the implementation of Directive 98/78/EC on the principles and the methods referred to in Annexes I and II of the directive for the calculation of the adjusted solvency of a primary insurance undertaking. This power may be delegated by regulation to the Supervisory Authority. The latter shall issue the rules in consultation with the supervisory authorities of the individual federal states; the Insurance Advisory Council is to be consulted before the regulations are issued.

Section 104h
Measures in the event of insufficient adjusted solvency

If the calculation carried out in accordance with section 104g or the report to be submitted in accordance with section 104e (3) reveals that the adjusted solvency of an insurance undertaking is insufficient or threatens to become insufficient, the Supervisory Authority shall take suitable measures in accordance with section 81 (2) and section 81b (1) and (2) at the level of the insurance undertaking concerned.

Section 104i
Initial adoption

The provisions of sections 104a to 104h shall apply for the first time to the accounts for the financial year beginning after 31 December 2000.

Vc. Supplementary supervision of insurance undertakings forming part of a financial conglomerate

Section 104k
Definitions

Within the meaning of this part:

  1. Sector-specific provisions: Refers to legislation on financial supervision passed by the European Communities, in particular the Directives 73/239/EEC, 79/267/EEC, 85/611/EEC, 98/78/EC, 93/6/EEC, 93/22/EEC and 2000/12/EC, the German legislation based on these directives, in particular this Act, the Banking Act, the Securities Trading Act, the German Investment Act (Investmentgesetz), the German Mortgage Bank Act (Hypothekenbankgesetz), the German Building and Loan Associations Act (Gesetz über Bausparkassen),the Money Laundering Act, including the accompanying regulations, and other laws, regulations and administrative provisions relating to financial supervision,
  2. Financial sector: Includes the following sectors:

    1. The insurance sector; this includes primary insurance undertakings, reinsurance undertakings within the meaning of section 104a (2) no. 3 and section 119 (1), insurance holding companies within the meaning of section 104a (2) no. 4 or similar undertakings domiciled abroad; primary insurance undertakings within the meaning of the first half of this sentence are undertakings that carry on insurance business and are not social insurance institutions, with the exception of reinsurance undertakings, death benefit funds and the undertakings and schemes named in section 1 (3) and section 159 (1),
    2. The banking and investment services sector; this covers credit institutions within the meaning of section 1 (1) of the Banking Act, financial services institutions within the meaning of section 1 (1a) sentence 2 nos. 1 to 4 of the Banking Act, financial enterprises within the meaning of section 1 (3) of the Banking Act, undertakings offering ancillary services within the meaning of section 1 (3c) of the Banking Act or similar companies domiciled abroad; for the purposes of sections 104n and 104p, investment companies are not deemed part of this sector,
    3. A further sector comprising mixed financial holding companies,
  3. Mixed financial holding companies: Parent companies, which are not supervised financial conglomerate entities and which, together with their subsidiaries, at least one of which must be a supervised financial conglomerate entity domiciled in Germany or in another member state or EEA state, and other companies, form a financial conglomerate. Supervised financial conglomerate entities are deposit-taking credit institutions, e-money institutions, securities trading firms, primary insurance undertakings, investment companies or other asset management companies within the meaning of Article 2 no. 5 and Article 30 of Directive 2002/87/EC belonging to a conglomerate,
  4. Financial conglomerate: A group of companies

    1. that consists of a parent, its subsidiaries and the companies in which either the parent or a subsidiary holds a participating interest within the meaning of section 104a (2) no. 1 sentence 2, as well as companies which are part of a horizontal group,
    2. that are headed by a supervised financial conglomerate entity, which must be a parent of a company belonging to the financial sector, a company holding a participating interest, within the meaning of section 104a (2) no. 1 sentence 2, in a company belonging to the financial sector, or a company which is part of a horizontal group with another company belonging to either the banking and investment services sector or the insurance sector; if the group is not headed by a supervised financial conglomerate entity, but has at least one of the aforementioned companies as its subsidiary, the group is deemed to be a financial conglomerate, provided that it operates primarily in the financial sector,
    3. that features at least one company from the insurance sector and at least one company from the banking and investment services sector, and
    4. whose consolidated or aggregated activities or whose companies’ consolidated and aggregated activities relate in significant measure to the insurance sector and the banking and investment services sector.

    Sub-groups of groups within the meaning of (a) above, which in their own right fulfil the criteria set forth in (a) to (d) are also considered to be financial conglomerates,

  5. Horizontal group: A group within the meaning of section 104a (2) no. 1 sentence 4,
  6. Parent: A parent company within the meaning of section 104a (2) no. 1 sentence 3,
  7. Subsidiary: A subsidiary within the meaning of section 104a (2) no. 2,
  8. Intra-group transactions at conglomerate level: Transactions whereby, in order to meet a liability, supervised financial conglomerate entities draw either directly or indirectly on the support of other companies within the same financial conglomerate or natural or legal persons closely linked to the companies in the group, in which context the issue as to whether the provision of such support is of a contractual or non-contractual nature, or whether or not it is remunerated, is irrelevant. Close linkage within the meaning of sentence 1 is deemed to exist if one or several companies or one or several natural persons are affiliated

    1. through the direct or indirect holding of at least 20 percent of the capital or the voting rights by one or more subsidiaries or trustees, or
    2. as parent and subsidiary, through a similar relationship, or as sister companies,
  9. Risk concentrations: All exposures of financial conglomerate entities, which are subject to default risk and large enough to threaten the solvency or the general financial situation of the supervised financial conglomerate entities, in which case the risk of default relates, or can relate, to counterparty risk, credit risk, investment risk, insurance risk, market risk, other risk, a combination of these risks or to any interaction between these risks.

Section 104l
Cooperation in the supervision of financial conglomerates

(1) The Supervisory Authority and the Bundesbank, insofar as the latter is involved in the supervision of financial conglomerates within the framework of the Banking Act, shall cooperate with the competent authorities of the other member states or EEA states in order to identify and supervise financial conglomerates in accordance with Directive 2002/87/EC of the European Parliament and of the Council of 16 December 2002 on the supplementary supervision of credit institutions, insurance undertakings and investment firms in a financial conglomerate and amending Council Directives 73/239/EEC, 79/267/EEC, 92/49/EEC, 92/96/EEC, 93/6/EEC and 93/22/EEC, and Directives 98/78/EC and 2001/12/EC of the European Parliament and of the Council (OJ L 35 2003 p. 1); section 84 (3) and (4) sentence 5 of this Act and section 8 (5) of the Banking Act apply accordingly. If a primary insurance undertaking belongs to a group involved in cross-border activities, which could be a financial conglomerate but has yet to be classified as such in accordance with Directive 2002/87/EC, the Supervisory Authority shall inform the competent authorities of the other relevant member state or EEA state accordingly.

(2) Pursuant to Article 10 of Directive 2002/87/EC, the Supervisory Authority, together with the competent authorities of the other relevant member state or EEA state, shall appoint the coordinator responsible for the supplementary supervision of the financial conglomerate in accordance with this Act. In the event that the Supervisory Authority is appointed as coordinator, it is responsible for performing, in particular, the following tasks in accordance with Article 11 of Directive 2002/87/EC:

  1. Coordination of the gathering and dissemination of relevant and essential information in the going concern and emergency situations,
  2. Supervisory overview and assessment of the financial situation of a financial conglomerate,
  3. Assessment of compliance with the rules on capital adequacy and of risk concentrations and intra-group transactions as set out in Articles 6 to 8 of Directive 2002/87/EC,
  4. Assessment of financial conglomerate's structure, organisation and internal control system as set out in Article 9 of Directive 2002/87/EC,
  5. Planning and coordination of supervisory activities in going concern, as well as in emergency situations, in cooperation with the relevant competent authorities of the other member states or EEA states involved, and
  6. Other tasks, measures and decisions assigned to the Supervisory Authority by Directive 2002/87/EC or deriving from the application of this Directive.

The Supervisory Authority as coordinator

  1. informs the competent authorities of the other member states or EEA states concerned that a group of companies has been classified as a financial conglomerate in accordance with section 104o (1) and of the chosen course in the cases set forth in section 104v;
  2. consults with the competent authorities of the other relevant member states or EEA states prior to taking decisions

    1. pursuant to section 104q (3) sentence 8, also in conjunction with section 104r (1) and section 104v,
    2. with regard to exemptions in accordance with section 104q (9) sentence 3; in urgent cases, the Supervisory Authority may refrain from such prior consultation,
    3. with regard to measures in accordance with section 104q (5), section 104r (4) sentence 5, section 104t (1) and section 104u (1), insofar as this is relevant to its supervisory activities. In urgent cases, or in the event of imminent risk, the Supervisory Authority may refrain from such prior consultation. It must immediately inform the competent authorities of the relevant member states and EEA states accordingly;
  3. provides the competent authorities in the other member states and EEA states involved with proposals for decisions on

    1. the non-consideration of conglomerate entities in calculating the thresholds in accordance with section 104n (4),
    2. the revocation of the classification of a group as a financial conglomerate and of the classification of a group company as the superordinated financial conglomerate entity in accordance with section 104o (3)
    3. exemptions in accordance with section 104p no. 2.

(3) In the cases set forth in section 104n (4) and (6) sentence 4, section 104o (3), section 104p and section 104q (4), the Supervisory Authority shall decide in consultation with the competent authorities in the other member states and EEA states involved.

(4) More detailed provisions on cooperation in the supervision of financial conglomerates shall be established by the Supervisory Authority in cooperation agreements with the competent authorities of the other member states and EEA states involved.

Section 104m
Responsibility for supplementary supervision at conglomerate level

(1) The Supervisory Authority may opt not to supervise a financial conglomerate and to exempt, on a revocable basis, the superordinated entity of the financial conglomerate from the provisions of this Act relating to supervision at conglomerate level, if

  1. the financial conglomerate is part of another financial conglomerate whose superordinated entity, which is domiciled in another member state or EEA state, is included in supplementary supervision at conglomerate level in that country in accordance with Directive 2002/87/EC, or
  2. this is deemed appropriate taking into consideration the structure of the financial conglomerate and the relative weighting of its activities in various member states or EEA states; the superordinated entity of the financial conglomerate shall be given an opportunity to state its position.

(2) In addition to the cases set forth in section 104k no. 4 and section 104q (3) sentences 6 to 8 or subsection (4), the Supervisory Authority may, in accordance with Article 2 no. 14, Article 3 and Article 5 of Directive 2002/87/EC, identify a cross-sector group as a financial conglomerate and a primary insurance undertaking as the superordinated entity of a financial conglomerate. In such cases, the provisions of this Act with regard to the supplementary supervision of financial conglomerates shall apply accordingly.

Section 104n
Identification of a financial conglomerate

(1) The Supervisory Authority shall determine whether cross-sector groups are to be classified as financial conglomerates.

(2) Within the meaning of section 104k no. 4 (b) second half-sentence, a group is deemed to be operating primarily in the financial sector if the ratio of the balance sheet total accounted for by a group company active in the financial sector totals more than 40 percent of the balance sheet total of the group as whole.

(3) The consolidated or aggregated activities, or the consolidated and aggregated activities of the companies active in the insurance sector and the banking and investment services sector are deemed to be significant within the meaning of section 104k no. 4 (d) if

    1. the average ratio of the balance sheet total contributed by the insurance sector entities exceeds 10 percent of the balance sheet total of all group entities active in both financial sectors, and the average ratio of the solvency requirements of the insurance sector entities exceeds 10 percent of the total solvency requirements of all group entities active in both financial sectors, and
    2. the average ratio of the balance sheet total contributed by the entities active in the banking and investment services sector exceeds 10 percent of the balance sheet total of all group entities active in both financial sectors, and the average ratio of the solvency requirements of the entities active in the banking and investment services sector exceeds 10 percent of the total solvency requirements of all group entities active in both financial sectors, or
  1. the balance sheet totals of the entities active in the insurance sector and in the banking and investment services sector both exceed 6 billion euros.

(4) In individual cases, the Supervisory Authority may opt not to take individual conglomerate entities into account when performing the calculations in accordance with subsections (2) and (3) if and as long as

  1. the group entity is situated in a non-member state where there are impediments to the transfer of the information required for the calculations,
  2. subject to sentence 2, the inclusion of the group entity is not relevant to supervision at conglomerate level, or
  3. the inclusion of the group entity in supplementary supervision at conglomerate level would be inappropriate or misleading.

If several conglomerate entities fulfil the requirements set forth in the cases outlined in sentence 1 no. 2, but are not, as a whole, of negligible interest with respect to supplementary supervision of the group, the Supervisory Authority shall include these entities in its calculations in accordance with subsections (2) and (3) above.

(5) If, in the case of a group identified as a financial conglomerate in accordance with section 104k no. 4 and subsections (2) and (3) above, which is already subject to supplementary supervision in accordance with this Act, the ratios set forth in subsections (2) and (3) no. 1 above or the amount set forth in subsection (3) no. 2 fall below the thresholds set forth in these subsections during the course of a financial year, the group shall continue to be classified as a financial conglomerate if, in the three subsequent financial years,

  1. a threshold of 35 percent in the cases set forth in subsection (2),
  2. a threshold of 8 percent in the cases set forth in subsection (3) no.1, or
  3. a threshold of 5 billion euros in the cases set forth in subsection (3) no. 2

is exceeded.

(6) Balance sheet totals within the meaning of subsections (2) and (3) shall be based on the aggregated balance sheet totals of the entities of the group calculated in accordance with the annual accounts. Undertakings in which a participating interest is held shall be taken into account as regards the amount of their balance sheet total corresponding to the aggregated proportional share held by the group. However, if consolidated accounts are available, these shall be used in place of the aggregated accounts contained in the separate financial statements of the undertakings in question. In derogation from sentences 1 and 2, the Supervisory Authority may, in individual cases, permit the use of the income structure or off-balance sheet transactions instead of, or in addition to the balance sheet total in the calculation of the thresholds. The solvency requirements to be taken into account in the calculations are to be determined in accordance with sections 53c and 104g of this Act, as well as sections 10 and 10a of the Banking Act. If an undertaking domiciled in another member state or EEA state not already covered by the calculations in accordance with section 104g of this Act or section 10a of the Banking Act is to be included in the calculations, the provisions on solvency requirements in the country in which the undertaking has its registered office shall apply; this shall apply accordingly to undertakings domiciled in a non-member state, provided that equivalent solvency requirements exist in the country in question.

Section 104o
Classification as a financial conglomerate

(1) The Supervisory Authority shall identify cross-sector groups to be classified as financial conglomerates. It shall inform the parent company at the head of the group of the classification as a financial conglomerate and as to the superordinated entity of the financial conglomerate; if there is no parent company at the head of the group, the Supervisory Authority shall inform the primary insurance undertaking in the conglomerate with the largest balance sheet total, unless a supervised entity of the financial conglomerate active in the banking and investment services sector with a higher balance sheet total is to be informed in accordance with section 51b (1) sentence 2 of the Banking Act.

(2) The Supervisory Authority shall remove the classification of a group as a financial conglomerate and the determination of the superordinated entity of the financial conglomerate if the conditions set forth in section 104k no. 4 are no longer fulfilled, in particular if the ratios in accordance with section 104n (2) and (3) no. 1 or the amount in accordance with section 104n (3) no. 2 fall below

  1. a threshold of 35 percent in the case set forth in section 104n (2),
  2. a threshold of 8 percent in the case set forth in section 104n (3) no.1,
  3. a threshold of 5 billion euros in the case set forth in section 104n (3) no.2.

Subsection (1) sentence 2 applies accordingly.

(3) Subject to the provisions of subsection (2) above, the Supervisory Authority may, in the cases set forth in section 104n (5), remove the classification of a group as a financial conglomerate and the determination of the superordinated entity of the financial conglomerate during the relevant three-year period; subsection (1) sentence 2 applies accordingly.

Section 104p
Exemptions

The Supervisory Authority may, on a revocable basis, opt not to classify a group of entities as a financial conglomerate or to exempt the superordinated entity of a financial conglomerate, either in full or in part, from the obligations set forth in sections 104r and 104s if

  1. in the case outlined in section 104n (3) no. 2, the group fails to reach the threshold set forth in section 104n (3) no. 1 and supplementary supervision at conglomerate level is not required or is deemed inappropriate or misleading; this is considered to be the case in particular if

    1. the relative size of the financial sector with the smallest representation, measured either in terms of the average referred to section 104n (3) no. 1 or in terms of the balance sheet total or the solvency requirements of this financial sector, does not exceed 5 percent; or
    2. the market share, measured in terms of the balance sheet total in the banking and investment services sector, and by gross premiums written in the insurance sector, does not exceed 5 percent in any signatory to the EEA Agreement;

the fact that the thresholds set forth in section 104n (2) and (3) have been exceeded, resulting in the group’s subsequent classification as a financial conglomerate, is due solely to significant changes in the structure of the group; the exemption must be limited to a maximum of three years starting with the following financial year.

Section 104q
Own funds requirements of financial conglomerates

(1) A financial conglomerate on the whole must have adequate own funds. The Federal Ministry of Finance is authorised to issue, by regulation subject to the approval of the Bundesrat, more detailed provisions, in consultation with the Bundesbank, on appropriate own funds, in order to implement Article 6 and Annex I of Directive 2002/87/EC, in particular relating to:

  1. The permissible composition of own funds,
  2. The extent and form of the calculations used to determine the supplementary capital adequacy requirements, as well as the other technical principles,
  3. The following permissible calculation methods for the supplementary capital adequacy requirements:

    1. Method 1: accounting consolidation method;
    2. Method 2: deduction and aggregation method;
    3. Method 3: book value/requirement deduction method or
    4. a combination of methods 1 to 3,
  4. Risk models,
  5. Calculation intervals.

The Federal Ministry of Finance may, by regulation, delegate this power to the Supervisory Authority, provided that the regulation is issued with the prior approval of the Bundesbank. The central associations of the institutions within the meaning of section 1b of the Banking Act and the Insurance Advisory Council shall be consulted before the regulation is issued.

(2) The Supervisory Authority shall make an assessment as to whether the financial conglomerates have adequate own funds. The superordinated entity of the financial conglomerate within the meaning of subsection (3) sentences 6 to 8 or subsection (4) above must submit to the Supervisory Authority and the Bundesbank the information required for assessing the adequacy of own funds at conglomerate level pursuant to subsection (1), unless the superordinated entity of a financial conglomerate within the meaning of section 10b (3) sentences 6 to 8 or subsection (4) of the Banking Act is subject to reporting requirements in accordance with section 10b (2) of the Banking Act. The regulation pursuant to subsection (1) sentence 2 above shall provide further details on the type, scope, time and form of the information and the media and transmission channels to be used.

(3) The calculation of own funds at conglomerate level in accordance with subsection (1) shall include the superordinated entity of the financial conglomerate domiciled in Germany and the subordinated entities of the financial conglomerate. As far as the companies to be included in the calculation of own funds at conglomerate level are concerned, own funds are deemed to be those elements which are eligible elements in accordance with the provisions of this Act and those contained in the Banking Act. The Supervisory Authority shall determine which of the calculation methods detailed in the regulation pursuant to subsection (1) sentence 2 must be used by the financial conglomerate in calculating own funds at conglomerate level; the superordinated entity of the financial conglomerate must be consulted in advance. In the event that the financial conglomerate is headed by a mixed financial holding company and that its supervised entities are not solely domiciled in Germany, any of the calculation methods detailed in the regulation pursuant to subsection (1) sentence 2 may be used; the superordinated entity of the financial conglomerate must inform the Supervisory Authority and the Bundesbank immediately of its chosen method of calculation. Subordinated entities of a financial conglomerate within the meaning of this Act include the supervised entities of a financial conglomerate and the mixed financial holding company, insofar as they are not superordinated entities of a financial conglomerate, as well as financial firms, undertakings offering ancillary services, reinsurance undertakings and insurance holding companies belonging to the conglomerate. Within the meaning of this Act, the superordinated entity of the financial conglomerate is the primary insurance undertaking domiciled in Germany, which

  1. heads the financial conglomerate, unless a supervised entity of the financial conglomerate domiciled in Germany that is active in the banking and investment services sector is also at the head of the financial conglomerate and the banking and investment services sector are more predominantly represented than the insurance sector,
  2. is a subsidiary of a mixed financial holding company domiciled in Germany, unless

    1. a supervised entity of the financial conglomerate domiciled in Germany that is active in the banking and investment services sector is a subsidiary of the same mixed financial holding company and the banking and investment services sector is more predominantly represented than the insurance sector;
    2. a primary insurance undertaking belonging to the same group domiciled in another member state or EEA state, which is a subsidiary of a mixed financial holding company in its home country, has a larger balance sheet total than the primary insurance undertaking domiciled in Germany;
    3. a supervised entity of the financial conglomerate belonging to the same group domiciled in another member state or EEA state and active in the banking and investment services sector is a subsidiary of a mixed financial holding company in its home country and the banking and investment services sector is more predominantly represented than the insurance sector;

    if several primary insurance undertakings domiciled in Germany fulfil these requirements, the primary insurance undertaking with the largest balance sheet total shall be deemed the superordinated entity of the financial conglomerate,

  3. is a subsidiary of a mixed financial holding company domiciled in another member state or EEA state, which is not the parent of a supervised entity of a financial conglomerate domiciled in its home country, provided that

    1. the insurance sector is more predominantly represented than the banking and investment services sector, and
    2. the primary insurance undertaking domiciled in Germany has the largest balance sheet total.

Subject to sentence 6 nos. 2 and 3, a primary insurance undertaking domiciled in Germany shall be identified as the superordinated entity of the financial conglomerate if the insurance sector is more predominantly represented than the banking and investment services sector and the primary insurance undertaking domiciled in Germany has the largest balance sheet total. Notwithstanding sentence 6 nos. 1 to 3 and sentence 7 above, the Supervisory Authority may, taking into account the structure of the financial conglomerate, identify a primary insurance undertaking or a mixed financial holding company as the superordinated entity of the financial conglomerate following consultation with the supervised entity of the financial conglomerate that would normally be identified as the superordinated entity of the financial conglomerate in accordance with sentences 6 and 7; the undertaking to be so identified must also be consulted in advance. Within the meaning of this subsection, the sector with the highest average ratio in accordance with section 104n (3) shall be deemed the predominantly represented financial sector in each case.

(4) If there are participating interests in one or several of the supervised entities of the financial conglomerate or capital ties with these entities, or if a dominant influence can be exercised over these entities, without constituting a case as set forth in subsection (3) sentences 7 or 8, the Supervisory Authority may apply the provisions of this Act relating to supplementary supervision at conglomerate level either in full or in part to these entities and identify one of these as the superordinated entity of the financial conglomerate, provided

  1. at least one of these entities is part of the banking and investment services sector and at least one belongs to the insurance sector, and
  2. the consolidated or aggregated activities or the consolidated and aggregated activities of these entities in the banking and investment services sector and the insurance sector are deemed significant within the meaning of section 104n (3).

(5) The Supervisory Authority may decide define an adjustment item for the own funds of the financial conglomerate if

  1. notwithstanding fulfilment of the requirements set forth in subsection (1) sentence 1 in conjunction with the regulation pursuant to subsection (1) sentence 2 or in accordance with section 104r or section 104s, the solvency of the financial conglomerate is at risk,
  2. significant intra-group transactions within the financial conglomerate or significant risk concentrations at conglomerate level pose a threat to the financial situation of the financial conglomerate.

At the request of the superordinated entity of the financial conglomerate, the Supervisory Authority shall cancel the adjustment item, provided the grounds for it are no longer given. The Supervisory Authority may impose the measures specified in sentence 1 only if the financial conglomerate has failed to remedy the deficiency within a period set by the Supervisory Authority.

(6) The superordinated entity of the financial conglomerate is responsible for ensuring that the financial conglomerate has adequate own funds. However, in order to fulfil its obligations in accordance with sentence 1, it may only exercise an influence over the entities to be included in the calculation of own funds at conglomerate level in accordance with subsection (3) sentence 1 above if this does not conflict with general company law.

(7) The entities to be included in the calculation of own funds at conglomerate level in accordance with subsection (3) sentence 1 must set up a proper business organisation and adequate internal control procedures to ensure that the data required for the supplementary supervision of the financial conglomerate is duly processed and forwarded. They are obliged to submit the data required for supplementary supervision to the entity subject to reporting requirements pursuant to subsection (2) above. In the event that the entity subject to reporting requirements in accordance with subsection (2) above fails to obtain the required data for individual subordinated entities of the financial conglomerate, the book values attributable to the subordinated entities of the financial conglomerate in question shall be deducted from the own funds of the superordinated entity of the financial conglomerate, in accordance with the regulation pursuant to subsection (1) sentence 2.

(8) Subsections (1), (6) and (7) shall not apply to financial conglomerates that are themselves subordinated to a financial conglomerate to which subsections (1), (6) and (7) apply.

(9) The Supervisory Authority may opt to exempt individual superordinated entities of a financial conglomerate within the meaning of subsection (3) sentences 6 to 8 and subsection (4) from the requirements set forth in the subsections (1) to (8) with regard to individual subordinated entities of the financial conglomerate within the meaning of subsection (3) sentence 5, if and as long as the inclusion of these entities is not relevant to supervision at conglomerate level and the Supervisory Authority is permitted to monitor compliance with these requirements. The Supervisory Authority shall not grant an exemption pursuant to sentence 1 if, although several subordinated entities of the financial conglomerate satisfy the conditions for exemption, these entities are not, on the whole, of negligible interest to supervision at conglomerate level. Individual subordinated entities of a financial conglomerate within the meaning of subsection (3) sentence 5 may also be exempted if the Supervisory Authority deems their inclusion in supervision at conglomerate level to be inappropriate or misleading. Exemptions in accordance with sentence 1 or sentence 3 above may be granted ex officio or at the request of the superordinated entity of the financial conglomerate.

Section 104r
Risk concentrations and intra-group transactions within financial conglomerates

(1) The superordinated entity of a financial conglomerate within the meaning of section 104q (3) sentences 6 to 8 or subsection (4) shall inform the Supervisory Authority and the Bundesbank of any significant risk concentrations at conglomerate level and any significant intra-group transactions within the financial conglomerate, unless a superordinated entity of the financial conglomerate is subject to reporting requirements in accordance with section 10b (3) sentences 6 to 8 or subsection (4) of the Banking Act.

(2) The Federal Ministry of Finance is authorised to issue, by regulation subject to the approval of the Bundesrat, more detailed provisions, in consultation with the Bundesbank, on risk concentrations and intra-group transactions, in order to implement Articles 7 and 8 and Annex II of Directive 2002/87/EC, specifically relating to:

  1. The types of risk concentrations and intra-group transactions to be reported, as well as the thresholds by which to determine whether or not the risk concentrations and intra-group transactions are to be deemed significant,
  2. The upper limits for significant risk concentrations and significant intra-group transactions, as well as restrictions with regard to the type of intra-group transactions,
  3. The type, scope, time and form of the information and the media and transmission channels to be used.

The Federal Ministry of Finance may, by regulation, delegate this power to the Supervisory Authority, provided that the regulation is issued with the prior approval of the Bundesbank. The central associations of the institutions within the meaning of section 1b of the Banking Act and the Insurance Advisory Council shall be consulted before the regulation is issued.

(3) Without prejudice to the validity of the legal transactions, a primary insurance undertaking forming part of a financial conglomerate may only execute significant intra-group transactions by virtue of a unanimous resolution by the full management of such primary insurance undertaking. This resolution must be passed before the transaction is entered into or executed. If, in individual cases, this is impossible, due to the urgency of the transaction, the resolution shall be made immediately thereafter. The resolution shall be placed on record.

(4) Without prejudice to the validity of the legal transactions, the superordinated entity of the financial conglomerate is responsible for ensuring that significant risk concentrations at conglomerate level or significant intra-group transactions do not exceed the upper limits set out in the regulation in accordance with subsection (2) sentence 1 above without the approval of the Supervisory Authority, or that these risk concentrations and intra-group transactions do not violate the restrictions set with regard to the type of intra-group transactions. However, to fulfil its obligations in accordance with sentence 1, it may only exercise an influence over the conglomerate entities if this does not conflict with general company law; section 104q (7) and (8) apply accordingly. Approval in accordance with sentence 1 shall be granted at the discretion of the Supervisory Authority. Irrespective of whether or not the Supervisory Authority grants its approval, the entity subject to reporting requirements in accordance with sentence 1 must immediately inform the Supervisory Authority and the Bundesbank in the event that the upper limits are exceeded or the restrictions with regard to the type of intra-group transactions are violated; in accordance with Article 12 of Directive 2002/87/EC, the Supervisory Authority shall forward this data to the competent authorities in the member state or EEA state involved. The Supervisory Authority may

  1. require the financial conglomerate to secure the excess amount with own funds in the event that it exceeds the upper limits set forth in the regulation pursuant to subsection (2) sentence 1,
  2. take appropriate and necessary measures to prevent violations of the restrictions with regard to the type of intra-group transaction set forth in the regulation pursuant to subsection (2) sentence 1.

Section 104s
Specific organisational requirements for financial conglomerates

Financial conglomerates must have in place a proper business organisation in accordance with Article 9 of Directive 2002/87/EC. Section 81 (1) sentence 5, sections 104d, 104e (4) and section 104q (6) and (7) sentences 1 and 2 apply accordingly to financial conglomerates. The persons of the superordinated entity of the financial conglomerate named in section 7a (1) sentence 4 or subsection (3) are responsible for ensuring that the financial conglomerate has a proper business organisation in place. The Supervisory Authority may, on a case-by-case basis, issue appropriate and necessary orders for the superordinated entity of the financial conglomerate within the meaning of section 104q (3) sentences 6 to 8 or subsection (4) and for any supervised subordinated entities of a financial conglomerate in order to create arrangements within the meaning of sentences 1 and 2; section 81 (2) shall apply accordingly.

Section 104t
Measures in the event of insufficient own funds at conglomerate level

(1) In the event that the own funds of a financial conglomerate do not meet the requirements set forth in section 104q (1), the Supervisor Authority may

  1. take measures against the superordinated entity of the financial conglomerate within the meaning of section 104q (3) sentences 6 to 8 or subsection (4), in particular measures in accordance with section 81 (2) and section 81b (1) and (2),
  2. take necessary and appropriate measures against a mixed financial holding company; in particular the Supervisory Authority may prohibit or limit withdrawals by the proprietors or partners and the distribution of profits.

(2) The Supervisory Authority may issue the orders specified in subsection (1) above only if the primary insurance undertaking or the mixed financial holding company has failed to remedy the deficiency within a period set by the Supervisory Authority. Resolutions on the distribution of profits are null and void to the extent that they contradict an order issued pursuant to subsection (1) no. 2.

Section 104u
Measures relating to mixed financial holding companies

(1) The Supervisory Authority may prohibit a mixed financial holding company heading a financial conglomerate from exercising its voting rights in the superordinated entity of the financial conglomerate and the other subordinated entities of the financial conglomerate if

  1. the mixed financial holding company fails to forward the data required in accordance with section 104q (8) sentence 2 or section 104q (8) sentence 2 in conjunction with section 104r (4) sentence 2 for supervision at conglomerate level pursuant to section 104q or section 104r to the entity subject to reporting requirements in accordance with section 104q (2) and section 104r (1),
  2. there is evidence to suggest that a person who effectively directs the business of the mixed financial holding company is not reliable or is not adequately qualified to manage the business.

(2) In the case of a prohibition pursuant to subsection (1), the court with competent jurisdiction at the place of the registered office of the superordinated entity of the financial conglomerate shall, at the request of the Supervisory Authority, appoint a trustee to whom it transfers the exercise of the voting rights. In exercising the voting rights, the trustee shall take into account the need to ensure sound management of the relevant entity, in line with the requirements of insurance supervision. The Supervisory Authority may request the appointment of a different trustee if it has cause for doing so. If subsection (1) no longer applies, the Supervisory Authority shall apply for a recall of the trustee. The trustee is entitled to the reimbursement of reasonable expenses and to remuneration for his activities. The court determines such expenses and remuneration at the request of the trustee; no further appeal is permissible. The Federal Government advances the expenses and remuneration; the mixed financial holding company and the relevant entities are jointly and severally liable for the payments made by the Federal Government.

(3) As long as the prohibition specified in subsection (1) is enforceable, the entities concerned shall not be deemed subordinated entities of the mixed financial holding company within the meaning of section 104q (3) sentence 5.

(4) In the cases set forth in subsection (1) sentence 1 no. 2 above, the Supervisory Authority may also order the superordinated entity of the financial conglomerate not to follow instructions issued by the mixed financial holding company, if there are no possibilities under company law to dismiss the individuals who effectively directs the business of the mixed financial holding company or if, although the possibilities exist, attempts to do so have been unavailing.

Section 104v
Parent undertakings domiciled in a non-member state

(1) If primary insurance undertakings domiciled in Germany that are subsidiaries of a supervised entity of a financial conglomerate or a mixed financial holding company domiciled in a non-member state are subject to supervision in the non-member state, which is not equivalent to the provisions for supervision of financial conglomerates under this Act, the Supervisory Authority may classify the group as a financial conglomerate and a primary insurance undertaking as the superordinated entity of the financial conglomerate; the provisions contained in this Act with regard to supplementary supervision at conglomerate level shall apply accordingly in such cases.

(2) Notwithstanding subsection (1), the Supervisory Authority may in certain cases allow for adequate supervision at conglomerate level in another manner. In particular, it may require the establishment of a mixed financial holding company domiciled in Germany or in another member state or EEA state, to which the provisions of this Act with regard to supplementary supervision at conglomerate level shall apply accordingly.

Section 104w
Cross border information and audits

Legislation that restricts the transmission of data does not apply to the transmission of data between the primary insurance undertakings subject to supplementary supervision pursuant to this section, and between them and their participating undertakings and affiliated companies if such transmission of data is necessary for compliance with the prudential rules pursuant to Directive 2002/87/EC applicable to the undertaking domiciled abroad. The Supervisory Authority may prohibit a primary insurance undertaking and a mixed financial holding company from transferring data to a non-member state within the meaning of section 105 (1) sentences 2 and 3.

VI. Insurance undertakings domiciled abroad

1. Undertakings domiciled outside the European Community or the European Economic Area

Section 105
Authorisation requirement

(1) Non-member state insurance undertakings are undertakings domiciled in a non-member state who would be required to have an official authorisation to operate in accordance with Article 6 of Directive 73/239/EEC or Article 4 of the Life Insurance Directive if they were domiciled in a state within the European Economic Area. A non-member state within the meaning of this Act is any country which is not a member state of the European Community or an EEA state. A non-member state is also a quasi-governmental entity with independent regulatory powers, provided the rules and regulations of European community law concerning the freedom of movement, of establishment and the provision of cross-border services do not apply.

(2) Non-member state insurance undertakings who wish to carry on primary insurance business in Germany through intermediaries are subject to authorisation.

(3) These undertakings are subject to the special requirements of sections 106 to 110, in addition to the other requirements of this Act, which apply accordingly.

Section 106
Branch, authorised agent

(1) (repealed)

(2) The undertakings shall establish a branch within the territorial scope of this Act, where they shall retain all records concerning the branch. The provisions of sections 13d to 13f of the Commercial Code relating to branches shall apply accordingly. Separate accounts shall be kept for the business activities of the branch. Sections 55 and 55a above are applicable with the proviso that

  1. on request, the annual accounts and management report of the principal branch are also sent in German to every insured,
  2. the internal report comprises the annual accounts and management report published in the home country of the undertaking in the language of the home country and in German and the report submitted to the supervisory authority of the home country in the language of the home country.

(3) An authorised agent whose domicile and permanent residence is within the territorial scope of this Act shall be appointed for the branch. This agent is subject to the same obligations and personal requirements that this Act prescribes for the management board of an undertaking domiciled in Germany. The authorised agent is deemed empowered to bind the undertaking in relation to third parties, in particular to write insurance contracts with policyholders in the territory to which this Act applies and in relation to real estate located in Germany, as well as to represent the undertaking vis-à-vis the authorities and courts. The authorised agent shall be entered into the commercial register.

(4) If security has to be provided in accordance with the provisions below, the Supervisory Authority may reserve the right in the return conditions to dispose of these securities in the interest of the insured.

Section 106a
(repealed)

Section 106b
Application; procedure

(1) The Federal Ministry of Finance decides on the application for authorisation to carry on insurance business, which is to be submitted to the Supervisory Authority. The following shall be submitted together with the application:

  1. The operating plan and the information and documents referred to in section 5 (4) sentences 3 and 4, and subsection (5) for the branch including the memorandum and articles of association of the undertaking; at the same time, the members of the body charged with legal representation of the undertaking and of a supervisory body shall be designated,
  2. A certificate from the competent authority in the home country stating

    1. that the undertaking may, at the place of its registered office, acquire rights and incur liabilities, sue and be sued in court, under its own name,
    2. which classes of insurance the undertaking may operate and which types of risks it actually covers,
  3. the balance sheet and the profit and loss account for each of the preceding three financial years; if the undertaking has been in business for less than three years, these documents shall be submitted for each of the concluded financial years that it has been in business.

(2) The capital requirements are those defined in section 8. The undertaking shall be obliged to establish own funds at least in the amount of a solvency margin, which is determined in accordance with the volume of business of the branch. These funds shall be located in the territory to which this Act applies up to an amount equal to the guarantee fund, otherwise in the territory of the member states of the European Community or another signatory to the EEA Agreement. The minimum amount of the guarantee fund may not be less than 50 percent of the amount specified in accordance with section 53c (2). Moreover, the undertaking shall be obliged to furnish the required security (fixed guarantee deposit). The fixed guarantee deposit shall amount to at least 25 percent of the minimum guarantee fund specified in section 53c (2). The fixed guarantee deposit shall be counted towards the own funds.

(3) If business operations are to be extended to other classes of insurance or to another area within the territorial scope of this Act, subsections (1) and (2) above apply accordingly. The authorisation is granted by the Supervisory Authority.

(4) Authorisation may be granted if

  1. the Supervisory Authority, after consulting the Insurance Advisory Council, issues an opinion that none of the grounds of section 8 (1) above for refusal of the authorisation exists,
  2. the requirements of section 106 (2) and (3) above have been met, and
  3. the amount required as a fixed guarantee deposit has been provided.

(5) For an undertaking which has been authorised or has applied for authorisation to carry on business in another member state of the European Community or a signatory to the EEA Agreement, provisional authorisation may be granted upon application for

  1. the solvency margin to be calculated on the basis of total business operations in the member states of the European Community or the other signatories to the EEA Agreement,
  2. own funds in an amount equal to the guarantee fund to be located in another member states of the European Community or another signatory to the EEA Agreement in which the undertaking conducts its business,
  3. the undertaking to be relieved of the obligation to provide a guarantee deposit within the territorial scope of this Act.

The Federal Ministry of Finance grants such authorisation while in all the other cases the authorisation is granted by the Supervisory Authority. The Supervisory Authority is responsible for the revocation of the authorisation.

(6) (repealed)

(7) The Supervisory Authority shall revoke the authorisation if

  1. the undertaking looses its authorisation to carry on business in its home country,
  2. in the case of subsection (5) above, the authorisation to carry on business is revoked in another member state of the European Community or another signatory to the EEA Agreement, due to insufficient own funds.

This is without prejudice to section 87. The Federal Ministry of Finance may revoke the authorisation if this is deemed to be in the public interest.

(8) If the authority competent for monitoring the capital adequacy of the undertaking for its total business activities in the member states of the European Community or the signatories to the EEA Agreement has limited the right to disposal of the assets of the undertaking due to insufficient own funds, the Supervisory Authority, at the request of this authority, shall take appropriate measures with respect to the assets located within the territorial scope of this Act. This is without prejudice to Section 81b (4).

Section 106c
Segregation of business

Insurance undertakings operating life insurance together with other classes of insurance may not be authorised to operate life insurance business in the territory to which this Act applies. Insurance undertakings operating health insurance together with other classes of insurance cannot be authorised to operate health insurance pursuant to section 12 (1) within the territorial scope of this Act.

Section 107
Pooling of distribution channels

Non-member state insurance undertakings within the meaning of section 105 (1) sentence 1, which have been granted the authorisation to carry on business in accordance with section 105 are only permitted to conclude insurance contracts with policyholders who have their habitual residence in the territory to which this Act applies, as well as insurance contracts covering real estate located therein, through authorised agents residing within the territorial scope of this Act.

Section 108
Transfer of portfolio

(1) If the insurance portfolio of a branch in Germany (section 106 (2)) is transferred to the German branch of another non-member state insurance undertaking within the meaning of section 105 (1) sentence 1, and if the capital adequacy of the branch of such an insurance undertaking is monitored by the supervisory authority of another member state of the European Community or another signatory to the EEA Agreement, the proof of own funds of the transferee in accordance with section 105 (3), in conjunction with section 14 (1), shall be in the form of a certificate from this authority. The security furnished by a branch for the transferred portfolio is maintained, unless otherwise stipulated by the competent authority of the transferee’s undertaking.

(2) A contract by which the insurance portfolio of a branch (section 106 (2)) is to be transferred wholly of partly to an undertaking domiciled in another member state of the European Community or in another signatory to the EEA Agreement is subject to the approval of the Supervisory Authority. This approval may not be granted unless it has been proved by a certificate from the supervisory authority of the home country that the transferee’s undertaking will dispose of own funds in an amount equal to the solvency margin after the transfer, and unless the supervisory authorities of the states in which the risks under the insurance portfolio are situated agree.

(3) Section 14 (1), sentences 3 and 4, subsections (2) and (3) above apply accordingly to contracts pursuant to subsections (1) and (2) above.

Section 109
(repealed)

Section 110
Restricted application of certain provisions

(1) Sections 54 to 54b, 54d, 65 and 66 subsections (1) to (3a) and (5) to (7) and sections 67 and 70 to 79a apply only to insurance business written in accordance with section 105.

(2) (rescinded)

2. Undertakings domiciled in a member state of the European Community or another signatory state to the EEA Agreement

Section 110a
Activities via a branch or cross-border provision of services

(1) Insurance undertakings domiciled in another member state or EEA state (home member state) may, with the exception of the undertakings mentioned in section 110d, carry on direct insurance business in Germany via a branch or under the freedom to provide cross-border services through persons acting on behalf of the undertaking only in accordance with subsection (2) to (2b) below. Section 13a (1) sentence 2, and subsection (2) apply accordingly.

(2) If the undertaking intends to operate from a branch, the supervisory authority of the home member state shall forward to the Supervisory Authority the information mentioned in Article 10 (2) and (3) sub-paragraph 2 of Directive 73/239/EEC in the version of Article 32 of the Third Non-Life Insurance Directive, or the information pursuant to Article 40 (2), (3) sub-paragraph 2 of the Life Insurance Directive, informing the undertaking concerned accordingly. The branch may not commence operations until a period of two months from the notification date has elapsed. This shall apply only if the Supervisory Authority does not stipulate to the undertaking an earlier date. The undertaking shall inform the Supervisory Authority and the supervisory authority of the country where it has its registered office of any changes to the content of the information referred to in Article 10 (2) sentence 1 (b), (c) and (d) of the above-mentioned directives one month before these changes are to become effective. If these changes are associated with an expansion of business operations, such expansion shall only be permissible after one month has passed since notification from the undertaking to the Supervisory Authority.

(2a) Business conducted under the freedom to provide cross-border services may not be commenced or changed before the supervisory authority of the home member state has forwarded to the Supervisory Authority the information provided under Article 16 (1) or Article 17 of the Second Council Directive of 22 June 1988 (88/357/EEC) on the coordination of laws, regulations and administrative provisions relating to direct insurance other than life assurance and laying down provisions to facilitate the effective exercise of freedom to provide services and amending Directive 73/239/EEC (OJ L 172 p. 1), last amended by Articles 35 and 36 of the Third Non-Life Insurance Directive, and in Article 42 (1) or Article 43 of the Life Insurance Directive, and has informed the undertaking accordingly.

(2b) The operation of health insurance within the meaning of section 12 (1) and compulsory insurance in the cases referred to in subsections (2) and (2a) above is not permitted until the undertaking has submitted its general policy conditions to the Supervisory Authority.

(3) Financial supervision of any such business is the sole responsibility of the supervisory authority of the home member state, while otherwise supervision is also the responsibility of the Supervisory Authority. For the purpose of financial supervision, the supervisory authority of the home member state is entitled to perform audits of its business operations on the premises of the branch, either using its own staff or persons acting on its behalf, after prior notification of the Supervisory Authority; section 81 (1) sentence 3, and section 83 (3) and (6) apply accordingly.

(4) For the purpose of supervision by the Supervisory Authority under subsection (3), the following apply in addition to the provisions of subsections (1) and (2) above:

  1. Of the introductory provisions (I.), section 1 (1), (3) and (4) and section 2,
  2. Of the provisions on the authorisation to carry on business (II.), sections 10 and 10a, with the proviso that the consumer information to be supplied in accordance with part D section I no. 1 (h) of the Annex shall also contain the address of any other body which the policyholder may contact with complaints about the insurer under foreign law, as well as sections 11b, 11c, 12 (1), (4) and (5), sections 12a, 12b (1) to (3), sections 12c to 12e, section 12f excluding the reference to section 12 (2) and (3) and 13d (7),
  3. Of the provisions on the duties and powers of the supervisory authorities (V.1.),

    1. section 81 (1) sentences 2, 3, and 4, subsection (2), section 83 (1) sentence 1 nos. 1 to 4, sentence 2, subsections (2), (4) and (5) nos. 1 and 2, subsection (6) and section 89a,
    2. additionally, for an existing branch, section 81 (4) sentence 1 (a) and section 83 (3),
  4. Of the provisions on insurance undertakings domiciled abroad (VI.), section 106 (3) sentence 4, and section 111b (1) sentences 2 and 3,
  5. Section 17 of the Act Establishing the Federal Financial Supervisory Authority.

Section 110b
Lloyd's underwriters

(1) The individual underwriters of the Lloyd's association of underwriters may not carry on business unless, in the case of an execution against the assets of Lloyds underwriters located in Germany, the association renounces on behalf of the underwriters any right arising from the fact that this is an execution also against the assets of underwriters to which this title is not enforceable; the declaration of renunciation must be irrevocable until the insurance contracts concluded in Germany have been completely run off.

(2) Any claims arising from insurance business carried on by the underwriters of the Lloyd's association of underwriters through a branch in Germany may only be enforced by legal action by and against the authorised agent. A title obtained under sentence 1 above is enforceable by or against the individual underwriters taking part in the insurance transaction. Section 727 of the Code of Civil Procedure shall apply accordingly. If a title is obtained against the authorised agent, it is possible to execute against the assets of all underwriters of the Lloyd's association of underwriters managed by him and located in Germany.

Section 110c
(repealed)

Section 110d
Branch

(1) Insurance undertakings domiciled in another member state of the European Community or another signatory to the EEA Agreement, which are not subject to the insurance directives of the Council of the European Communities and wish to carry on direct insurance business through a branch are subject to authorisation. The Supervisory Authority shall decide on the application.

(2) The provisions of sections 1 to 104 shall be applied to these undertakings accordingly, under the following provisos:

  1. The memorandum and articles of association of the undertaking, and the balance sheet and profit and loss account for each of the preceding three financial years shall also be submitted; if the undertaking has been in business for less than three years, these documents shall be submitted for each of the concluded financial years that it has been in business,
  2. The names of the members of the body authorised to legally represent the undertaking shall be disclosed,
  3. The documents concerning the branch shall be retained there,
  4. The capital adequacy requirements are those defined in section 8 (1) sentence 1 no. 3; this is without prejudice to section 53c (2a),
  5. Section 14 (1a) shall not apply.

In addition, section 106 (3) and sections 106c and 110 (1) apply accordingly.

(3) Subsections (1) and (2) above also apply if business is to be carried on by way of the cross-border provision of services through persons entitled to act on behalf of the undertaking; the provisions of subsection (2), however, do not apply, as they require the existence of a branch

Section 110e
(repealed)

Section 110f
(repealed)

Section 110g
(repealed)

Section 110h
(repealed)

Section 110i
(repealed)

Section 111
Cross-border provision of services

(1) Undertakings which only write the classes of insurance mentioned in nos. 4 to 7 and no. 12 of part A of the Annex and the types of risks mentioned under no. 10 (b) are not subject to the provisions of this Act.

(2) Furthermore, undertakings which conduct the sort of insurance business specified in Article 10 (1) of the Introductory Law of the Insurance Contract Act as co-insurance shall not be subject to the provisions of this Act, provided that they do not conduct their business via a registered office or branch within the territorial scope of this Act, except via the lead insurer, and such co-insurance does not relate to compulsory third party liability insurance in connection with damage caused by nuclear energy or medications.

(3) The Federal Ministry of Finance is authorised by regulation not requiring approval by the Bundesrat

  1. to declare that subsections (1) and (2) above shall be applicable to insurance undertakings from a non-member state within the meaning of section 105 (1) sentence 1, if the interests of the insured are adequately safeguarded and the interests of the Federal Republic of Germany are not affected,
  2. to declare that the provisions relating to foreign insurance undertakings domiciled in a member state of the European Community or another signatory to the EEA Agreement shall also be applicable to undertakings domiciled in a non-member state within the meaning of section 105 (1) sentences 2 and 3, to the extent that this is required under European Community agreements.

(4) If the requirements of subsection (3) no. 1 above have been met the Federal Ministry of Finance may also grant exemptions in individual cases by means of an administrative act.

VIa. Cooperation of the Supervisory Authority with the competent authorities of the other member states of the European Community or another signatory to the EEA Agreement in direct insurance

Section 111a
Provision of information about legal provisions and data relating to health insurance

(1) The Supervisory Authority shall inform the supervisory authorities of the other member states or EEA states on an ongoing basis of those provisions that the insurance undertakings domiciled in these states must observe if they carry on business in accordance with section 110a (1), and with regard to which the Supervisory Authority monitors compliance within the framework of its supervisory duties, with the exception of financial supervision (section 110a (3) sentence 1, section 81 (1) sentence 1). The Supervisory Authority shall inform the supervisory authority of the undertaking’s home member state of any provisions that have not been disclosed pursuant to sentence 1 within a period of two months from receipt of the information specified in section 110a (2) or (2a).

(2) The Supervisory Authority shall communicate the information relating to health insurance published in accordance with section 103a (1) to the supervisory authorities of the home member states.

Section 111b
Instruments of legal supervision

(1) If, in the case of the business specified in section 110a (1), an undertaking does not comply with the requirements or orders of the Supervisory Authority pursuant to section 81 (2), the Supervisory Authority shall inform the supervisory authority of the home member state concerning the measures it intends to take in accordance with sentence 2, and ask it for its cooperation. If this request is unavailing, and if attempts to enforce orders via coercive measures or coercive penalties are futile or unavailing, the Supervisory Authority may prohibit the undertaking from continuing to do business in Germany wholly or partly, if other measures are also ineffective or impracticable (section 81 (2), section 110a (4) no. 3). In urgent cases the orders referred to in sentence 2 may be issued without informing the supervisory authority of the home member state.

(2) If the supervisory authority of the home member state intends to audit a branch in accordance with section 110a (3) sentence 2, the Supervisory Authority shall provide administrative assistance on request. It may take part in the audit; section 83 (3) and (6) apply accordingly.

(3) If the Supervisory Authority has reasons to believe that the financial security of an undertaking carrying on business in accordance with section 110a (1) could be impaired, it shall inform the competent authority performing financial supervision of the home member state.

(4) If the supervisory authority in the home member state restricts the free disposal of an undertaking’s assets in accordance with Article 20 (1), (2) sub-paragraph 2 or subsection (3) sub-paragraph 2 of Directive 73/239/EEC or in accordance with Article 37 (1), (2) subparagraph 2 or subsection (3) subparagraph 2 of the Life Insurance Directive, the Supervisory Authority shall, at the request of this authority, impose the same measures with respect to the assets of the undertaking located in Germany and referred to in the request.

(5) If the authorisation of an undertaking that carries on business in Germany in accordance with section 110a (1) is revoked, the Supervisory Authority shall impose the measures deemed appropriate and necessary, after it has been informed by the supervisory authority of the home member state, to prevent any further business activities in Germany.

Section 111c
Instruments of financial supervision

(1) The Supervisory Authority may request that the supervisory authorities of the member states or EEA states in which the undertaking has a branch or carries on business under the freedom to provide cross-border services issue orders, which are equivalent to the measures under section 81b (1) sentence 2, subsection (2) sentence 2 or subsection (4), restricting disposal of the undertaking's assets located within their territory.

(2) If, within the framework of financial supervision, the Supervisory Authority intends to perform audits on the premises of a branch using its own personnel or persons it has commissioned, it shall inform the supervisory authority of the other member state or EEA state accordingly. The same applies if it issues orders with respect to a business activity carried on in accordance with subsection (1) sentence 1 above.

(2a) If the supervisory authority of another member state or EEA state seeks cooperation for the purpose of supervision, the Supervisory Authority shall impose the appropriate measures pursuant to sections 81, 83, 84 and 93 and inform the authority seeking such cooperation accordingly.

(3) If the supervisory authority of another member state or EEA state intends to send an undertaking that carries on business in that state and is domiciled in Germany a document for the purpose of proceedings in accordance with the insurance supervisory provisions applicable in such other member state or EEA state, it is permitted to send the document directly by post in compliance with the rules applicable to postal communication with the other member state or EEA state. Sending the document by registered mail, delivered “to addressee only” (eigenhändig) and with “confirmation of receipt” (Rückschein), is sufficient to prove that the document has been delivered. If the document cannot be directly delivered by post or if is not appropriate due to the nature and content of the document, the Supervisory Authority shall see to its delivery.

(4) The Supervisory Authority shall inform the supervisory authorities of all member states or EEA states about any revocation of authorisation pursuant to section 87. It shall also contact the supervisory authorities of the member states in which business is conducted with respect to any necessary measures pursuant to section 87 (4).

Section 111d
Transfer of portfolio

Any contract by which an insurance undertaking domiciled in another member state or EEA state intends to transfer part or all of its portfolio of insurance contracts, which it has concluded in accordance with section 110a (1) via a branch or cross-border provision of services, to an undertaking domiciled in a member state or EEA state requires approval by the Supervisory Authority, for the approval by the competent supervisory authority of the transferor undertaking in the home member state. Section 8 (1) sentence 1 no. 3, section 14 (1) sentence 4 and subsection (3) apply accordingly. If the insurance portfolio of a branch does not cover any risks situated in Germany, the Supervisory Authority merely states its opinion on the contract. If the Supervisory Authority does not comment on the request for approval or for an opinion within a period of three months this shall be deemed a tacit approval or positive statement of opinion. In the event that the competent supervisory authority within the meaning of sentence 1 above requests the certification pursuant to section 14 (1a) sentence 2 no. 1 from the Supervisory Authority, section 13b (2) sentence 4 and section 13c (2) sentence 5 shall apply accordingly.

Section 111e
Cooperation in respect of insurance undertakings domiciled in non-member states

(1) Approval of an application pursuant to section 106b (5) requires the consent of the competent authorities of the member states and EEA states in which the undertaking has been authorised or an authorisation procedure is under way.

(2) The Supervisory Authority shall monitor compliance with capital adequacy requirements for all business activities in the territory of the member states and EEA states that consented to the application, if provided for therein.

(3) If the Supervisory Authority monitors compliance with capital adequacy requirements, it informs the competent authorities of the member states and EEA states concerned of the measures taken in accordance with section 81b (2) sentence 2. It may request these authorities to take the same measures.

Section 111f
Information obligation and cooperation in supervision of affiliated undertakings and financial conglomerates

(1) For cases in which an insurance undertaking domiciled in Germany is directly or indirectly affiliated with an insurance undertaking domiciled in another member state or EEA state, or has a common participating undertaking with such an affiliated undertaking, the Supervisory Authority shall communicate all information to the supervisory authority of the other member state or EEA state that it deems necessary for this authority to have. Upon request by the supervisory authority of this country, the Supervisory Authority shall also communicate any relevant information appropriate to enable or facilitate supervision in accordance with Directives 98/78/EC and 2002/87/EC.

(2) The Supervisory Authority may request that the competent authorities in the member state or EEA state in which a parent company is domiciled require the parent company to provide the information necessary to allow it to fulfil its duties as coordinator and that the information then be forwarded to the Supervisory Authority.

(3) For the purpose of assessment of any information required for supplementary supervision in accordance with section 83 (1) sentence 1 nos. 1a and 1b and sentence 2, the Supervisory Authority shall request that the competent authority of the other member state or EEA state cooperate and inform this authority of the intended measures.

(4) If the competent authority of another member state or EEA state (requesting authority) files a request for an assessment within the meaning of subsection (3) above with regard to an undertaking domiciled in Germany, the Supervisory Authority shall provide administrative assistance by performing the assessment itself or authorising the requesting authority to do so or approving the commissioning of an auditor or other expert to perform the assessment; the requesting authority may opt to attend any assessment performed by the Supervisory Authority. It may take part in the assessment; section 83 (3) and (6) apply accordingly.

VIb. Notification to the EC Commission

Section 111g
Scope of the notification requirement

(1) The Supervisory Authority shall notify the Commission of the European Communities of the following:

  1. The granting of an authorisation in accordance with section 5 (1) to an undertaking that is the subsidiary (section 7a (2) sentence 6) of a parent undertaking (section 7a (2) sentence 7) domiciled in a non-member state within the meaning of section 105 (1) sentences 2 and 3; the structure of the group shall be stated in the notification,
  2. The acquisition of a participation in an insurance undertaking by which the insurance undertaking becomes the subsidiary of a parent undertaking domiciled in a non-member state within the meaning of section 105 (1) sentences 2 and 3,
  3. The number and nature of the cases in which the establishment of a branch or operation of direct insurance business via cross-border provision of services in another member state or EEA state could not be realised because the Supervisory Authority did not forward the documents under section 13b (1) sentence 2, or section 13c (1) sentences 2 and 3 to the supervisory authority of the other member state or EEA state,
  4. The number and nature of the cases in which measures in accordance with section 111b (1) sentences 2 and 3 were imposed,
  5. General difficulties which insurance undertakings encounter when establishing branches, setting up subsidiaries or related in any other way with the operation of insurance business in a country that is a non-member state within the meaning of section 105 (1) sentences 2 and 3,
  6. At the request of the Commission, the application for authorisation of an undertaking that is the subsidiary of a parent undertaking domiciled in a non-member state within the meaning of section 105 (1) sentences 2 and 3,
  7. At the request of the Commission, any intention disclosed in accordance with section 104 to acquire a participation in an insurance undertaking by which the insurance undertaking would become a subsidiary of an undertaking domiciled in a non-member state within the meaning of section 105 (1) sentences 2 and 3,
  8. The maximum interest rates set pursuant to section 65 (1) sentence 1 no. 1,
  9. The chosen course in the cases set forth in section 104v.

(2) The notification requirements pursuant to subsection (1) nos. 6 and 7 above only apply if the Commission of the European Communities finds that insurance undertakings domiciled in a member state or EEA state are not permitted effective access to the market of the non-member state within the meaning of section 105 (1) sentences 2 and 3, which is comparable to the access the European Community permits undertakings of this non-member state, or if the Commission finds that the insurance undertakings domiciled in a member state or EEA state are not granted national treatment. The notification requirements pursuant to subsection (1) nos. 6 and 7 above in conjunction with sentence 1 no longer apply if an agreement has been concluded with the non-member state concerning effective access to the market and national treatment of insurance undertakings domiciled in a member state or EEA state, or if decisions on applications for authorisation of undertakings domiciled in this country no longer need to be deferred in accordance with section 8 (3).

VII. Occupational pension schemes

1. Pension funds

Section 112
Definition

(1) A pension fund is a scheme with legal personality which

  1. offers funded occupational retirement provision for one or more employers for the benefit of employees,
  2. is not permitted to guarantee the level of benefits or the level of future contributions required to provide a given level of benefits in respect of all benefit cases provided for as opposed to insurance contracts,
  3. affords employees an independent claim to payment of benefits from the pension fund, and
  4. is obliged to provide the retirement benefits as a life annuity.

Retirement benefits within the meaning of sentence 1 are annuities or income withdrawal plans that meet the requirements set forth in section 1 (1) sentence 1 no. 4 of the German Pension Contracts Certification Act (Altersvorsorge-Zertifzierungsgesetz).

(1a) Pension funds may provide retirement benefits other than those named in subsection (1) sentence 1 no. 4 above, provided contribution payments by the employer are to be continued after the retirement commencement date. No fixed date may be set for the end of contribution payments. Sentence 1 shall not apply for commitments within the meaning of section 1 (2) no. 2 of the German Occupational Retirement Provision Act (Betriebsrentengesetz).

(2) The operation of pension funds must be authorised by the Supervisory Authority.

(3) For the purposes of this provision, employees also refers to former employees as well as individuals coming within the scope of section 17 (1) sentence 2 of the Occupational Retirement Provision Act.

Section 113
Applicable provisions

(1) The provisions applicable to life insurance undertakings under this Act shall apply accordingly to pension funds within the meaning of section 112, unless otherwise set forth in this Act.

(2) Of the provisions of this Act that are applicable to life insurance undertakings, the following shall apply to pension funds, subject only to a proviso:

1. Section 5 (3) no. 2, with the proviso that the pension plans must be submitted with the application for authorisation; pension plans refers to the terms governing the scheduled provision of benefits on occurrence of the insured event as set forth in the operating plan,

2. Section 5 (4), with the proviso that section 114 (2) replaces section 53c (2),

3. Section 7 (1), with the proviso that the authorisation may be issued only to public limited companies and mutual pension funds; the provisions concerning mutual societies shall apply accordingly to mutual pension funds, unless otherwise stipulated,

4. Section 10a, with the proviso that the employee shall receive the information in part D section III of the Annex,

4a. Section 11a (3), with the proviso that section 116 (1) replaces section 65 (1) in all cases,

4b. Section 11b sentence 4, with the proviso that the independent trustee must also dispose of adequate knowledge relating to the field of occupational retirement provision,

5. Section 13 (1), with the proviso that the authorisation requirement shall not apply to pension plans; changes and the introduction of new pension plans shall not take effect until three months have passed, unless the Supervisory Authority either denies authorisation for the reasons given in section 8 (1) or declares the application unobjectionable before that time,

6. (rescinded)

7. Section 81, with the proviso that, “the interests of the beneficiaries” shall replace the “interests of the insured”, and that the subject of legal supervision includes monitoring of compliance with the social and labour law provisions applicable to the scheme in the area of occupational retirement provision,

8. Section 81a, with the proviso that the “interests of the beneficiaries” shall replace the “interests of the insured” and that “pension contracts" shall replace “insurance contracts”,

8a. Section 81b (4), with the proviso that section 115 (2) replaces section 54 (3),

9. Section 81c, with the proviso that the “interests of the beneficiaries” shall replace the “interests of the insured”,

10. Section 81e, with the proviso that that the “beneficiaries” replace the “policyholders”,

Section 101, with the proviso that the contribution income is used as the basis rather than premium income.

(3) Section 6 (1) sentence 2, subsection (4), section 9, sections 13a to 13c, section 14 (1a), sections 53, 53b and 53c (1) to (3c), section 54 (1) to (3), sections 54b and 54c, 64, 65 and 66 (7), section 85 sentence 2, section 88 (1) sentence 2, subsection (3) sentences 1, 3 and 4, subsection (4) sentence 2, sections 88a and 89b, 110a and 110b, sections 111 to 111g, as well as sections 122 and 123 shall not apply.

(4) If the amount of benefits paid is contingent upon the performance of a fund established in accordance with the pension plan, separate accounts shall be kept for this fund in accordance with section 44 of the Investment Act; section 44 (2) of the Investment Act shall not apply.

Section 114
Capital requirement

(1) To ensure that their liabilities under the pension contracts may be fulfilled at all times, pension funds are obliged to maintain own funds free of all foreseeable liabilities in an amount not less than the solvency margin, which is determined in relation to the total volume of business.

(2) In order to ensure the adequate solvency of pension funds, the Federal Ministry of Finance is authorised to issue by regulation provisions on the following:

  1. The calculation and the amount of the solvency margin,
  2. The minimum amount of the guarantee fund relevant to pension funds, and
  3. The items that may be considered own funds within the meaning of subsection (1) above, and the extent to which these may be counted towards the solvency margin

Section 115
Investments

(1) Pension funds shall be obliged to establish guarantee assets, taking account of the pension plans concerned. The amount of the guarantee assets and other restricted assets are to be invested in a way appropriate to the type and duration of the retirement benefits, taking into account the terms of the respective pension plan. All of the assets of a pension fund are to be invested in such a way as to ensure maximum security and profitability, while, at the same time, maintaining sufficient liquidity of the pension fund and an adequate diversification and spread.

(2) In order to ensure that the obligations under the pension plan can be fulfilled at all times, the Federal Government is authorised to set forth details by regulation in accordance with subsection (1) above, taking into account the types of investment pursuant to Article 23 of the Third Life Insurance Directive and the terms of the pension plan in respect of investment risk and the bearer of such risk. This includes, in particular, quantitative and qualitative requirements in accordance with Article 23 of the Third Life Insurance Directive on the investment of restricted assets, matching and location requirements, and restricting investments in the sponsoring company. It may be considered to be ensured that obligations under a pension plan can be fulfilled at all times, even if it is temporarily underfunded, if the deficit does not exceed 5 % of the amount of the provisions, and if the interests of the beneficiaries are safeguarded. To ensure full coverage of the provisions, an agreement must be concluded between the employer and the pension fund, which is subject to approval by the Supervisory Authority. Such approval shall be granted if the employer has ensured the ability to meet the obligation to make further contributions to fully cover the provisions by having furnished the surety or guarantee of a suitable credit institution or by any other suitable means. The pension fund must immediately notify the Pension Security Association (Pensionssicherungsverein) of the agreement.

(3) Pension funds are obliged to inform the Supervisory Authority annually of their investment policy, as well as immediately following any significant change in such policy. To this end they shall submit a statement of the principles underlying their investment policy, including a description of risk assessment and risk management procedures and of the strategy in relation to the pension plan, in particular the allocation of assets according to the type and duration of retirement benefits.

(4) The pension fund must inform its beneficiaries in writing of whether, and, if so, how, it takes ethical, social and ecological interests into account in the way it invests the contributions paid.

Section 116
Premium reserve

(1) The Federal Ministry of Finance is authorised to issue by regulation provisions for the purpose of calculating the premium reserve in accordance with German Accepted Accounting Principles

  1. one or several maximum technical interest rates,
  2. the principles of actuarial calculation applicable to the calculation of the premium reserve.

This power may be delegated by regulation to the Supervisory Authority. The latter shall issue the rules in consultation with the supervisory authorities of the individual federal states.

(2) The regulations pursuant to subsection (1) above shall be issued in agreement with the Federal Ministry of Justice.

Section 117
Cross-border activities of pension funds

(1) Pension funds may carry on business in other member states and EEA states in accordance with subsections (2) to (6) below.

(2) Pension funds must report any intention to conduct the business of occupational retirement provision for a sponsoring company domiciled in another member state or EEA state, indicating the member state or EEA state in question. They must also indicate the name of the sponsoring company and the main characteristics of the occupational pension scheme to be operated for this company.

(3) Once this notification has been submitted, the Supervisory Authority shall ensure that the planned activity complies with statutory requirements, in particular with regard to the adequacy of the administrative structure, the financial position and the qualification of the managers responsible for the planned activities. If unobjectionable, the Supervisory Authority shall forward the information submitted in accordance with subsection (2) to the competent authorities of the other member state or EEA state within three months of receiving it, and shall inform the pension fund accordingly.

(4) Within two months of receipt of the notification pursuant to subsection (3) sentence 2, the Supervisory Authority shall provide the pension fund with the information furnished by the competent authority of the other member state or EEA state concerning the social and labour law provisions relating to occupational retirement provision, as well as information on the provisions in the host member state, which are applicable in accordance with Article 18 (7) and Article 20 (7) of Directive 2003/41/EC of the European Parliament and the Council of 3 June 2003 on the activities and supervision of institutions for occupational retirement provision (OJ L 235 p. 10). After receipt of the notification in accordance with sentence 1, or in the event that the competent authorities fail to reply before expiration of the period specified in sentence 1, the pension fund may commence operations in accordance with the provisions set forth in sentence 1 above.

(5) The Supervisory Authority shall take the necessary measures, in consultation with the competent authorities of the other member state or EEA state where appropriate, to ensure that the pension fund puts a stop to the breach of social and labour law provisions identified by these authorities. If the undertaking continues to violate the provisions named in sentence 1 above, the Supervisory Authority may prohibit or restrict the undertaking’s activities.

(6) For pension funds that are subject to supervision by the individual federal states, the competent state supervisory authority shall inform the Supervisory Authority of the undertaking’s notification. Upon request, the Supervisory Authority shall provide the state supervisory authority with assistance in the implementation of the notification procedures and measures referred to in subsection (5).

(7) Section 13 (3) shall apply accordingly to the extension of business operations to cover an area outside of the member states and EEA states.

Section 118
Separate regulations

Sections 5 (6), 11a (6), 55a, 57 (2), 81c (3), 104 (6) and 104g (2) shall apply, subject to the proviso that the Federal Ministry of Finance is authorised to issue, on the basis of these provisions, separate regulations applicable to pension funds.

2. Pensionskassen

Section 118a
Definition

A Pensionskasse is a legally independent life insurance undertaking, the purpose of which is to provide cover for a loss of income due to old-age, invalidity or death and which

  1. provides a funded insurance scheme,
  2. does not, as a general rule, provide benefits until the actual loss of income takes place,
  3. in the event of death, may only provide benefits to surviving dependents, though a death grant, which may not exceed standard funeral costs, may be included for third parties who have to bear the costs of a funeral,
  4. affords the insured an independent claim to benefits from the Pensionskasse or provides benefits in the form of a pension liability insurance.

Section 118b
Applicable provisions

(1) Section 113 (2) nos. 4b, 5 and 7, section 113 (4) as well as section 115 (3) and (4) apply accordingly to Pensionskassen; section 5 (3) no. 2 applies, subject to the proviso that the general policy conditions are to be submitted together with the application for authorisation; section 81c (2) does not apply.

(2) If considered to be a small mutual association the Pensionskasse shall, notwithstanding section 53, also be subject to sections 29, 58 and 59 of this Act. The memorandum and articles of association shall stipulate that the management board is to be appointed by the supervisory board or the senior body. By way of derogation from section 11a (3) no. 2, the appointed actuary shall submit the actuarial certification for small mutual associations as well. The appointed actuary shall also certify compliance with the requirements set forth in the regulation pursuant to section 118d (1).

(3) Pensionskassen which have the legal form of a mutual society may apply to be regulated by the Supervisory Authority if

  1. benefit reductions are permitted under their memorandum and articles of association,
  2. their memorandum and articles of association stipulate that at least 50 percent of the members of the senior representative body should be appointed by the insured or their representatives, Pensionskassen which only carry on pension liability insurance shall afford such a right to their policyholders,
  3. they only insure individuals covered by section 17 of the Occupational Retirement Provision Act, the managers or proprietors of the sponsoring companies or individuals assigned to the Pensionskasse by virtue of law or who continue their policy with the Pensionskasse after their contract of employment has been terminated, and if
  4. they do not charge any acquisition cost loadings for the intermediation of insurance contracts and do not pay any fees for the intermediation or conclusion of insurance contracts,

(regulated Pensionskassen). Pensionskassen which the Supervisory Authority determines to fulfil the criteria of section 156a (3) sentence 1 in the version dated 15 December 2004 may also apply. The Supervisory Authority shall approve the application if the terms set forth in this subsection have been fulfilled. Section 5 (3) no. 2, section 11a (5), section 13a (1) sentence 3, section 113 (2) no. 4 and section 157 (1) apply accordingly to regulated Pensionskassen, additionally, subsections (1) and (2) shall apply.

(4) Pensionskassen subject to supervision by the individual federal states and Pensionskassen that are collective schemes within the meaning of section 4 (2) of the German Collective Bargaining Act (Tarifvertragsgesetz) established under a generally binding collective bargaining agreement, are always considered regulated Pensionskassen.

(5) If Pensionskassen no longer fulfil the requirements set forth in subsection (3) or (4) above, the Supervisory Authority shall issue a corresponding notice. Section 11c shall apply accordingly to insurance contracts that came into force before the date of the notice, if they are based on an operating plan approved by the Supervisory Authority. Section 11b shall not apply in such cases.

(6) Subsection (5) sentences 2 and 3 above shall apply accordingly to those Pensionskassen that received their authorisation on 2 September 2005 and do not meet the requirements set forth in subsection (3) or (4).

(7) Subsections (1) and (2) and subsections (5) and (6) above shall come into force on 1 January 2006.

Section 118c
Cross-border activities of Pensionskassen

Section 117 shall apply accordingly to cross-border activities of Pensionskassen; sections 13a to 13c shall not apply.

Section 118d
Enabling provision

(1) In accordance with the following principles, the Federal Ministry of Finance may, by regulation not requiring approval by the Bundesrat, issue rules with regard to life insurance contracts of Pensionkassen which are not based on an approved operating plan:

  1. In the case of Pensionskassen with collective funding, to issue provisions on the actuarial methods used to calculate premiums, including premium adjustments and mathematical provisions, specifically the premium reserve, to take into account any relevant assumptions with respect to the risk of mortality, the dependence of the risk on age and gender and probability of cancellation, assumptions regarding the composition of existing and new business, as well as the interest rate, including the safety loading and the principles for the assessment of the other loadings; this power may be delegated to the Supervisory Authority by regulation not requiring approval by the Bundesrat. The Supervisory Authority shall issue the rules in consultation with the supervisory authorities of the individual federal states.
  2. For Pensionskassen where both the employee and the employer are subject to a contractual obligation to pay premiums, to issue provisions stating how the employee’s share of surplus of revenues over and above the technical interest rate is to be determined and setting an appropriate level for the employee’s share in this income within the meaning of section 81c. This power may be delegated to the Supervisory Authority by regulation not requiring approval by the Bundesrat. The latter shall issue the rules in consultation with the supervisory authorities of the individual federal states.

(2) The regulations pursuant to subsection (1) no. 1 above shall be issued in agreement with the Federal Ministry of Justice.

3. Occupational pension schemes domiciled abroad

Section 118e
Schemes domiciled in another member state or another signatory state to the EEA Agreement

(1) Authorised occupational pension schemes domiciled in another member state or EEA state may conduct business in Germany in accordance with the provisions set forth below.

(2) The Supervisory Authority shall notify the competent authorities in the home member state, within two months of receiving the information referred to in Article 20 (3) of Directive 2003/41/EC concerning the social and labour law provisions relating to occupational retirement provision and the regulations set forth in subsection (5). After receipt of the notification from the Supervisory Authority via the competent authorities, or in the event that the competent authorities fail to reply before expiration of the period specified in sentence 1, the scheme may commence operations in Germany in accordance with the provisions set forth in sentence 1.

(3) The Supervisory Authority shall determine under which vehicle, within the meaning of section 1b (2) to (4) of the Occupational Retirement Provision Act, the scheme shall be classified and shall inform both the scheme and the Pension Security Association.

(4) The Supervisory Authority shall inform the competent authorities in the scheme’s home member state of any significant changes to the social and labour law provisions which could have an effect on the characteristics of the occupational retirement provision system, and of any significant changes to the rules set forth in subsection (5) below.

(5) With regard to their business activities in Germany, authorised occupational pension schemes domiciled in another member state or EEA state must adhere to the following rules, in addition to the supervisory regulations that apply in their home country:

  1. The scheme may not invest more than 5 percent of its assets in shares and other securities treated as shares, bonds, debt securities and other money and capital market instruments issued by the same undertaking, and may not invest more than 10 percent of its assets in shares and other securities treated as shares, bonds, debt securities and other money and capital market instruments issued by undertakings belonging to a single group; the thresholds set forth in the Investment Ordinance (Anlageverordnung) shall be relevant to investments for which higher percentages apply under section 3 (2) of the Investment Ordinance.
  2. The scheme may not invest more than 30 percent of these assets in assets denominated in other currencies than those of its liabilities.

Sentence 1 shall only apply to the part of the scheme’s assets which corresponds to the activities it performs in Germany within the meaning of Directive 2003/41/EC. The schemes must also provide consumer information in accordance with part D section III of the Annex.

(6) The Supervisory Authority shall monitor the scheme’s compliance with the social and labour law provisions and its provision of the consumer information. In the event of irregularities within the meaning of Article 20 (9) of Directive 2003/41/EC, it shall immediately inform the competent authorities in the scheme’s home member state.

(7) If the scheme persists in breaching the applicable labour or social law provisions, the Supervisory Authority may, after informing the competent authorities in the scheme’s home member state, take appropriate measures to prevent such breaches. In the event that other measures are unavailing, the Supervisory Authority may prohibit the scheme from conducting business in Germany.

Section 118f
Schemes domiciled in non-member states

Sections 105 to 110 shall apply to undertakings domiciled outside the member states of the European Community or the European Economic Area.

VIIa. Reinsurance Supervision

Section 119
Authorisation; application; documents to be submitted

(1) Undertakings with their registered office or head office in Germany that exclusively conduct reinsurance business shall be required to obtain authorisation from the Supervisory Authority to commence or expand business operations.

(2) An operating plan is to be submitted along with the application for authorisation.
This operating plan shall comprise:

  1. The memorandum and articles of association,
  2. A description of the purpose and structure of the business, as well as the region in which business is to be conducted,
  3. An estimated balance sheet and profit and loss account, for the first year of business,
  4. Details on the risks to be covered by way of reinsurance and the types of reinsurance contracts that the reinsurance undertaking plans to conclude with the ceding insurers,
  5. Enterprise agreements as specified under sections 291 and 292 of the Stock Corporation Act,
  6. An overview of the agreements for the purpose of permanently transferring the portfolio management, claims administration, accounting, investments or asset management of a reinsurance undertaking wholly or in essential part to another undertaking (outsourcing),
  7. Details on the kind and scope of the intended retrocession,
  8. An estimate of the costs of setting up the administration; the undertaking shall prove that it disposes of the necessary funds for this purpose (organisation fund),
  9. The information necessary to assess the reliability and qualification of the managers (section 7a (1)),
  10. If qualified participating interests are held in the reinsurance undertaking (section 7a (2) sentence 3)

    1. The names of the holders and the amounts of the participating interests,
    2. The information necessary to assess if the requirements under section 7a (2) sentences 1 and 2 are met,
    3. If the holders are required to prepare annual accounts, the annual accounts for the previous three financial years including the audit reports by independent auditors, provided that such reports are to be prepared and there are no provisions under German law barring their release to the applicant, and
    4. If the holders belong to a group, details of the group structure and, if such accounts are to be prepared, the consolidated accounts for the last three financial years, including the audit reports by independent auditors, provided that such reports are to be prepared and there are no provisions under German law barring their release to the applicant,
      and
  11. Facts pointing at a close relationship (section 121 (3)) between the reinsurance undertaking and other natural persons or undertakings.

(3) The description of planned business activities must include documentation of available own funds in the amount of the minimum guarantee fund (section 121d). Their composition shall be detailed. Additionally, estimates shall be submitted for the first three financial years with respect to the expenses for reinsurance commissions and other current operating expenses for reinsurance business, the expected premiums, the expected charges for claims incurred and the expected liquidity situation. These estimates are to demonstrate the conditions which shall secure that the future liabilities of the undertaking can be fulfilled at any time, in particular, which financial means are expected to be available to meet the liabilities under the contracts and the capital adequacy requirements.

Section 120
Permissible legal forms; scope of authorisation

(1) Authorisation may only be granted to public limited companies, mutual societies and corporations and institutions under public law. The head office must be located in Germany.

(2) If the application or operating plan does not indicate otherwise, the authorisation is issued without restriction.

(3) The application and operating plan may be limited to property and casualty reinsurance, including personal reinsurance other than life reinsurance (non-life reinsurance), or life reinsurance.

(4) There may be further requirements and conditions placed on the granting of the authorisation.

Section 121
Refusal of authorisation

(1) The authorisation shall be refused if

  1. there is evidence indicating that the managers do not meet the requirements under section 7a (1), or
  2. there is evidence to suggest that the holder of a qualified participating interest (section 7a (2)) in the reinsurance undertaking, or, if such holder is a legal person, a legal representative or representative according to the memorandum and articles of association, or, if such holder is a partnership, a partner, is not reliable or for any other reason does not meet the demands required in the interest of ensuring sound and prudent management of the reinsurance undertaking; this shall also apply if there is evidence to suggest that the funds raised in order to purchase the qualified participating interest have been acquired by an action which objectively constitutes a criminal offence, or
  3. the information and documentation submitted together with the application pursuant to section 119 (2) and (3) do not provide sufficient evidence that the obligations under the reinsurance contracts can be fulfilled at all times.

(2) The authorisation may be refused if there is evidence to suggest that effective supervision of the reinsurance undertaking will be hindered. This is specifically the case if

  1. the reinsurance undertaking is affiliated or closely linked with other persons or undertakings through corporate ties which, due to the ownership structure or poor economic transparency, hinder the effective supervision of reinsurance undertaking, or
  2. the effective supervision of the reinsurance undertaking is hindered due to the legal or administrative provisions of non-member states within the meaning of section 105 (1) sentence 2 and 3 applicable to these persons or undertakings, or
  3. the effective supervision of the reinsurance undertaking is hindered due to a lack of effective supervision of these persons or undertakings in the states where they have their registered office of head office, and due to unwillingness by their competent supervisory body to cooperate satisfactorily with the Supervisory Authority.

The authorisation may also be refused if, contrary to section 119 (2), insufficient information or documents have been submitted with the application.

(3) A close link is deemed to exist if a reinsurance undertaking and another natural person or another undertaking are affiliated

  1. through direct or indirect holding of at least 20 percent of the capital, the voting rights of a public limited insurance company, or the initial fund of a mutual society, by one or more subsidiaries or trustees, or
  2. as parent and subsidiary, through a similar relationship, or as sister companies. Sister companies are defined as undertakings sharing the same parent.

(4) Authorisation may not be refused for reasons other than those given under subsections (1) and (2) above.

Section 121a
Ongoing legal and financial supervision

(1) In addition to the provisions contained in this section, only sections 7a, 13d nos. 1, 2, 4, 4a and 5, sections 55 to 59, 83, 84, 86, 89a, 101 to 103, 150 and 156 (2) shall apply to the undertakings specified in section 119 (1). Sections 2, 3, 4, 53c (1) and (3) to (4), sections 81b, 83a (1) and (2) and section 104 shall apply accordingly. In the case of undertakings in the legal form of a mutual society that exclusively conduct reinsurance business, sections 15 to 38, 39 (1), (2) and (4), section 40 (1) sentences 1 and 3, subsections (2) and (3), sections 42, 43, 45 to 52 and 87 (5) shall also apply. Section 34 sentence 1 shall also apply accordingly to the undertakings named in section 119 (1), to the extent that these are public limited insurance companies.

(2) The Supervisory Authority must be notified immediately of any changes to the information in accordance with section 119 (2) nos. 1, 2, 4 and 5, and of any intention to transform a reinsurance undertaking in accordance with section 1 of the Transformation Act.

(3) The Supervisory Authority may issue to the undertakings, the members of the management boards and the other managers or persons controlling the undertaking all orders necessary and appropriate to ensure that they uphold the laws applicable to reinsurance underwriting and comply with the regulations issued by the Supervisory Authority, in particular the requirement that reinsurance undertakings are at all times able to fulfil the obligations arising from their reinsurance contracts. The Supervisory Authority may also directly issue orders pursuant to sentence 1 to other undertakings, if these perform activities for a reinsurance undertaking which can be considered the subject of an outsourcing contract (section 119 (2) no. 6).

Section 121b
Investment rules

As regards the portfolios of assets that serve to ensure the ability to fulfil obligations under reinsurance contracts at all times, section 54 (1) applies accordingly, subject to the proviso that the adequacy of diversification and spread is to be assessed in the context of the particularities of the reinsurance undertaking concerned; the undertaking's capital adequacy as well as its overall financial situation and group structure are to be taken into account. The portfolios of assets within the meaning of sentence 1 comprise assets in the amount of the technical provisions and the liabilities under reinsurance contracts, as well as accruals and deferred income; retrocessionnaires' shares are not taken into account. When determining the amount of the liability to be covered, liabilities shall not be taken into account that are covered by cash deposits with the ceding insurer.

Section 121c
Revocation of authorisation

(1) The authorisation to carry on life reinsurance or non-life reinsurance business, or for overall business operations, shall be revoked if the reinsurance undertaking expressly waives the authorisation. Furthermore, the authorisation shall be revoked upon opening of insolvency proceedings. Revocation of the authorisation shall not bear upon actions of the reinsurance undertaking legally required as part of the insolvency proceedings. The authorisation shall be revoked if the reinsurance undertaking

  1. has not made use of the authorisation within twelve months of its being granted, or
  2. has ceased operations for more than six months.

(2) The Supervisory Authority may revoke the authorisation to carry on life reinsurance or non-life reinsurance business, or for the whole of business operations, if

  1. the undertaking no longer satisfies the requirements for authorisation,
  2. the undertaking seriously breaches its obligations under the law,
  3. the undertaking is likely to be permanently unable to fulfil its obligations to the ceding insurers, or
  4. the undertaking is unable to carry out the measures set forth in the solvency plan or financing plan pursuant to section 81b (1) or (2) within the prescribed period.

(3) After revocation of the authorisation, the undertaking is prohibited from writing new business and from increasing or renewing existing policies.

(4) If the authorisation is revoked, the Supervisory Authority takes all appropriate measures to safeguard the interests of the ceding insurers with respect to the enforceability of their claims. It may, in particular, restrict or prohibit free disposal of the assets of the undertaking and appoint qualified persons to manage the assets.

(5) If the Supervisory Authority should become aware of evidence that would justify refusal of the authorisation pursuant to section 121 (1) no. 1, it may, instead of revoking the authorisation, require the dismissal of the managers to which the evidence relates and prohibit such managers from conducting business. The Supervisory Authority may also require the dismissal of or prohibit from conducting business any manager who either intentionally or negligently violates provisions of this Act, regulations issued to implement this Act or orders of the Supervisory Authority, and persists in this conduct despite a warning from the Supervisory Authority.

Section 121d
Enabling provision

The Federal Ministry of Finance is authorised to issue, by regulation subject to the approval of the Bundesrat, rules with respect to the following for undertakings within the meaning of section 119 (1):

  1. The calculation and the amount of the solvency margin,
  2. The minimum amount of the guarantee fund for life and non-life reinsurance in accordance with Directive 73/239/EEC of the Council of 24 July 1973 on the coordination of laws, regulations and administrative provisions relating to the taking-up and pursuit of the business of direct insurance (other than Life Assurance) (OJ L 228 p. 3) as last amended by Directive 2002/13/EC of the European Parliament and of the Council of 5 March 2002 (OJ L 77 p. 17), and
  3. The method for calculating life reinsurance own funds not shown in the balance sheet, and the extent to which this may be counted towards the solvency margin and the guarantee fund in accordance with Directive 2002/83/EC of the European Parliament and of the Council of 5 November 2002 concerning life assurance (OJ L 345 p. 1).

Section 121e
Grandfathering provision

For undertakings that exclusively conduct reinsurance business, began operating before 21 December 2004 and are registered with the Supervisory Authority as reinsurance undertakings, the authorisation (section 119 (1)) shall be deemed granted for the existing scope of its business operations. Such undertakings are, however, fully subject to ongoing supervision.

VIII. Transitional Provisions

Section 122
Continuation of business operations

Insurance undertakings which, on 1 January 1902, were authorised to conduct business in one or more German states under the laws of the respective state(s), require no authorisation under this Act to continue business operations within the boundaries by which they had restricted operations up to 1 January 1902, or by which, in the case of permission to conduct business based on a special authorisation, their operations had been restricted under such authorisation.

Section 123
Eligibility as guarantee assets

All assets held on 29 December 1974 in accordance with the legal provisions and orders of the supervisory authority applicable until that date, as well as with individual approvals granted by the supervisory authority, may remain classified as restricted assets, but not as guarantee assets, unless they had already been allocated to the Deckungsstock (coverage fund) and entered into the Deckungsstock register.

VIIIa. Guarantee Scheme

Section 123a
Existing public sector schemes

Schemes that conducted the business referred to in section 1a (2) on 21 December 2004 must meet the requirements of this Act and the regulations issued to implement this Act by 23 September 2010 at the latest.

Section 123b
Reinsurance undertakings

(1) By no later than 30 June 2005, undertakings within the meaning of section 121e must submit to the Supervisory Authority an operating plan in accordance with section 119 (2) nos. 1, 2, 4, 5 and 10 (a), which details the business operations to date.

(2) For undertakings within the meaning of section 121e, the provisions set forth in section 120 (1) sentence 1 and section 121b shall not apply until 1 January 2005. Section 121a (1), insofar as it refers to section 53c (1) and (3) to (4) and section 81b, shall first come into force for these undertakings as of 1 March 2007. During the period from 31 December 2005 until 28 February 2007, sentence 2 shall apply subject to the proviso that section 1 of the Ordinance Concerning the Capital Adequacy of Insurance Undertakings (Capital Resources Ordinance) dated 13 December 1983 (BGBl. I p. 1451) in the version dated 16 April 1996 (BGBl. I p. 616) shall apply by analogy; the guarantee fund during the period in question shall be at least 2 million euros. In the event that the own funds of a reinsurance undertaking are less than the notional solvency margin on 31 December 2004, the own funds are not permitted to fall further below the notional solvency margin.

Section 123c
Transitional provisions on the Act Implementing the Financial Conglomerates Directive

(1) Until a regulation is issued in accordance with section 104r (2)

  1. all significant risk concentrations that occur during the course of any given calendar year must be reported to the Supervisory Authority and the Bundesbank by 16 January of the following year. A risk concentration is deemed to be significant if the counterparty risk, credit risk or investment risk calculated in accordance with sections 13 to 13b, 19 and 20, each in conjunction with the regulation pursuant to section 22 of the Banking Act and relating to a counterparty within the meaning of section 19 (2) of the Banking Act, reaches or exceeds, individually or in the aggregate, 10 percent of the capital requirement at conglomerate level;
  2. the superordinated entity of the financial conglomerate within the meaning of section 104q (3) sentences 6 to 8 or subsection (4) must immediately inform both the Supervisory Authority and the Bundesbank of any insurance-related risk concentrations which have been identified as significant on the basis of the internal risk management system and which are the result of large risks, accumulation risks and long term risks where the causal mechanism is difficult to ascertain. To the extent that these risks have a direct effect on individual counterparties in accordance with no. 1, this must also be included in the notification, broken down by individual counterparty. The insurance risk relates to potential claims, which can be determined on the basis of the sum insured under the contract taking into account reinsurance, claims experience and mathematical models;
  3. the superordinated entity of the financial conglomerate within the meaning of section 104q (3) sentences 6 to 8 or subsection (4) must immediately inform both the Supervisory Authority and the Bundesbank of any risks resulting from a combination of, or the interaction between various individual types of risk;
  4. all significant intra-group transactions within a financial conglomerate during the course of any given calendar year must be reported to the Supervisory Authority and the Bundesbank by 16 January of the following year. Intra-group transactions include, specifically

    1. Loans,
    2. Guarantees and warrantees and other off-balance sheet transactions,
    3. Transactions relating to own funds elements within the meaning of sections 53c and 104g of this Act and sections 10 and 10a of the Banking Act,
    4. Investments,
    5. Reinsurance transactions,
    6. Cost-sharing agreements.

An intra-group transaction is deemed to be significant if the individual transaction reaches or exceeds 5 percent of the capital requirement at conglomerate level. Several transactions between the same or different conglomerate entities with another conglomerate member during any given financial year are to be grouped by counterparty, even if the individual transaction does not reach 5 percent of the capital requirement at conglomerate level.

(2) The identification and classification of a group operating on a cross-sectoral basis as a financial conglomerate in accordance with sections 104n to 104o in conjunction with section 104k no. 4 shall be performed for the first time on the basis of the annual accounts for the financial year ending in 2003; the Supervisory Authority shall take into account any significant changes during financial year 2004. The provisions set forth in section 104q with regard to capital adequacy at conglomerate level shall be applied for the first time on the basis of the financial accounts for the financial year beginning on 1 January 2005 or the financial year that ends during the course of 2005. The notifications referred to in subsection (1) nos. 1 and 4 shall be submitted for the first time by 16 January 2006.

Section 124
Compulsory membership

(1) Undertakings that are authorised to carry on business in insurance classes 19 to 23 (life insurers) in accordance with section 5 (1) or section 105 (2) or are authorised to provide substitutive health insurance within the meaning of section 12 (health insurers), with the exception of Pensionskassen and death benefit funds, must belong to a guarantee scheme, which serves to safeguard the claims of their policyholders, insured persons, beneficiaries and other individuals vested with rights under the insurance contract.

(2) Pensionskassen may volunteer to join a guarantee scheme. In order to ensure a comparable financial situation amongst all members, the guarantee scheme may make admission contingent upon the fulfilment of certain conditions.

Section 125
Maintenance of insurance contracts

(1) In the event that the Supervisory Authority finds that an insurance undertaking which is a member of a guarantee scheme fulfils the conditions set forth in section 89 (1) sentence 1, or that a notification pursuant to section 88 (2) has been made by such an insurance undertaking, it shall inform the guarantee scheme of its findings and shall inform the insurance undertaking in question accordingly.

(2) To the extent that other measures designed to safeguard the interests of the insured are deemed insufficient, the Supervisory Authority shall order that the entire portfolio of the undertaking in question, as well as all of the assets required to cover the liabilities under these contracts, be transferred to the responsible guarantee scheme.

(3) With the portfolio transfer, the rights and obligations of the transferor under the insurance contracts, also in relation to the policyholders, are transferred to the guarantee scheme; section 415 of the Civil Code shall not apply.

(4) The guarantee scheme shall segregate administration of the contracts transferred to it from its other assets and shall keep separate accounts for these contracts. It shall immediately calculate the amount required in order to fully cover any liabilities under the insurance contracts and make adequate qualified assets available. In this respect, section 7 (2), sections 11a to 11c, 12, 12a, 12b, 12f, 13d nos. 7 and 8, sections 54, 54d sentence 1, sections 55a, 56a and 81d apply accordingly; section 81c shall apply to the insurance contracts administered by the guarantee scheme, as soon as the Supervisory Authority has found the restructuring of the contracts transferred to the guarantee scheme to be complete and the capital provided to the guarantee scheme for this purpose to have been returned to the contributing insurance undertakings.

(5) In the event that the assessment pursuant to subsection (4) reveals that the funds available to the guarantee scheme in accordance with section 129 (4) to (5a) are insufficient to guarantee the continuation of the contracts, the Supervisory Authority shall reduce the liabilities of the life insurance undertakings under their contracts by a maximum of 5 percent of the contractually guaranteed benefits. The Supervisory Authority may also issue orders to prevent an undue increase in the number of early cancellations.

(6) The guarantee scheme may transfer the portfolio of contracts, either in full or in part, to undertakings authorised to conduct insurance business in Germany; section 14 applies accordingly to such transfers. Upon transfer of the portfolio, the guarantee scheme may amend the general policy conditions and the premium rate terms applicable to the transferred contracts, in order to align them with the portfolio of the transferee, provided that this is appropriate to allow the continuation of the contracts at the transferee and that such a move does not place an unreasonable burden on the persons insured. The amendment shall become effective if due consideration is given to the interests of the insured, the objective of the contract in question is safeguarded and an independent trustee confirms that these conditions have been met. Sections 11b and 12b (5) shall apply accordingly to the trustee.

(7) The transferor's authorisation to conduct business lapses as soon as the Supervisory Authority has ordered that the portfolio of contracts be transferred to the guarantee scheme.

(8) Objections to and actions to annul the orders issued by the Supervisory Authority shall have no suspensive effect.

Section 126
Guarantee scheme

(1) A guarantee scheme for life insurance undertakings and a guarantee scheme for health insurance undertakings shall be set up as Federal Government funds without legal personality at the Kreditanstalt für Wiederaufbau. The guarantee schemes may act with legal effect, sue or be sued.

(2) The guarantee schemes are responsible for safeguarding the claims of policyholders, insured persons, beneficiaries and other individuals vested with rights under the insurance contracts in question. To this end, they ensure that the contracts of the insurance undertaking in question are continued.

(3) The guarantee schemes shall be administered by the Kreditanstalt für Wiederaufbau. The latter shall receive a fee paid out of the scheme's assets to cover the costs of administration.

(4) The Supervisory Authority shall decide on any objections to administrative acts by a guarantee scheme.

Section 127
Assignment of duties and powers to persons under private law

(1) The Federal Ministry of Finance is authorised to assign, by regulation which does not require the approval of the Bundesrat and to be prepared in consultation with the Federal Ministry of Food, Agriculture and Consumer Protection, the duties and powers of one or both guarantee schemes to a legal person under private law, provided that the latter is prepared to assume the duties of the guarantee schemes and can be deemed sufficiently able to satisfy the claims of those covered by the guarantee scheme. A legal person is deemed to be sufficiently able if

  1. the individuals responsible for managing and representing the legal person by virtue of law or the undertaking’s memorandum and articles of association are reliable and qualified,
  2. it has the necessary facilities and organisation to allow it to fulfil its duties, in particular with regard to the collection of premiums, claims administration and the management of funds, and has financial resources of at least 1 million euros for this purpose,
  3. it can document that it is able to organise, in particular, the collection of premiums, the claims administration and the management of funds in accordance with section 125 (2) upon transfer of the contract portfolio.

The duties and powers in question may also be assigned to an undertaking which is authorised in accordance with section 5. The Federal Ministry of Finance may, by means of the regulation pursuant to sentence 1, reserve the right to approve the memorandum and articles of association of the legal person and any amendments thereto.

(2) In the event of assignment in accordance with subsection (1), the legal person under private law shall succeed to the rights and obligations of the guarantee scheme in question. Section 126 (4) applies accordingly. There shall be no transfer of assets.

Section 128
Supervision

The Supervisory Authority shall counteract any irregularities that could adversely impact the guarantee scheme’s ability to properly perform its duties. It may issue orders that are appropriate and necessary to remedy or prevent such irregularities. The Supervisory Authority also has the right to request information from and to audit the guarantee scheme in accordance with section 83 (1) and (3). Otherwise, only the provisions contained in this Chapter and those set forth in section 144c shall apply to the guarantee scheme provided that it is not an authorised undertaking within the meaning of section 5.

Section 129
Financing

(1) The insurance undertakings that belong to a guarantee scheme shall pay contributions to the guarantee scheme. These contributions are intended to cover any shortfalls from the transferred insurance contracts, the resulting administrative costs and other costs which arise as a result of the guarantee scheme’s activities. The contributions paid to the guarantee scheme are deemed investments within the meaning of section 1 (1) and section 2 (3) of the Investment Ordinance.

(2) The liability of the guarantee scheme for fulfilment of the obligations under the insurance contracts shall be limited to the assets available based on the contributions made minus the costs set forth in subsection (1) sentence 2, as well as the assets transferred in accordance with section 125 (2) sentence 1. These assets shall not be used to cover the other liabilities of the guarantee scheme. A guarantee scheme within the meaning of section 127 must segregate these assets from its other assets.

(3) The funds accumulated for the assumption of the insurance contracts shall be invested in accordance with section 54 (1) and (2).

(4) The value of these assets should not fall below one thousandth of the total net technical provisions of all insurance undertakings that belong to the guarantee scheme.

(5) The insurance undertakings are required to pay annual contributions. The total annual contributions made by all of the insurance undertakings that are members of the life insurance guarantee scheme shall amount to 0.2 thousandths of their total net technical provisions. The guarantee scheme shall calculate the annual contribution to be paid by each individual insurance undertaking on an annual basis, in accordance with the procedure set forth in the regulation issued pursuant to subsection (6). Any income generated by the guarantee scheme shall be distributed to the members on a pro rata basis according to their contributions. The guarantee scheme can impose special contributions of up to one thousandth of total net technical provisions if this is required in order to enable it to perform its duties.

(5a) Subsection (1) sentence 3, and subsections (2) to (5) shall not apply to the health insurance guarantee scheme. After assuming the insurance contracts in question, the guarantee scheme shall impose special contributions of up to two thousandths of the total net technical provisions of the member health insurance undertakings in order to enable it to perform its duties.

(6) In consultation with the Federal Ministry of Food, Agriculture and Consumer Protection, the Federal Ministry of Finance shall issue a regulation, which shall not require the approval of the Bundesrat, detailing the minimum amount of the guarantee assets, the annual and special contributions and the upper limit for payments per calendar year. With respect to the annual contributions, the type and scope of the business covered shall be taken into account, along with the number, size and business structure of the insurance undertakings that belong to the guarantee scheme. The amount of the contributions shall also reflect the financial and risk situation of the contributors. The regulation may also contain provisions relating to investment.

(7) The contribution notice issued by the guarantee scheme shall be enforced in accordance with the provisions contained in the German Act on Administrative Enforcement (Verwaltungsvollstreckungsgesetz). The guarantee scheme shall be responsible for delivering the enforceable copy.

Section 130
Guarantee scheme accounting

(1) The guarantee schemes must prepare annual accounts at the end of each calendar year and commission an independent auditor or an independent auditing firm to certify that the annual report is complete and that the information contained therein is accurate. The guarantee schemes must immediately inform the Supervisory Authority of their choice of auditor. The Supervisory Authority may require the appointment of a different auditor within a month of receiving the notification if this is deemed necessary to achieve the purpose of the audit; objections and actions to annul any such measure shall have no suspensive effect. The annual report must contain information on the activities and the financial situation of the guarantee scheme, in particular the amount of funds and how these are invested, the use of these funds for compensation arrangements, the amount of contributions and the guarantee scheme’s administrative costs.

(2) The guarantee schemes shall submit the approved annual reports to the Supervisory Authority by 31 May of each year. The auditor shall submit the report on the audit of the annual report to the Supervisory Authority immediately following completion of the audit. The Supervisory Authority shall also be notified upon request concerning the information pursuant to subsection (1) sentence 4 above.

Section 131
Duties of cooperation

(1) Upon request, the insurance undertakings shall provide the guarantee scheme of which they are a member with all information and any documents that it requires in order to perform its duties in accordance with this Act.

(2) The parties obliged to furnish information may refuse to do so in respect of any questions, the answers to which would place themselves or one of their relatives as designated in section 383 (1) nos. 1 to 3 of the Code of Civil Procedure at risk of criminal prosecution or proceedings under the Act on Breaches of Administrative Regulations. Such persons shall be informed of their right to refuse to furnish the information.

(3) The employees of the guarantee schemes, as well as any persons commissioned by them, shall have access to the business premises of any insurance undertaking during normal business hours, as soon as the Supervisory Authority has made the findings named in section 125 (1). These persons shall be provided with all of the documents required for preparation of the portfolio transfer. To the extent that the insurance undertaking in question has outsourced functions to another undertaking, sentences 1 and 2 above shall apply accordingly to such undertaking.

(4) In the event that the undertaking whose portfolio is being transferred has concluded contracts in accordance with section 5 (3) no. 4 or other service agreements relating to the administration of the portfolio, the guarantee scheme may assume these contracts. Section 415 of the Civil Code does not apply. The service provider may not terminate the contract without cause until at least twelve months have passed since the guarantee scheme assumed the contract. In the event that the other party requests that the guarantee scheme exercise its right of option, the guarantee scheme must immediately declare whether or not it wishes to assume the contract. In the event that the guarantee fund fails to make this declaration, it cannot claim performance of the contract.

Section 132
Exclusion

(1) In the event that an insurance undertaking fails to fulfil its obligation to pay contributions and to cooperate in accordance with section 129 or 131, or that it fails to do so correctly, in full or in a timely manner, the guarantee scheme must inform the Supervisory Authority. If the Supervisory Authority is not the competent authority, it shall immediately inform this authority. In the event that the insurance undertaking fails to fulfil its obligations even after a period of one month has passed since the Supervisory Authority requested it to do so, the guarantee scheme may issue the insurance undertaking with a notice of exclusion from the guarantee scheme, subject to a notice period of twelve months. After this notice period has expired, the guarantee scheme is entitled to exclude the insurance undertaking with the approval of the Supervisory Authority if the insurance undertaking’s obligations remain unfulfilled. Following the exclusion, the guarantee scheme shall only be liable for those liabilities of the insurance undertaking that arose before the period expired.

(2) The guarantee scheme shall not be liable for any liabilities of the insurance undertaking that arose after its authorisation to conduct business lapsed.

Section 133
Duty of confidentiality

Persons who are employed at, or perform activities on behalf of a guarantee scheme may not disclose or utilise secrets relating to third parties, in particular business or trade secrets, without authorisation to do so. The Supervisory Authority must oblige these persons to fulfil their obligations conscientiously in accordance with the German Act on the Formal Obligation of Persons with Non-Civil Servant Status (Gesetz über die förmliche Verpflichtung nichtbeamteter Personen) dated 2 March 1974 (BGBl. I, pp. 469, 547). The forwarding of information to the Supervisory Authority shall not be deemed to be an unauthorised disclosure or use within the meaning of sentence 1 above.

Section 133a
Enforcement

(1) The guarantee scheme is entitled to enforce its orders in accordance with the provisions set forth in the Act on Administrative Enforcement

(2) For measures as set forth in section 129 (1), (5) sentence 1 and section 131 (1), the coercive penalty may be up to fifty thousand euros

Section 133b
(repealed)

Section 133c
(repealed)

Section 133d
(repealed)

Section 133e
(repealed)

Section 133f
(repealed)

Section 133g
(repealed)

IX. Regulations regarding criminal penalties and administrative fines

Section 134
False statements

A person who makes false statements to the Supervisory Authority in order to receive authorisation for an insurance undertaking or a pension fund (section 112 (1) sentence 1) to conduct business, renewal of such authorisation or approval for a change to the operating plan or transfer of a portfolio of insurance contracts (sections 14, 108) shall be liable to imprisonment for a term not exceeding three years or a fine.

Section 135
(repealed)

Section 136
(repealed)

Section 137
Criminal offences committed by an auditor

(1) Any person who, as auditor or assistant to an auditor, falsely reports on the results of the audit or fails to disclose material facts in the report shall be liable to imprisonment for a term not exceeding three years or a fine.

(2) If the offender acts in exchange for a consideration or with the intent to enrich himself or another person or to harm another person, he shall be liable to imprisonment for a term not exceeding five years or a fine.

Section 138
Breach of the duty of secrecy

(1) With the exception of the cases under section 333 of the Commercial Code or section 404 of the Stock Corporation Act, any person who without being authorised to do so discloses any secret of the insurance undertaking or pension fund (section 112 (1) sentence 1), in particular any business or trade secret which has come to his knowledge in his capacity as

  1. auditor or assistant to an auditor in accordance with section 341k in conjunction with section 319 of the Commercial Code,
  2. member of the management or supervisory board or liquidator,

shall be liable to imprisonment for a term not exceeding one year or a fine. This shall also apply to persons performing activities on behalf of the guarantee scheme within the meaning of section 133.

(2) If the offender acts in exchange for a consideration or with the intent to enrich himself or another person or to harm another person, he shall be liable to imprisonment for a term not exceeding two years or a fine. Also subject to punishment is any person who makes use of a secret of the kind described under subsection (1) above, in particular any business or trade secret which came to his knowledge under the conditions specified under subsection (1), without being authorised to do so.

(3) The offence is prosecuted only upon filing of a criminal complaint by the insurance undertaking or pension fund (section 112 (1) sentence 1). If a member of the management board or a liquidator committed the offence, the supervisory board is entitled to file the complaint; if a member of the supervisory board committed the offence, the management board or the liquidators is entitled to file the complaint.

Section 139
Misrepresentations concerning the premium reserve and guarantee assets

(1) A person who as appointed actuary submits a false actuarial certification within the meaning of section 11a (3) no. 2 sentence 1, also in conjunction with a regulation pursuant to subsection (6) or sections 11d, 11e or 110d (2) or (3), or within the meaning of section 12 (3) no. 2 sentence 1, also in conjunction with section 110d (2) or (3), shall be liable to imprisonment for a term not exceeding three years or a fine.

(2) Also subject to punishment is any person, who as trustee appointed to monitor guarantee assets or as deputy trustee (section 70 above) submits a certificate in accordance with section 73, also in conjunction with section 110d (2) or (3), which is false.

Section 140
Unauthorised business activities

(1) Any person who, in Germany,

  1. carries on insurance business without authorisation within the meaning of section 5 (1), section 105 (2), section 110d (1) sentence 1 or section 119 (1),
  2. commences or expands business operations, commences or changes cross-border provision of services, or carries on health insurance or compulsory insurance in violation of section 110a (2) sentence 2 or 5, subsection (2a) or (2b),
  3. fails to comply with an enforceable order pursuant to section 111b (1) sentence 2 or 3, or
  4. carries on pension fund business pursuant to section 112 (2) without authorisation,

shall be liable to imprisonment for a term not exceeding three years or a fine.

(2) If the offender has acted negligently, he shall be liable to imprisonment for a term not exceeding one year or a fine.

Section 141
Failure to give notification of insolvency

(1) Any person who, as member of the management board, as authorised agent (section 106 (3) above) or as liquidator of an insurance undertaking or pension fund (section 112 (1) sentence 1), in violation of section 88 (2), also in conjunction with section 113 (1), fails to notify the Supervisory Authority as required, shall be liable to imprisonment for a term not exceeding three years or a fine.

(2) If the offender has acted negligently, he shall be liable to imprisonment for a term not exceeding one year or a fine.

Section 142
(repealed)

Section 143
Misrepresentation

Any person who, as member of the management or supervisory board, as authorised agent (section 106 (3)) or as liquidator of a mutual society

  1. misrepresents or conceals the actual situation of the mutual society in descriptions or overviews of the financial situation of the society or in oral statements or information to the senior representative body, or
  2. misrepresents or conceals the actual situation of the mutual society in explanations or documents to be made available to the auditor of a mutual society in accordance with the provisions of this Act,

shall be liable to imprisonment not exceeding three years or a fine, however, only if in the case of (1) above no penalty is set forth in section 331 no. 1 or 1a, and in the case of (2) above no penalty is set forth in section 331 no. 4 of the Commercial Code.

Section 144
Administrative offences in insurance business

(1) An administrative offence shall be deemed to be committed by any person who, as member of the management or supervisory board, as authorised agent (section 106 (3)) or as liquidator of an insurance undertaking

1. proposes or permits the distribution of profits determined in violation of statutory provisions or the approved operating plan relating to the establishment of provisions and reserves,

1a. fails to appoint a claims representative in violation of section 7b (1) sentence 1,

2. violates a provision with respect to the investment of the guarantee assets, the other restricted assets or the segregated investment portfolio, the calculation, posting, custody or management of the premium reserve or the Deckungsstock (section 54 (2) sentence 1, also in conjunction with a regulation pursuant to subsection (3), section 54 (2) sentence 2, or section 54b (1) or (2) sentence 2, each also in conjunction with section 54c, sections 65 to 67, 77, 79, 110d (2) and (3)) or fails to issue or to correctly issue a certification in accordance with section 66 (6) sentence 6, also in conjunction with section 110d (2) and (3),

3. violates the approved operating plan with respect to the investment of cash,

4. carries on business not provided for in the approved operating plan or permits the carrying on of such business, or

5. violates a regulation pursuant to section 55a (1), also in conjunction with section 106 (2) sentence 4, to the extent that it refers to these provisions on administrative fines in relation to a certain offence.

The provisions concerning administrative fines pursuant to sentence 1

  1. nos. 1, 3, and 4,
  2. no. 2 to the extent that it relates to sections 54a, 66, 67, 77 or 79, and
  3. no. 5 to the extent that it relates to section 55a (1)

shall also apply to pension funds pursuant to section 113.

(1a) An administrative offence shall be deemed to be committed by any person who

1. intentionally or negligently violates a regulation in accordance with section 5 (6), section 12c, also in conjunction with section 110a (4) no. 2 or section 65 (1), to the extent that it refers to these provisions on administrative fines in relation to a certain offence,

2. intentionally or negligently fails to give notice in accordance with section 13b (1) or (4) sentence 1, section 13c (1), also in conjunction with subsection (4), section 13d nos. 1 to 6, 7, also in conjunction with section 110a (4) no. 2, or no. 8 or no. 9, section 13e (1) no. 1 or 2, subsection (2) sentence 1 or subsection (3) sentence 1, section 58 (2) sentence 1 or section 104 (1) sentence 1 and sentence 2 first half sentence, sentence 3 or 4 or subsection (3), each also in conjunction with a regulation pursuant to subsection (6) or section 121a (2), or does so incorrectly, incompletely or not within the prescribed period,

3. intentionally or negligently, in violation of section 59 sentence 1, fails to submit copy of the auditor's report or fails to do so within the prescribed period,

3a. intentionally or negligently, in violation of section 80 subsection (1) or (2), cooperates with an insurance intermediary,

3b. intentionally or negligently, in violation of section 80 (4), fails to give notice, or does so incorrectly or not within the prescribed period,

4. intentionally or negligently violates an enforceable order in accordance with section 81b (1) sentence 2 or subsection (2) sentence 2, also in conjunction with subsection (4), or section 104 (1a) sentence 1 or 2, or subsection (2) sentence 2, or an enforceable requirement under section 8 (2) or section 120 (4),

5. intentionally or negligently violates an enforceable order in accordance with section 83 (1) sentence 1 no. 1, also in conjunction with section 83 (5a) or section 110a (4) no. 3 (a), or section 83 (1) sentence 1 no. 1a or subsection (2) sentence 1, each also in conjunction with section 110a (4) no. 3 (a),

6. in violation of section 83 (1) sentence 1 no. 5, also in conjunction with section 83 (5b) sentence 1 fails to grant the right to speak,

7. in violation of section 83 (1) sentence 1 no. 6, also in conjunction with section 83 (5b) sentence 1, fails to convene or announce meetings,

8. intentionally or negligently fails to tolerate a measure, in violation of section 83 (1) sentence 2, subsection (3) sentence 3, or subsection (4) sentence 2, also in conjunction with section 83 (5a), or section 110a (4) no. 3 (a),

9. violates an enforceable order in accordance with section 87 (6) or section 121c (5), or

10. intentionally or negligently fails to communicate data, in violation of section 103a (2) in conjunction with a regulation pursuant to section 12c, or does so incorrectly, incompletely or not within the prescribed period, or

11. in violation of section 131 (1), fails to provide information, or to provide it correctly, completely or within the prescribed period, or fails to submit a document, or to submit it correctly, completely or within the prescribed period.

The provisions concerning administrative fines pursuant to sentence 1

  1. no. 2, to the extent that it relates to section 104, and
  2. number 4, to the extent that it relates to section 81b or 104,

shall also apply to reinsurance undertakings within the meaning of section 119 (1).

(2) The administrative offence is punishable by a fine of up to one hundred and fifty thousand euros in the cases referred to in subsection (1) nos. 1 to 4 and subsection (1a) above, and by a fine of up to fifty thousand euros in the cases referred to in subsection (1) no. 5.

Section 144a
Unauthorised insurance intermediation

(1) An administrative offence shall be deemed to be committed by any person who wilfully or negligently

  1. concludes an insurance contract or a pension fund contract in Germany for an undertaking that does not have the authorisation required to carry on such insurance or pension fund business, has commenced or expanded business operations in violation of section 110a (2) sentence 2 or 5, has commenced or changed activities carried on under the freedom to provide cross-border services in violation of section 110a (2a), or carries on health insurance or compulsory insurance business in violation of section 110a (2b), or continues business operations in violation of section 111b (1) sentence 2 or 3,
  2. intermediates insurance contracts or pension fund contracts for such an undertaking on a commercial basis, or
  3. violates an enforceable order issued pursuant to section 81 (2) sentence 3, 4 or 5, each also in conjunction with section 110a (4) no. 3 (a).

(2) The administrative offence is punishable by a fine of up to fifty thousand euros.

Section 144b
Administrative offences in the operation of legal expenses insurance

(1) An administrative offence shall be deemed to be committed by any person who

  1. in violation of section 8a (3) sentence 2, also works for an insurance undertaking which operates other insurance business in addition to legal expenses insurance,
  2. in violation of section 8a (3), carries on an activity comparable to claims administration for an insurance undertaking as specified under no. 1 above,
  3. in violation of section 8a (4) sentence 1, issues instructions, or
  4. in violation of section 8a (4) sentence 2, provides information

(2) The administrative offence is punishable by a fine of up to twenty thousand euros.

Section 144c
Administrative offences in the operation of the guarantee scheme

(1) An administrative offence shall be deemed to be committed by any person who intentionally or negligently fails to submit the annual report, in violation of section 130 (2) sentence 1, or does so incorrectly, incompletely or not within the prescribed period.

(2) The administrative offence is punishable by a fine of up to twenty thousand euros.

Section 145
(rescinded)

Section 145a
Competent administrative authority

The administrative authority (Verwaltungsbehörde) within the meaning of section 36 (1) no. 1 of the Act on Breaches of Administrative Regulations shall be the Supervisory Authority, to the extent that it is authorised to supervise insurance undertakings.

Section 145b
Notification to the Supervisory Authority

(1) In criminal proceedings against the managers of insurance undertakings or pension funds as well as holders of qualified participating interests in insurance undertakings or pension funds or their legal representatives or personally liable partners due to violation of their professional obligations or other criminal offences in carrying out or in connection with performance of a trade or profession or any other commercial operation, as well as in criminal proceedings relating to criminal offences described in sections 134, 137 to 141, 143 and 145 of this Act, the court, prosecuting authority or enforcement authority shall, in the case of a public action, communicate to the Supervisory Authority

  1. the indictment or the petition in lieu of an indictment,
  2. the application for the issuing of a summary order, if this order is not immediately complied with,
  3. the decision concluding the proceedings together with the grounds for the decision;

if an appeal has been lodged against the decision, the decision shall be transmitted together with a reference to the appeal that has been lodged. In the case of proceedings in respect of criminal offences that have been committed by negligence, the communications set forth in nos. 1 and 2 shall only be made if, in the view of the authority making the communication, immediate decisions or other measures of the Supervisory Authority are deemed necessary.

(2) If in criminal proceedings other facts indicating irregularities in the business operations of an insurance undertaking or pension fund, including its field sales force, become known, and if in the view of the authority making the communication the knowledge thereof is necessary for the Supervisory Authority to take action, the court or the prosecuting or enforcement authority shall also communicate such facts, if it is not obvious to the authority making the communication that warranted interests of the persons concerned prevail. In this case it must be taken into consideration to which extent the information to be communicated is reliable. Evidence to suggest that a manager or the holder of a qualified participating interest within the meaning of section 7a is unreliable is generally an indication of irregularities in business operations.

(3) If a notification pursuant to subsection (1) or (2) above relates to an insurance undertaking or pension fund that, under this Act, is supervised by the competent authority of a federal state, the Supervisory Authority shall communicate such notification to this authority immediately.

X. Area of Responsibility

Section 146
Federal Supervision

(1) The Supervisory Authority shall supervise

  1. private insurance undertakings and pension funds within the meaning of section 112 (1) that have their registered office, or a branch, in Germany or otherwise carry on insurance business in Germany,
  2. insurance holding companies within the meaning of section 1b and guarantee schemes within the meaning of section 124,
  3. public law insurance undertakings subject to competition (öffentlich-rechtliche Wettbewerbs-Versicherungsunternehmen) which operate on a national basis.

(2) The Supervisory Authority is furthermore the supervisory authority within the meaning of Part Vc. If a primary insurance undertaking that is subject to state-level supervision belongs to a financial conglomerate within the meaning of section 104k no. 4 or section 1 (20) of the Banking Act, then supervision of this undertaking is transferred to the Supervisory Authority as soon as the group to which the primary insurance undertaking in question belongs has been finally classified as a financial conglomerate in accordance with section 104o (1) or in accordance with section 51b (2) of the Banking Act; the competent authority in the relevant federal state shall be informed in a timely manner that the group has been classified as a financial conglomerate in accordance with section 104o (1) or in accordance with section 51b (2) of the Banking Act. Upon revocation of classification in accordance with section 104o (1) or in accordance with section 51b (2) of the Banking Act by the Supervisory Authority, or if the primary insurance undertaking in question no longer belongs to the financial conglomerate, the Supervisory Authority can transfer supervision of the primary insurance undertaking back to the competent authority in the relevant federal state with its approval.

(3) The Supervisory Authority shall be responsible for the technical supervision of the type of institutions named in section 140 (1) of book seven of the Social Security Code if these institutions operate on a national basis.

Section 147
Transfer of supervision to a state supervisory authority

(1) At the request of the Supervisory Authority, the Federal Ministry of Finance can transfer supervision of private insurance undertakings of minor economic importance, pension funds within the meaning of section 112 (1) or public law insurance undertakings subject to competition to the competent state supervisory authority with its approval.

(2) Even after responsibility for supervision has been transferred, the Federal Ministry of Finance can transfer supervision of such undertakings back to the Supervisory Authority, particularly if they have gained greater economic importance.

Section 148
Transfer of supervision to the Federal Financial Supervisory Authority

(1) The competent state supervisory authority may request that technical supervision of the activities of public law insurance undertakings subject to competition, with operations limited to a single federal state be transferred to the Supervisory Authority.

(2) In the case of other public law insurance undertakings which are not insurance undertakings subject to competition, the Supervisory Authority may assume responsibility for supervision at the request of the governments of the relevant federal states.

Section 149
Procedures

(1) Any application filed pursuant to section 148 (1) may be withdrawn by the state authority previously responsible for supervision on 1 January at any time and with effect from 1 January of the following year.

(2) If the Supervisory Authority has assumed responsibility for supervision in accordance with section 148 (2), the application can only be withdrawn by all of the federal state governments involved with effect from 1 January of the following year.

(3) In the event of a transfer of supervisory powers in accordance with sections 147 and 148, the Supervisory Authority shall announce the date of the assumption or transferral of responsibility for supervision in the electronic Federal Gazette at least two weeks in advance.

Section 150
Cooperation between supervisory authorities

The Supervisory Authority and the supervisory authorities of the individual federal states are required to exchange information about their legal and administrative principles. This also applies to principles established by the authorities of the individual federal states for the supervision of public law insurance undertakings.

XI. Final provisions

Section 151
Statistical information

All insurance undertakings subject to supervision under this Act shall submit the statistical information about their business operations required by the Supervisory Authority. The Insurance Advisory Council shall be consulted with respect to the nature of this information.

Section 152
Statistical information from public law insurance undertakings

Upon request, public law insurance undertakings that are not subject to supervision under this Act shall submit to the Supervisory Authority the same statistical information about their business operations as insurance undertakings that are subject to supervision under this Act.

Section 153
Enabling provision

The Federal Ministry of Finance is authorised to set forth, by regulation not requiring approval by the Bundesrat, that all the insurance business or certain kinds of insurance business with the group of persons specified under Article I (1) (a) to (c) of the Treaty dated 19 June 1951 between the parties to the North Atlantic Treaty relating to the legal status of their troops (BGBl. 1961 II, pp. 1183, 1190) be exempted, either in full or in part, from the provisions of this Act, provided that this does not endanger the interests of other insured and the undertaking’s ability to fulfil its obligations under its other insurance contracts at all times within the territorial scope of application of this Act.

Section 154
Individual state legislation

(1) The provisions of the individual federal states concerning the police supervision of fire insurance contracts after conclusion and of damage payments in the case of fire under these contracts are not affected.

(2) (repealed)

(3) Equally unaffected are obligations that existed on 1 January 1901 for fire insurance companies to write certain insurance contracts in an individual federal state under the law of that state or on the basis of agreements with the authorities of that state if the undertaking has continued or is continuing business operations in that state or if it has been authorised to carry on business under this Act. Compliance with the obligations is monitored by the supervisory authority under this Act.

Section 155
After-the-fact appointment of a claims representative

If the authorisation to carry on business operations has already been granted, claims representatives shall be appointed in accordance with section 7b by 15 January 2003. Section 13d no. 9 and section 144 (1a) no. 2 and subsection (2) shall apply accordingly.

Section 156
Analogous application of company law provisions

(1) Section 34 sentence 1 and section 39 (3) shall apply accordingly to public limited insurance companies.

(2) With respect to the executive body of public law insurance undertakings, sections 80 and 91 (2) of the Stock Corporation Act apply accordingly. With respect to the supervisory body of public law insurance undertakings, section 80 of the Stock Corporation Act applies accordingly.

Section 156a
Non-application to certain insurance undertakings

(1) Section 5 (4) and sections 53c and 81b (1) to (2c) shall not apply to small mutual associations if

  1. supplementary contributions or benefit reductions are permitted under their memorandum and articles of association, and
  2. the annual contributions do not exceed the amount set by regulation in accordance with subsection (2) below,

unless they operate third party liability insurance, credit and suretyship insurance or life insurance operated as Pensionskasse or death benefit fund. For the undertakings referred to in sentence 1, the amount of the required financial means is determined in accordance with section 8 (1) sentence 1 no. 3.

(2) The Federal Ministry of Finance is authorised for the purpose of implementing insurance directives of the Council of the European Communities to set, by regulation not requiring approval by the Bundesrat, the amount of the annual contributions for the purpose of subsection (1) no. 2 above.

(3) (rescinded)

(4) (rescinded)

(5) (rescinded)

(6) (rescinded)

Section 157
Deviations permitted by the Supervisory Authority

(1) The Supervisory Authority may permit deviations from sections 11, 11a, 12, 55a and 66 for the authorisation to carry on business and for the management of small mutual associations. The same shall apply to death benefit funds for deviations from section 10a (1). The Supervisory Authority may also permit deviations for Pensionskassen that are not small mutual associations.

(2) If the deviations relate to management, they may be permitted on the particular condition that business operations and the financial situation are audited by an expert at the expense of the association at intervals of several years, and that the audit report is submitted to the Supervisory Authority.

Section 157a
Exemption from supervision

(1) The Supervisory Authority may exempt mutual societies that are not required to be registered from ongoing supervision under this Act if the nature of their business and other circumstances are such that supervision is deemed to be unnecessary to safeguard the interests of the insured. In particular, these requirements may be met by death benefit funds and by societies whose business is limited to a specific geographical area, that have a small number of members and minimal premium income.

(2) The exemption under subsection (1) above may be limited to a certain period of time and subject to certain requirements; it shall be revoked if it comes to the attention of the Supervisory Authority that the conditions for an exemption are no longer met.

(3) If the Supervisory Authority has granted an exemption in accordance with subsection (1) above, the provisions under sections 13, 14, 22 (4), section 37 and sections 53c to 104 shall not apply, with the exception of the provisions under section 83 (1) nos. 1 and 2, subsections (3), (5) and (6) as well as sections 89a and 93, to the extent that requirements under subsection (2) or the powers of the Supervisory Authority under section 83 are to be enforced; a transformation in accordance with the Transformation Act is prohibited.

Section 158
(repealed)

Section 159
Analogous application to insurance institutions of trade associations and undertakings not subject to supervision

(1) Resolutions by the representatives' meeting relating to the type of institutions specified under section 140 (1) of book seven of the Social Security Code, or their memoranda and articles of association and operating plans, require approval by the Supervisory Authority; section 5 (1) to (3) and section 8 apply accordingly. Furthermore, section 13 (1), sections 14, 54 (2) sentence 1 (a) and sentence 2, section 55 (1) and (2), section 55a and sections 81, 81a, 82 to 84, 86, 88 and 89 shall apply accordingly to these institutions.

(2) (repealed)

(3) If there are other provisions stipulating that provisions of this Act shall be applied accordingly to undertakings which are no longer subject to section 1 above, such provisions shall not be affected.

Section 160
Provisions relating to accident insurance sub-portfolios

(1) to (4) (repealed)

(5) Undertakings which, under a comprehensive contract, cover risks attributable to the classes of insurance listed under nos. 1 and 19 of part A of the Annex may transfer the accident insurance portion of such contracts to another undertaking. Section 14 applies accordingly.

Section 161
(repealed)

XI. Transitional provisions for the implementation of the monetary, economic and social union with the German Democratic Republic

(repealed)

Annex

A. Classification of risks by class of insurance

  1. Accident

    1. fixed pecuniary benefits
    2. benefits in the nature of indemnity
    3. combinations of the two
    4. injury to passengers
  2. Sickness

    1. fixed pecuniary benefits
    2. benefits in the nature of indemnity
    3. combinations of the two
  3. Land vehicles (other than railway rolling stock)
    All damage to or loss of:

    1. land motor vehicles
    2. land vehicles other than motor vehicles
  4. Railway rolling stock
    All damage to or loss of railway rolling stock
  5. Aircraft
    All damage to or loss of aircraft
  6. Ships (sea, lake and river and canal vessels)
    All damage to or loss of:

    1. river and canal vessels
    2. lake vessels
    3. sea vessels
  7. Goods in transit
    All damage to or loss of goods in transit, irrespective of the form of transport
  8. Fire and natural forces
    All damage to or loss of property (other than property included in classes 3 to 7) due to:

    1. fire
    2. explosion
    3. storm
    4. natural forces other than storm
    5. nuclear energy
    6. land subsidence
  9. Other damage to property
    All damage to or loss of property (other than property included in classes 3 to 7) due to hail or frost, and any event such as theft, other than those mentioned under 8
  10. All liability arising out of the use of motor vehicles operating on the land

    1. motor vehicle liability
    2. liability arising out of transports by motor vehicles operating on the land
    3. other
  11. Aircraft liability
    All liability arising out of the use of aircraft (including carrier's liability)
  12. Liability for ships (sea, lake and river and canal vessels)
    All liability arising out of the use of ships, vessels or boats on the sea, lakes, rivers or canals (including carrier's liability)
  13. General liability
    All liability other than those forms mentioned under classes 10 to 12
  14. Credit

    1. insolvency (general)
    2. export credit
    3. instalment credit
    4. mortgages
    5. agricultural credit
  15. Suretyship
  16. Miscellaneous financial loss

    1. employment risks
    2. insufficiency of income (general)
    3. bad weather
    4. loss of benefits
    5. continuing general expenses
    6. unforeseen trading expenses
    7. loss of market value
    8. loss of rent or revenue
    9. indirect trading losses other than those mentioned above
    10. other financial loss (non-trading)
    11. other forms of financial loss
  17. Legal expenses
  18. Assistance for persons who get into difficulties

    1. while travelling, while away from home or while away from their permanent residence
    2. in other circumstances unless such risks are covered by other classes of insurance
  19. Life assurance
    (unless listed under classes 20 to 24)
  20. Marriage insurance, birth insurance
  21. Unit-linked life insurance
  22. Tontines
  23. Capital redemption operations
  24. Operations relating to the management of retirement provision schemes
  25. Pension fund operations

B. Description of authorisations granted for more than one class of insurance

Where the authorisation simultaneously covers:

a. Nos. 1 (d), 3, 7 and 10 (a), it shall be named ‘motor vehicle insurance’,

b. Nos. 1 (d), 4, 6, 7 and 12, it shall be named ‘marine and transport insurance’,

c. Nos. 1 (d), 5, 7 and 11, it shall be named ‘aviation insurance’,

d. Nos. 8 and 9, it shall be named ‘insurance against fire and other damage to property’,

e. Nos. 10 to 13, it shall be named ‘liability insurance’,

f. Nos. 14 and 15, it shall be named ‘credit and suretyship insurance’,

g. Nos. 1, 3 to 13, and 16, it shall be named ‘property and casualty insurance’.

C. Matching Rules

  1. Where the cover provided by a contract is expressed in terms of a particular currency, the insurer's commitments shall be considered to be payable in that currency.
  2. Where the cover provided by a contract is not expressed in terms of a particular currency, the insurer's commitments shall be considered to be payable in the currency of the country in which the risk is situated. The insurer may choose the currency in which the premium is expressed if there are justifiable grounds for exercising such a choice, in particular if, from the time the contract is entered into, it appears likely that a claim will be paid in this currency.
  3. The currency which the insurer in accordance with experience acquired considers to be the one in which it must most likely provide cover or, in the absence of such experience, the currency of the country in which it is established, may, if there are no special reasons against such a choice, be taken as a basis for the following risks:

    1. For contracts covering risks classified under classes 4 to 7, 11 to 13 (producers' liability only) of part A of the Annex,
    2. For contracts covering the risks classified under other classes where, in accordance with the nature of the risks, the cover is to be provided in a currency other than that which would result from the application of the above rules.
  4. Where a claim has been reported to an insurer and is payable in a currency other than the currency resulting from application of the above rules, the insurer's commitments shall be considered to be payable in that currency, and in particular in the currency which has been determined by court judgement or by agreement between the insurer and the insured as the currency in which the compensation is to be paid by the insurer.
  5. Where a claim is assessed in a currency which is known to the insurer in advance but which is different from the currency resulting from application of the above rules, the insurer may consider its commitments to be payable in that currency.
  6. The restricted assets need not be matched in the currency in which the insurer's commitments are payable if

    1. it is not the currency of a member state of the European Community or another signatory to the EEA Agreement and if it is not suitable for investment, in particular because of transfer restrictions,
    2. neither the guarantee assets nor the other restricted assets to be matched exceed 20 percent, or for occupational pension schemes 30 percent in total, of the commitments payable in a particular currency, or
    3. application of the rules under nos. 1 to 5 above would result in assets which amount to not more than 7 percent of the assets of the undertaking existing in other currencies having to be matched in a certain currency.
  7. If under the above rules, the other restricted assets have to be expressed in the currency of a member state of the European Community whose currency is not the euro or that of another EEA signatory state, up to 50 percent of the assets may be in euro, to the extent that this is in line with the care of a prudent businessman.

D. Consumer information

Section I

Consumer information to be supplied by the insurance undertaking in accordance with section 10a (1) before insurance contracts are concluded:

  1. Consumer information required for all classes of insurance

    1. name, address, legal form and registered office of the insurer and, where appropriate, any branch through which the contract is to be concluded,
    2. general policy conditions, including the premium rate terms and law applicable to the contract,
    3. nature, extent and date of benefits paid by the insurer if no general policy conditions or premium rate terms are applied,
    4. term of the contract,
    5. amount of the premiums, indicating individual premiums, if several independent insurance contracts are to be concluded, as well as an indication of how the premiums are to be paid, about any additional fees and expenses and about the total sum to be paid,
    6. period during which the applicant shall be bound by the application,
    7. information about the cooling-off period,
    8. address of the competent supervisory authority which the policyholder may contact in the case of complaints about the insurer,
    9. membership in a scheme to guarantee the claims of the insured (guarantee scheme).
  2. Additional consumer information required for life or accident insurance with premium refund

    1. calculation basis and criteria for determining surplus and surplus participation,
    2. surrender values,
    3. minimum sum insured for transformation into paid-up insurance and about the benefits under paid-up insurance,
    4. extent to which the benefits under (b) and (c) are guaranteed,
    5. for unit-linked policies, definition of the units to which the insurance is linked and indication of the nature of the underlying assets,
    6. general information on the tax treatment applicable to the type of contract.
  3. Additional consumer information required for substitutive medical expenses insurance in

    1. the effects of increasing health care costs on future premium development,
    2. any possibility of premium limitations after retirement,
    3. a remark that it is generally impossible for elderly individuals to obtain statutory health insurance cover.

Section II

Consumer information to be supplied by the insurance undertaking in accordance with section 10a (1) during the term of the insurance contract:

  1. Change of name, address, legal form and registered office of the insurer and any branch through which the contract was concluded,
  2. Changes to the consumer information supplied in accordance with section I no. 1 (c) to (e) and no. 2 (a) to (e) above, if such changes result from legislative amendments,
  3. Annual disclosure concerning the state of surplus participation in life insurance and accident insurance with premium refund,
  4. In health insurance within the meaning of section 12 (1), at each premium increase, information on the right to switch to another tariff category, including the text of the relevant statutory provision. For insured persons who have attained the age of 60, the policyholder shall be made aware of insurance tariffs that include classes of benefits equivalent to the previously selected tariff and would result in a premium reduction in the event of a tariff switch. This information shall include tariffs that, in an informed consideration of the interests of the policyholder, are deemed particularly relevant; however, no more than ten tariff categories may be indicated. For each tariff, the premium which would have to be paid for the insured persons if they opted for a switch shall be given. Moreover, the possibility to opt for the standard premium scale shall be indicated. The conditions under which the tariff switch can be made, and the premium that would have to be paid in the standard tariff shall be provided.

Section III

Beneficiaries have to be supplied with the following information; this information must be comprehensive and concise:

  1. At the start of the contract,

    1. name, address, legal form and registered office of the provider and any branch through which the contract is to be concluded,
    2. the terms and conditions of the contract, including premium rate terms as well as the law applicable to the contract,
    3. term of the contract,
    4. general information on the tax treatment applicable to this type of retirement provision,
    5. the financial, insurance-related and other risks related to the system of retirement provision, as well as the nature and distribution of these risks.
  2. During the term of the contract,

    1. change of name, address, legal form and registered office of the provider and any branch through which the contract was concluded,
    2. annually, beginning with the start of contract

      aa) the expected amount of benefits due to the future beneficiaries,

      bb) the options of investment and the structure of the investment portfolio, as well as information on the potential risk, the costs of asset management and other costs related to the investment, provided the future beneficiary bears the investment risk,

      cc) the information pursuant to section 115 (4),

      dd) a summary concerning the state of the scheme, as well as the current financing situation for individual benefit claims,
    3. upon request,

      aa) the annual accounts and management report for the previous financial year; to the extent that the benefits under the contract are determined based on units in a fund established in accordance with the contract terms, the annual report for this fund as well (section 113 (4), section 118b (4)),

      bb) the investment policy in accordance with section 115 (3),

      cc) the amount of benefits in the event of discontinuation of employment,

      dd) the means of transfer of vested benefit entitlements to a different occupational pension scheme in the event of termination of employment.

[1]

The name “Railway Insurance Institute (Bahnversicherungsanstalt) – section B” was changed pursuant to Article 35 of the law of 9 December 2004 (BGBl. I p. 3242) to: “German Pension Insurance Institute for Miners, Railway and Maritime Workers” (Deutsche Rentenversicherung Knappschaft-Bahn-See).

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Please note:Ger­man ver­sion is bind­ing

This translation is furnished for information purposes only and may refer to an older version of the text. The original German text is binding in all respects.