- BaFin – Translation -
This translation is furnished for information purposes only.
The original German text is binding in all respects.

By virtue of section 330 (1), (3) and (4) of the Commercial Code (Handelsgesetzbuch – HGB) in the revised version published in the Federal Law Gazette (Bundesgesetzblatt – BGBl), Part III, Classification Number 4100–1, Paragraph 1 having last been amended and Paragraphs 3 and 4 having been added by Article 1 number 7 of the Act of 24 June 1994 (Federal Law Gazette I p. 1377), the Federal Ministry of Justice, in agreement with the Federal Ministry of Finance, issues the following Regulation:

Part 1
Scope

Section 1
Scope

The present Regulation shall apply to insurance undertakings and branches to which, pursuant to section 341 (1) and (2) of the Commercial Code, Subpart Two of Part Four of the Third Book of the Commercial Code shall apply.

Part 2
Balance sheet and profit and loss account

Section 2
Financial statement forms

Instead of applying section 266 of the Commercial Code relating to the layout of the balance sheet, insurance undertakings shall employ Form 1 annexed hereto and instead of applying section 275 of the Commercial Code relating to the layout of the profit and loss account they shall employ

1. Form 2 annexed hereto if they are property and casualty insurance companies or reinsurance undertakings,
2. Form 3 annexed hereto if they are life insurance undertakings, 'Pensionskassen', funeral expenses funds or health insurance undertakings,
3. Form 4 annexed hereto, instead of Form 3, if they are life insurance undertakings that also engage in direct accident insurance business,
4. Form 4 annexed hereto, instead of Form 2, if they are property and casualty insurance companies that also engage in significant direct health insurance conducted according to the technical principles of life insurance,

unless otherwise provided for hereinafter or in the footnotes to the forms for certain types and legal forms of insurance undertakings or because of their size. Only those undertakings which engage solely in reinsurance shall be deemed to be reinsurance undertakings.

Section 3
Aggregation of items

In the

1. balance sheet (Form 1) under the following items:

   1. investments in affiliated undertakings and participations (Asset Item C II),
   2. other investments (Asset Item C III),
   3. debtors arising out of direct insurance operations (Asset Item E I),
   4. other provisions (Liability Item G),
   5. creditors arising out of direct insurance operations (Liability Item I I)

   the sub-items preceded by an Arabic or Roman numeral or by a lower-case letter
   and in the

2. profit and loss account under the following items:

   1. change in other net technical provisions (Forms 2 and 4, Item I 5),
   2. operating expenses, net of reinsurance (Form 2, Item I 7; Form 3, Item I 9; Form 4, Items I 7 and II 9),
   3. investment income (Form 2, Item II 1; Form 3, Item I 3; Form 4, Items II 3 and III 2),

   4. investment expenses (Form 2, Item II 2; Form 3, Item I 10; Form 4, Items II 10 and III 3),
      the sub-items preceded by lower-case letters

      may be aggregated if

      aa) their amount is immaterial for conveying a true and fair view within the meaning of section 264 (2) of the Commercial Code or

      bb) such aggregation makes for greater clarity; in this case the aggregated items must, however, be shown separately in the notes to the accounts.

Section 4
"Of which" memorandum items

In the balance sheet (Form 1) the following shall be disclosed separately:

1. amounts owed by affiliated undertakings and amounts owed by undertakings in which a participation is held under each of the following items: "Debtors arising out of direct insurance operations" (Asset Item E I), "Debtors arising out of reinsurance operations" (Asset Item E II) and "Other debtors" (Asset Item E III);
2. amounts owed to affiliated undertakings and amounts owed to undertakings in which a participation is held under each of the following items: "Creditors arising out of direct insurance operations" (Liability Item I I), "Creditors arising out of reinsurance operations" (Liability Item I II), "Debenture loans" (Liability Item I III), "Amounts owed to credit institutions" (Liability Item I IV) and "Other creditors" (Liability Item I V).

Section 5
Prefixes and suffixes

(1) If terms appearing in the forms for the balance sheet and profit and loss account and in the following provisions are prefixed or suffixed by the word "gross", the items, sub-items and information shall be disclosed inclusive of the amounts attributable to reinsurance ceded.

(2) If terms appearing in the forms for the profit and loss account and in the following provisions are prefixed or suffixed by the words "net of reinsurance" or "net", the items, sub-items and information shall be disclosed exclusive of the amounts attributable to reinsurance ceded.

(3) If no outward reinsurance operations are conducted, the "gross", "net" and "net of reinsurance" prefixes and suffixes appearing in the forms shall be omitted, as also shall the sub‑items preceded by an Arabic numeral in the balance sheet under Liability Items E and F. Furthermore, the sub-items preceded by one or more lower-case letters in the technical accounts of Forms 2, 3 and 4 for the profit and loss account shall also be omitted to the extent that they relate to reinsurance ceded.

Part 3
Provisions relating to individual balance sheet items

Subpart 1
Asset items

Section 6
Intangible assets

(1) The following sub-items shall be shown separately under "Intangible assets":

1. internally generated industrial and similar rights and assets;
2. purchased concessions, industrial and similar rights and assets, and licences in such rights and assets;
3. goodwill;
4. prepayments.

(2) The movements in the individual intangible asset items shall be disclosed in the book or in the notes to the accounts. For this purpose, the book values at the end of the preceding financial year shall be taken as the starting base and additions, disposals, transfers, write-ups and write-downs over the financial year and the book values at the end of the financial year shall in each case be stated separately.

Section 7
Shares, investment fund units and other variable yield securities

Shares shall be shown under "Shares, investment fund units and other variable yield securities" insofar as they do not have to be shown under "Shares in affiliated undertakings" or "Participations", as also shall in particular interim certificates (Zwischenscheine), investment fund units (Investmentanteile), warrants (Optionsscheine), profit participation certificates (Gewinnanteilscheine), marketable participation certificates (Genussscheine) in bearer or payable to order form and other variable yield securities insofar as they are quoted on a stock exchange. Profit participation certificates accepted for encashment before the due date shall also be recorded under this item.

Section 8
Bearer securities and other fixed income securities

(1) The following instruments in particular shall be shown as bearer securities and other fixed income securities insofar as they are marketable and do not have to be shown under "Loans to affiliated undertakings", "Loans to undertakings in which a participation is held" or "Other loans": fixed income bearer bonds and other fixed income bearer securities, irrespective of whether they are evidenced by stock certificates or take the form of book-entry securities, bonds payable to order that are parts of a total issue, treasury bills, treasury notes and other money market paper (commercial paper, euronotes, certificates of deposit, bons de caisse and similar certificated instruments) and medium-term notes (Kassenobligationen). Interest coupons accepted for encashment before the due date shall also be recorded under this item.

(2) Securities bearing interest rates that vary in accordance with specific factors, such as an interbank rate or a Euro money-market rate, zero coupon bonds and debt instruments that entitle the holder to a proportion of the income from a pooled asset shall also be considered "fixed income".

Section 9
Loans guaranteed by mortgages, land charges and annuity land charges

Under "Loans guaranteed by mortgages, land charges and annuity land charges" the insurance undertaking preparing the accounts shall show all debtors on whose land, buildings or ships liens have been created and for which satisfaction is assured in particular by enforcing the liens on that property. The aforementioned claims shall also include those that are additionally secured by an insurance policy.

Section 10
Other loans

(1) Irrespective of their duration, the following loans shall be shown under "Other loans" insofar as they do not have to be shown under "Loans to affiliated undertakings" or "Loans to undertakings in which a participation is held":

1. registered bonds, which shall include in particular registered mortgage bonds, registered public sector debentures, Namens-Landesbodenbriefe (registered land mortgage bonds issued by the former Bayerische Landesbodenkreditanstalt) as well as bonds issued by the Federal Government, including the former federal railways (Bundesbahn)and federal postal service (Bundespost), and by the Länder and local authorities that are registered in the Debt Register in the name of the insurance undertaking preparing the accounts;
2. notes and loans receivable;
3. loans and advance payments on insurance contracts;

4. any other loans, including in particular:

   1. repayment-extending loans¹⁾;
   2. loans and advances of salary to employees (including independent insurance intermediaries) of more than six months' salary; smaller loans shall be shown under "Other debtors".

(2) The amount of the loans and advance payments referred to in subsection (1) no. 3, shall be disclosed in the notes to the accounts if not disclosed in the balance sheet. Any other loans shall be broken down if they are significant.

Section 11
Deposits with credit institutions

Under "Deposits with credit institutions" shall be shown balances on accounts, including savings accounts, held with credit institutions drawings on which are permitted only at the end of a notice period. Cash lodged as guarantee deposits in favour of foreign governments shall also be shown under this item. Deposits with credit institutions drawings on which are permitted at any time even if these sums are interest-bearing shall be shown under "Cash at bank and in hand"; these shall also include equivalent balances with the Postbank.

Section 12
Other investments

"Other investments" shall also include equalisation claims arising from the 1948 currency reform. If "Other investments” are significant, they shall be disclosed in the notes to the accounts.

Section 13
Deposits with ceding undertakings

(1) Under "Deposits with ceding undertakings" undertakings which conduct reinsurance business shall show the amounts owed by ceding undertakings to the amount of the guarantees retained by those ceding undertakings or the guarantees deposited with those undertakings or with third parties.

(2) The deposits may not be combined with other amounts owed by the ceding undertaking nor offset against amounts owed to the ceding undertaking.

(3) If the securities deposited with a ceding undertaking or third party remain the property of the undertaking conducting reinsurance business, they shall be shown in the latter's accounts as securities under the appropriate investment item. In that respect subsection (1) shall not apply.

Section 14
Investments for the benefit of life insurance policyholders who bear the investment risk

(1) In respect of life insurance this item shall comprise investments the value of which is used to determine the value of or the surpluses on unit-linked policies and investments serving as cover for liabilities arising from index-linked policies this item shall also comprise investments that are held on behalf of the members of a tontine and are intended for distribution among them.

(2) The composition of the investment portfolio and the number of units on the balance sheet date shall be disclosed in the notes to the accounts.

Section 15
Debtors arising out of direct insurance operations

(1) Under the sub-item "Claims not yet payable" life insurance undertakings and 'Pensionskassen' and funeral expenses funds that zillmerise the premium reserve shall show the insurance undertakings' claims to premiums not yet payable by policyholders and by member and sponsoring undertakings insofar as they relate to acquisition costs incurred to the amount taken into account in the premium calculation.

(2) For contracts with guaranteed values to which the law applicable up to the date on which the Third Implementation Act/EEC concerning the Insurance Supervision Act of 21 July 1994 (Federal Law Gazette I p. 1630) came into effect continues to apply, the difference between the premium reserve as declared in the business plan and the unlimited zillmerised premium reserve shall be shown under this item.

Section 16
Debtors arising out of reinsurance operations

"Debtors arising out of reinsurance operations" shall comprise the credit balances of current accounts with ceding undertakings, reinsurers and reinsurance brokers on inward and outward reinsurance operations. For reinsurance contracts terminated on the balance sheet date the balances shall also include the technical provisions attributable to them if they are commuted on the balance sheet date; if the technical provisions are not commuted until a later balance sheet date or other date, they shall be shown until then under the appropriate sub-items within the technical provisions.

Section 17
Other debtors

"Other debtors" shall comprise debtors that cannot be allocated to any other item. They shall also include debtors arising from insurance intermediary activities on behalf of other insurance undertakings, from activities as the leading insurer in co-insurance and from other service contracts, as well as guarantee deposits paid, any amount paid to a mutual insurance association as initial funds and amounts owed by member and sponsoring undertakings not deriving from insurance operations.

Section 18
Tangible assets and stocks

(1) Tangible assets shall comprise technical equipment and machinery, other equipment, office fixtures and fittings, payments on account for such items and assets under construction.

(2) Stocks shall comprise in particular stocks of consumables and office supplies and payments on account for such items.

Section 19
Other assets

"Other assets" shall be disclosed in the notes to the accounts if they are significant.

Section 20
Accrued interest and rents

"Accrued interest and rents" shall comprise interest and rental income which is attributable to the period up to the balance sheet date but which is not yet payable.

Section 21
Balancing item

Branches shall add as the final item on the assets side a "Balancing item" if there is a surplus of liabilities over other assets.

Subpart 2
Liability items

Section 22
Subordinated liabilities

"Subordinated liabilities" shall comprise liabilities which, in the event of a winding up or insolvency, may not be met until the claims of other creditors have been satisfied.

Section 23
Reinsurers' shares of gross amounts of technical provisions

Reinsurers' shares of gross amounts of technical provisions shall comprise the amounts by which the gross amounts of technical provisions are reduced by virtue of contractual agreements with reinsurers. The corresponding shares in the gross amount of unearned premiums shall be calculated in accordance with section 24; in the event of the reinsurance contract being terminated, sentence 1 shall apply.

Section 24
Unearned premiums

The gross amount of unearned premiums pursuant to section 341e (2) no. 1 of the Commercial Code shall comprise that portion of gross premiums written which is to be allocated as income to the following financial year or years for a particular period of time after the balance sheet date insofar as it does not have to be shown in any other technical provision. If in particular classes and types of insurance there is no time proportionality between risk experience and premium to enable the gross amount of unearned premiums to be calculated, the gross amount of unearned premiums shall be determined in accordance with methods that take due account of the different pattern of risk over time.

Section 25
Premium reserve

(1) For the purposes of calculating the premium reserve, appropriate loadings for contingencies shall be applied to reflect the risks arising from the insurance contract. One-off acquisition costs may be taken into consideration in accordance with an appropriate actuarial method, in particular the zillmerisation method.

(2) Where the premium reserve of an insurance contract calculated in accordance with section 341f of the Commercial Code is less than the contractually or legally guaranteed surrender value, it shall be set at the level of the latter; the same shall apply mutatis mutandis to any paid-up insurance benefits.

(3) The "Premium reserve" item shall also comprise in particular the administrative cost provision for premium-free years and paid-up policies.

(4) In other respects, for the purposes of calculating the premium reserve for life insurance business and for property and casualty insurance business conducted according to the technical principles of life insurance, section 5 (3), no. 2, second half-sentence, and section 11c in conjunction with section 156a (3) sentence 3 of the Insurance Supervision Act and the Regulations issued under section 65 of the Insurance Supervision Act shall apply.

(5) For the purposes of calculating the provision for increasing age that has to be established by health insurance undertakings, the Regulations issued under section 12c (1), no. 1 of the Insurance Supervision Act shall apply. If the net result of offsetting negative provisions for increasing age against positive provisions for increasing age for the purposes of arriving at the provision for increasing age for all of the health insurance undertaking's direct insurance policies is a negative provision, the latter shall be entered in the balance sheet as zero.

(6) For property and casualty insurance companies and reinsurance undertakings the "Premium reserve" item shall also comprise the premium reserve created out of the accumulated interest-bearing savings proportions of the premiums in respect of property and casualty insurance business conducted according to the technical principles of life insurance. The premium reserve for annuities created by these undertakings for annuity claims shall be shown under "Provision for claims outstanding".

Section 26
Provision for claims outstanding

(1) In life insurance the liabilities existing towards the beneficiary shall determine the amount of the provision for claims outstanding pursuant to section 341g (1) sentence 1 of the Commercial Code; this shall also include the provisions for surrenders, returns and withdrawal refunds outstanding. In health insurance this provision shall comprise claims arising up to the balance sheet date only to the extent that the services of the doctor, pharmacy, hospital or the like were called upon before the balance sheet date or the daily benefit was paid for days preceding the balance sheet date. The initial amount as determined in accordance with section 341g (3) sentence 2 of the Commercial Code shall be increased by an estimated amount which shall be based on the average ratio for at least the last three financial years of claims payments in the early months of each year to total charges for claims expenditures in the previous financial year. Additionally, for these purposes the effects of exceptional circumstances shall be estimated separately.

(2) Amounts owed from salvage, subrogation and sharing agreements shall be deducted from the provision for claims outstanding. In legal expenses insurance the amounts referred to in sentence 1 shall also include existing amounts owed by the other party in a lawsuit in respect of recovery of costs. If the amounts deducted are significant, they shall be disclosed in the notes to the accounts.

Section 27
Approximation and simplification methods

(1) If, owing to particular characteristics of the insurance business, the information relating to the financial year in respect of premiums due or claims arising is insufficient to allow proper estimates to be made at the time the accounts are prepared, one of the methods described in subsections (2) and (3) shall be employed. The amount of the technical provisions established in this way shall if necessary be increased to the point that it is sufficient to meet current and future liabilities.

(2) For classes or types of insurance in which accounts are rendered on an underwriting year basis, the technical provision shall be established from the excess of premiums written over claims payments and operating expenses incurred in respect of contracts commencing in the underwriting year. This provision may also be calculated on the basis of a certain percentage of premiums written if, in view of the particular nature of the risk insured against, such a method is appropriate. As soon as sufficient information is available, but no later than the end of the third year following the underwriting year, the provision so established shall be replaced by a provision for claims outstanding calculated in accordance with the general principles. The underwriting year shall be the financial year in which the insurance contracts in the class or type of insurance in question commenced.

(3) In the technical account the data relating to the year wholly or partly preceding the financial year may be used, provided that this period does not exceed twelve months.

(4) The use of a method described in subsections (2) and (3) shall be disclosed and the reasons given in the notes to the accounts; in the event of any change in the method used, an indication of the impact on the net assets, financial position and results of operations shall be provided in the notes to the accounts. If one of the methods described in subsection (2) is used, the period of time until a provision for claims outstanding calculated in accordance with the general principles is established shall be disclosed in the notes to the accounts. If the method described in subsection (3) is used, the period of time by which the year to which the data shown relate precedes the financial year and the amount of business in question shall be disclosed in the notes to the accounts.

Section 28
Provision for bonuses and rebates

(1) The "Provision for bonuses and rebates" shall comprise the provisions for premium refunds pursuant to section 341e (2), no. 2 of the Commercial Code. They shall also include the amounts that are intended to be offset against future premiums to the extent that they are not credited directly to individual policyholders.

(2) Premium refunds taking the form of bonuses shall comprise the amounts that depend on the aggregate income, the technical profit of total insurance operations or the net income of a class or type of insurance.

(3) Premium refunds taking the form of rebates shall comprise the amounts that depend on claims experience or the profit on one or more insurance contracts or are contractually agreed or governed by law.

(4) Interest-bearing reversionary with-profits bonuses and bonuses that are payable but have not yet been distributed shall be shown under "Creditors arising out of direct insurance operations: policyholders".

(5) On balance sheet dates on which an actuarial calculation of the premium reserve is not made, 'Pensionskassen' and funeral expenses funds shall show the transfers to the premium reserve from the provision for bonuses and rebates under the "Premium reserve" item separately as "Transfer from the provision for bonuses and rebates".

(6) In life insurance a sub-provision for terminal bonuses, final payments, with-profits annuities and the minimum threshold for revaluation reserves (terminal bonus fund) shall be established within the provision for bonuses and rebates on the basis of the applicable bonus declaration. The provision may be used only for the purposes specified in sentence 1. Section 56a of the Insurance Supervision Act shall remain unaffected.

(7) The terminal bonus fund for insurance contracts in the accumulation phase shall be calculated pursuant to sections 7a to 7d so as to arrive on the balance sheet date at the pro-rata discounted terminal value of the terminal bonuses, final payments and the minimum threshold for revaluation reserves on the basis of the applicable bonus declaration payable on its scheduled due date (maturity of the policy or commencement of the annuity payable under a deferred annuity insurance policy.

(7a) The pro-rata terminal value of terminal bonuses for with-profit endowment contracts shall be based on the time course of the generation of investment income taking into account the generally recognised actuarial principles.

(7b) The pro-rata terminal value of terminal bonuses and final payments for term life insurance contracts shall be calculated by multiplying the terminal value derived from the declaration by the ratio of that part of the policy which has already been completed to the total life of the policy.

(7c) The pro-rata terminal value for the minimum threshold for revaluation reserves shall be that proportion, calculated on the basis of the generally recognised actuarial principles, which corresponds to the minimum amount payable to the policyholder on termination of the contract.

(7d) The pro-rata terminal values shall be discounted by a rate of interest which shall be no higher than the arithmetic mean, calculated over a reference period of ten calendar years, of the current yields on public sector bonds according to the capital market statistics published by the Deutsche Bundesbank in its Monthly Reports. Premature termination of the contract may be taken into account by way of appropriate additions or deductions. In the distribution phase, the calculation of the fund for with-profits annuities and terminal bonuses shall be based, as a minimum, on the difference between the premium reserve and the present value of the future annuities including non-guaranteed annuity bonuses as set out in the applicable bonus declaration, the present value being calculated on the basis of best-estimate actuarial assumptions.

(7e) Methods different from those set out in subsections (7) to (7d) are permitted provided they

1. lead to roughly similar results or
2. are used to conform with the approved business plan in respect of contracts whose tariffs were approved by the supervisory authority, or with the particular features of the tariff or the bonus declaration.

(7f) Terminal bonuses that become due prior to maturity owing to surrender of policies must be covered by the terminal bonus fund of the respective sub-portfolio.

(8) For direct insurance operations life insurance undertakings and 'Pensionskassen' and funeral expenses funds shall disclose in tabular form in the notes to the accounts:

1. the movements (opening position, additions, withdrawals, closing position) in the provision for bonuses and rebates;

2. the parts of the provision for bonuses and rebates attributable to

   1. current bonuses already set but not yet declared;
   2. terminal bonuses and final payments already set but not yet declared;
   3. amounts representing the minimum threshold for revaluation reserves already set but not yet declared;
   4. amounts representing the threshold for revaluation reserves already set but not yet declared, but excluding those amounts to be disclosed under letter c);
   5. that portion of the terminal bonus fund which is set aside to fund with-profit annuities, but excluding those amounts to be disclosed under letter a);
   6. that portion of the terminal bonus fund which is set aside to fund terminal bonuses and final payments, but excluding those amounts to be disclosed under letters b) and e);
   7. that portion of the terminal bonus fund which is set aside to fund the amount required for the minimum threshold of revaluation reserves, but excluding those amounts to be disclosed under letter c);
   8. the unrestricted portion (provision for bonuses and rebates excluding those amounts to be disclosed under letters a) to g);
3. the bonus set for the individual ring-fenced funds or portfolio groups and, if appropriate, the reversionary with-profits bonus interest rate, stating the declaration year;
4. the methods used to calculate the terminal bonus fund and the underlying actuarial assumptions.

(9) For property and casualty insurance business conducted according to the technical principles of life insurance subsections (6) to (8) shall apply mutatis mutandis.

Section 29
Equalisation provision

The provisions of the Annex hereto shall apply to the establishment of equalisation provisions pursuant to section 341h (1) of the Commercial Code. The supervisory authority responsible for the insurance undertaking may permit derogations on an ad hoc basis if the actual circumstances necessitate a change in the actuarial assumptions or the existing arrangements do not or do not adequately guarantee the smoothing out of fluctuations in the annual claims experience.

Section 30
Provisions similar to the equalisation provision

(1) For direct and reinsured product liability insurance for pharmaceutical risks under the Medicinal Products Act (Arzneimittelgesetz ‑ AMG), a provision for pharmaceutical risks shall in each case be established as a provision similar to an equalisation provision pursuant to section 341h (2) of the Commercial Code in accordance with the following:

1. The maximum amount of the provision for pharmaceutical risks shall in each case be fifteen times premiums earned (net of reinsurance) in the financial year.
2. Until the amount referred to in no. 1 has been reached or has been reached again following a write-back, a yearly amount of 75 per cent of the net balance of premiums earned and bonuses less claims paid and rebates (net of reinsurance) shall be transferred to the provision for pharmaceutical risks.
3. If the calculations pursuant to no. 2 produce a negative amount, the pharmaceutical risks provision shall be written back correspondingly.

(2) For direct and reinsured property and liability insurance for installations for the production or fission of nuclear fuels or installations for reprocessing spent nuclear fuels against nuclear risks a provision for nuclear installation risks shall in each case be established as a provision similar to an equalisation provision pursuant to section 341h (2) of the Commercial Code in accordance with the following:

1. The maximum amount of the provision for nuclear installation risks shall be either 100 per cent of the property and liability sum insured for nuclear risks that the insurance undertaking has accepted (net of reinsurance) in respect of the highest sum insured for an installation of the type referred to in sentence 1 or 25 per cent of the aggregate sum insured for all nuclear risks that the insurance undertaking has accepted (net of reinsurance) to insure such installations. The lower of the two amounts shall apply.
2. Until the amount referred to in no. 1 has been reached or has been reached again following a withdrawal, a yearly amount of 20 per cent of the amount referred to in no. 1, but not exceeding 75 per cent of premiums earned less claims paid (net of reinsurance) shall be transferred to the provision for nuclear installation risks.
3. If claims paid exceed 75 per cent of premiums earned (in each case net of reinsurance), the provision for nuclear installation risks is to be written back correspondingly.

(2a) For direct insurance and accepted reinsurance against terrorism with high claims risk a provision for terrorism risks shall in each case be established as a provision similar to an equalisation provision pursuant to section 341h (2) of the Commercial Code in accordance with the following:

1. The maximum amount of the provision for terrorism risks for inward reinsurance business shall correspond to the maximum amount of liability applicable to the risk the insurance undertaking has accepted, net of reinsurance. The maximum amount for direct insurance business shall be 15 times premiums earned (net of reinsurance) in the financial year.
2. Until the amount referred to in no. 1 has been reached or has been reached again following a write-back, a yearly amount of 90 per cent of the net balance of premiums earned and bonuses less claims paid and rebates (net of reinsurance) shall be transferred to the provision for terrorism risks. If, in individual cases, the insurance undertaking recognises other expenses relating to insurance business which are lower or higher than the amount of 10 per cent referred to in sentence 1, the amount of 90 per cent shall be reduced or increased accordingly.
3. If the calculations pursuant to no. 2 produce a negative amount, the terrorism risks provision shall be written back correspondingly.

(3) Similar provisions are not permitted if an equalisation provision has been established. They shall be transferred to the equalisation provision as soon as in a financial year the conditions of section 341h (2) of the Commercial Code no longer apply.

Section 31
Other technical provisions

(1) "Other technical provisions" shall include in particular:

1. the cancellation provisions for debtors arising out of direct insurance operations and for premiums already collected by the insurance undertaking preparing the accounts to the amount of the premiums expected to be refunded because the technical risk has ceased to exist or has diminished pursuant to section 80 of the Insurance Contract Act (Versicherungsvertragsgesetz – VVG);
2. the provision for unexpired risks for the individual direct insurance and inward reinsurance classes or types of insurance; where the amount is significant, it shall be shown separately in the balance sheet or in the notes to the accounts.

(2) Property and casualty insurance companies and reinsurance undertakings shall also show under this item:

1. the provision for obligations arising from membership of Solidarhilfe e. V.²⁾ and Verkehrsopferhilfe e. V.³⁾;
2. the provision for unexpired premiums in respect of motor insurance and motor legal expenses insurance relating to laid-up vehicles;
3. the provision for rebates if established as a precaution before the end of an observation period of more than one year.

Section 32
Technical provisions for life insurance contracts
where the investment risk is borne by the policyholders

(1) This item shall comprise the technical provisions for the insurance undertaking's liabilities arising from life insurance contracts the value of or return on which is determined by reference to investments for which the policyholder bears the risk or on which the insurance payout is linked to an index.

(2) Any additional technical provisions established to cover mortality risks, operating expenses or other risks (such as guaranteed minimum benefits or surrender values) shall be shown under the "Premium reserve" liability item.

(3) Technical provisions for obligations of a tontine organiser vis-à-vis the members of a tontine shall also be shown under this item.

Section 33
Deposits received from reinsurers

(1) "Deposits received from reinsurers" shall comprise amounts owed to reinsurers for sums retained by the insurance undertaking preparing the accounts as a deposit or deposited with it by the reinsurer for this purpose.

(2) The deposits may neither be combined with other amounts owed to the reinsurer nor offset against amounts owed by the reinsurer.

Section 34
Creditors arising out of reinsurance operations

"Creditors arising out of reinsurance operations" shall comprise the debit balances of current accounts with ceding undertakings, reinsurers and reinsurance brokers on inward and outward reinsurance operations. In other respects section 16 sentence 2, shall apply.

Section 35
Balancing item

Branches shall add as the final item on the liabilities side a "Balancing item" if there is a surplus of assets over other liabilities. Amounts allocated to equity and not representing a fixed guarantee deposit shall not be shown under this item but under the "Capital reserves" liability item.

Part 4
Provisions relating to individual profit and loss account items

Section 36
Gross premiums written

(1) Insofar as they relate to direct insurance operations, the following premiums in particular shall be shown under "Gross premiums written":

1. all premiums and premium instalments (including instalment surcharges) payable in the financial year, even if they relate in whole or in part to a later financial year, plus contractual incidental charges levied on policyholders, even if they are retained in whole or in part by the insurance intermediary;
2. premiums which cannot be calculated until after the balance sheet date;
3. in life insurance: single premiums;
4. supplementary contributions levied by mutual insurance associations in the financial year;
5. supplementary premiums payable in the financial year in classes of insurance business conducted on an underwriting year basis;
6. premiums from policies ceded to an insurance pool;
7. premiums underwritten as its portion by the leading insurer in open co-insurance;
8. premiums from joint insurance operations that the co-insurer has received from the leading insurer in open co-insurance;
9. recoveries of outstanding premiums written off or cancelled in previous financial years and income resulting from the write-back and reduction of the general provision for outstanding premiums due from policyholders.

(2) The following shall be deducted from the premiums referred to in subsection (1):

1. Insurance Premium Tax, even if not levied from the policyholder separately;
2. write-offs of irrecoverable outstanding premiums owed by policyholders and the costs of establishing and increasing the general provision for outstanding premiums owed by policyholders.

The premiums referred to in subsection (1) may not be reduced by bonuses and rebates and commissions paid to insurance intermediaries.

(3) Insofar as they relate to inward reinsurance business, the following premiums shall be shown under "Gross premiums written":

1. amounts credited by ceding undertakings for the financial year in respect of premiums and additional payments from policyholders;
2. premiums accepted from insurance pools;
3. portfolio entries received from ceding undertakings on the conclusion of or increases in inward reinsurance business.

The portfolio withdrawals paid to ceding undertakings on the termination of or decreases in inward reinsurance business shall be deducted from the premiums referred to in sentence 1.

Section 37
Outward reinsurance premiums

The following amounts shall be shown under "Outward reinsurance premiums":

1. amounts credited to reinsurers in respect of premiums and additional payments from policyholders
2. premiums ceded to insurance pools;
3. portfolio entries payable to reinsurers on the conclusion of or increases in outward reinsurance business.

The portfolio withdrawals paid by reinsurers on the termination of or decreases in outward reinsurance contracts shall be deducted from the premiums referred to in sentence 1.

Section 38
Allocated investment return transferred from the non-technical account, net of reinsurance

(1) Under "Allocated investment return transferred from the non-technical account, net of reinsurance“ property and casualty insurance companies and reinsurance undertakings shall show the following investment income:

1. investment income (net of corresponding direct expenses) from the investment portfolio created as cover for the guarantee assets for the gross premium reserve in respect of direct property and casualty insurance business conducted according to the technical principles of life insurance;
2. interest transfers to the gross premium reserve for annuities in respect of direct accident and third-party liability insurance business;
3. interest income from deposits with ceding undertakings to the amount of the gross premium reserves for reinsurance accepted in respect of life insurance, health insurance and property and casualty insurance conducted according to the technical principles of life insurance.

Insofar as it relates to the deposits retained for reinsurers' shares of the gross technical provisions referred to in sentence 1, interest on the deposits paid to the reinsurers shall be deducted from the amounts specified in sentence 1.

(2) The reason for the transfer and the calculation basis shall be disclosed in the notes to the accounts.

Section 39
Unrealised gains on investments, unrealised losses on investments

Life insurance undertakings shall show unrealised gains or losses on investments for the benefit of life insurance policyholders who bear the investment risk under "Unrealised gains on investments" or "Unrealised losses on investments".

Section 40
Other technical income, net of reinsurance

"Other technical income, net of reinsurance" shall comprise all technical income which cannot be allocated to any other item. It includes in particular:

1. for all insurance undertakings:

   1. reminder charges and default interest payable by policyholders;
   2. bonuses and rebates that have not been cashed by policyholders and are now barred by lapse of time;
2. for life insurance undertakings: in addition, income from any increase in capitalised claims on policyholders not yet due;
3. for 'Pensionskassen' and funeral expenses funds: in addition to the income referred to under no. 2, income from contributions from member or sponsoring undertakings for full or partial coverage of operating expenses.

Reinsurer's shares shall be deducted from the above income.

Section 41
Charges for claims incurred, net of reinsurance

(1) "Charges for claims incurred, net of reinsurance" shall comprise gross claims payments made in the financial year and the change in the gross provision for claims outstanding. Reinsurers' shares shall be deducted from the gross charges referred to in sentence 1.

(2) The gross amount of claims payments shall comprise all payments made in the financial year in respect of claims incurred in the financial year and in previous years less payments received in the financial year by way of salvage, subrogation and sharing agreements and payments within the meaning of section 26 (2) sentence 2. This calculation shall take into account withdrawals of loss provisions due to contract cancellations as of the end of financial year. The gross amount of claims payments shall also include annuity payments, surrenders and refunds paid as well as the staff and non-staff costs allocated to the "Claims, surrenders and refunds settlement" function, consisting of both external and internal settlement costs. External settlement costs shall include in particular lawyers' fees, court and litigation costs, fees charged by external loss-adjusters and additional loss-adjustment commission payable to insurance intermediaries. The costs of defending unjustified claims in third-party liability insurance and indemnification-like costs in legal expenses insurance arising as a result of supporting policyholders and lawyers and assessing the prospects of success shall also be regarded as settlement costs.

(3) The change in the gross amount of the provision for claims outstanding shall be equal to the difference between the value at the end of the financial year compared with the value at the beginning of the financial year.

(4) For the purposes of showing the reinsurers' share in the gross amount of claims payments and in the change in the gross amount of the provision for claims outstanding subsections (2) and (3) shall apply mutatis mutandis.

(5) If the run-off result of the provision for claims outstanding carried over from the preceding financial year is material, it shall be disclosed in the notes to the accounts, broken down by type and amount.

Section 42
Charges for bonuses and rebates, net of reinsurance

(1) The charges for bonuses in life insurance and health insurance shall include all additions to the provision for bonuses.

(2) The charges for bonuses in property and casualty insurance and the charges for rebates in property and casualty insurance, reinsurance and health insurance shall include:

1. the addition to the provision for bonuses and rebates;
2. the run-off losses of the provisions carried over from the preceding financial year; any corresponding gains shall reduce the charges.

Reinsurers' shares shall be deducted from the charges referred to in subsection (1) and in sentence 1.

(3) If the bonuses and rebates paid to policyholders are significant, they shall be disclosed separately in the notes to the accounts.

Section 43
Operating expenses, net of insurance

(1) All staff and non-staff costs incurred by the undertaking, including notional rental expense for land and buildings occupied by the undertaking for its own use shall be allocated to the following functions:

1. settlement of claims, surrenders and refunds;
2. acquisition of insurance contracts;
3. administration of insurance contracts;
4. investment management.

Expenses that cannot be allocated to these functions shall be shown under "Other expenses". For property and casualty insurance companies the expenses allocated to functions 1 to 3 shall, in consideration of section 51 (4), no. 1 sentence 3, also be divided into direct insurance operations, broken down by the groups of classes, classes and types of insurance specified therein, and reinsurance operations. If expenses are not directly attributable, they shall ordinarily be allocated to the functions on the basis of the proportion of activities of the operating the department that incurred the expense devoted to each function.

(2) Acquisition costs shall comprise the costs arising from the conclusion of insurance contracts, even if they are taken into account in the premium calculations of life insurance undertakings and 'Pensionskassen' and funeral expenses funds. Acquisition costs shall cover both

1. direct costs, such as in particular:

   1. acquisition commissions, additional commissions for drawing up the insurance policies and cooperation and leadership commissions in co‑insurance;
   2. commission payments to insurance brokers;
   3. the costs of preparing the contract documents, of adding the insurance contract to the insurance portfolio and of medical examinations in connection with the conclusion of insurance contracts;
      and

2. indirect costs, such as in particular:

   1. general advertising costs;
   2. non-staff costs incurred in connection with the processing of proposals and the issuing of policies.

(3) Administration expenses shall comprise in particular costs arising from:

1. the collection of premiums, including the corresponding commissions;
2. the administration of the portfolio, including the corresponding commissions;
3. preventing and minimising losses;
4. caring for the health of policyholders;

5. the processing of

   1. bonuses and rebates;
   2. outward reinsurance and retrocession.

(4) Outward reinsurance commissions and profit commissions received shall be deducted from gross operating expenses and shown separately. Such receipts shall also include any pro‑rata reimbursement by the reinsurer of the original operating expenses incurred by the ceding undertaking and any overriding commissions and other contributions towards overhead expenses received.

(5) Property and casualty insurance companies shall show acquisition costs and administration expenses as an aggregate figure under "Gross operating expenses". These items shall, however, be disclosed separately in the notes to the accounts.

Section 44
Other technical expenses, net of reinsurance

"Other technical expenses, net of reinsurance" shall comprise all technical expenses which cannot be allocated to any other item. They shall include in particular:

1. for property and casualty insurance companies and reinsurance undertakings: Fire Protection Tax, even insofar as the ceding undertakings are reimbursed for it;

2. for life insurance undertakings and 'Pensionskassen' and funeral expenses funds:

   1. interest on reversionary with-profits bonuses;
   2. the direct crediting of with-profits bonuses insofar as they are not allocated to the premium reserve;
   3. expenses arising from any decrease in capitalised claims on policyholders not yet due;
   4. the interest paid to reinsurers on deposits retained by the ceding undertaking.

Reinsurers' shares shall be deducted from the above expenses.

Section 45
Investment income

(1) Where a life insurance undertaking also engages in direct accident insurance, investment income shall, to the extent that it is connected directly to the life insurance business, be shown in the life insurance technical account. Where a property and casualty insurance company also engages in direct health insurance according to the principles of life insurance, investment income shall, to the extent that it is connected directly to the designated health insurance business, be shown in the health insurance technical account.

(2) The notional rent for land and buildings occupied by an insurance undertaking for its own use shall also be shown as "Income from land, land rights and buildings including buildings on third party land".

Section 46
Investment expenses

(1) Section 45 (1) shall apply mutatis mutandis to the reporting of investment expenses.

(2) The staff and non-staff expenses allocated to the "investment management" function shall be shown as investment management expenses.

(3) Interest and other investment expenses shall comprise in particular:

1. expenses incurred in respect of land, land rights and buildings including buildings on third party land, such as operating costs, maintenance costs, rental default risks, business rates and the like and insurance premiums;
2. custody charges;
3. emoluments paid to guarantee asset trustees;
4. losses from participations in partnerships;
5. interest payable on mortgages on own land and buildings.

Section 47
Other income

"Other income" shall comprise non-technical income that cannot be allocated to any other item. It shall include in particular:

1. income from services provided;
2. repealed;
3. other interest and similar income insofar as it does not derive from investments;

4. income relating to recoveries of claims written off and income from the write-back of and reduction in general provisions for the claims, insofar as this income does not

   1. derive from receivables associated with investments, which shall be recorded under "Income from write-ups";
   2. derive from outstanding premiums due from policyholders, which shall be recorded under "Gross premiums written".

Section 48
Other expenses

"Other expenses" shall comprise non-technical expenses that cannot be allocated to any other item. They shall include in particular:

1. staff and non-staff expenditure that cannot be allocated to the functions mentioned in section 43 (1), nos. 1 to 4;
2. repealed;
3. interest charges including additions to the pensions provision. Interest paid to reinsurers on deposits retained by ceding undertakings shall not be shown under “Other expenses” but shall be accounted for by property and casualty insurance companies and reinsurance undertakings under "Allocated investment return transferred from the non-technical account, net of reinsurance" and shall be recorded by life insurance undertakings under "Other technical expenses, net of reinsurance";

4. write-offs of claims and the costs of establishing and increasing general provisions for the claims insofar as these expenses do not

   1. relate to receivables associated with investments, which shall be recorded under "Write-downs of investments";
   2. relate to outstanding premiums due from policyholders, which shall be recognised under "Gross premiums written" as a deductible item;
5. the central administration expenses charged to a foreign-owned domestic branch by its general management.

Section 49
Other taxes

"Other taxes" shall comprise all taxes other than taxes on income and Fire Protection Tax.

Section 50
Balancing item

On balance sheet dates on which an actuarial calculation of the premium reserve is not made, 'Pensionskassen' and funeral expenses funds, when providing additional details of the non-technical account in accordance with Footnote 4 of Form 3, shall, instead of showing the accounting surplus of income over expenditure or of expenditure over income as "Net income/Net loss", show it under the title of "Balancing item”. In the following financial year the amount of this difference shall be shown under "Prior year balancing item".

Part 5
Notes to the accounts

Section 51
Additional explanatory notes

(1) In addition to the information prescribed in section 341a in conjunction with section 284 and section 285, nos. 1 to 3a, 6, 7, 9 to 14 and 16 to 29 of the Commercial Code, the notes to the accounts shall incorporate the information on the individual balance sheet or profit and loss account items prescribed in the present Regulation. The other information prescribed in this Part shall also be disclosed.

(2) Instead of the information prescribed in section 268 (2) of the Commercial Code, details shall be provided of the movements in Asset Items B and C I to III in accordance with the model Notes to the Accounts Form 1 annexed hereto insofar as no equivalent details are provided in the balance sheet.

(3) Instead of the information prescribed in section 268 (7) of the Commercial Code, the contingent liabilities referred to in section 251 of the Commercial Code shall be disclosed separately indicating the corresponding liens and other collateral security granted. If such liabilities exist vis-à-vis affiliated undertakings, they shall be disclosed separately. The book value of pledged assets assigned or deposited as collateral for which separation rights or preferential creditor rights can be asserted in insolvency proceedings, with the exception of the guarantee assets pursuant to section 66 of the Insurance Supervision Act, shall be disclosed as one sum, together with the figure for the previous financial year.

(4) Instead of the information prescribed in section 285 no. 4 of the Commercial Code, the following details shall be provided and compared with the previous financial year's equivalent details:

1. Property and casualty insurance companies shall disclose the following details for their total direct insurance business, their total inward reinsurance business and their total insurance business as a whole:

   1. gross premiums written;
   2. gross premiums earned;
   3. net premiums earned;
   4. gross claims incurred;
   5. gross operating expenses;
   6. the reinsurance balance; this is defined as the net balance of the reinsurer's earned premiums and the reinsurer's share in the technical expenses specified under letters d) and e) above;
   7. the underwriting result, net of reinsurance;

   8. total gross technical provisions;
      of which:

      aa) gross provision for claims outstanding;

      bb) equalisation provision and similar provisions;
      

   9. the number of insurance contracts with a minimum duration of one year (only for direct insurance business).

   If gross inward reinsurance premiums written amount to less than 10 per cent of total gross insurance premiums written, separate disclosure of direct insurance business and inward reinsurance business shall not be required. For direct insurance business the details referred to in sentence 1 shall be broken down into the following groups of classes, classes and types of insurance:

   1. accident and health as a whole;
      of which:
      aa) acciden;
      bb) health;
      
   2. third-party liability;
   3. motor third-party liability;
   4. motor, other classes;
   5. fire and other damage to property;
      of which:
      aa) fire;
      bb) comprehensive contents;
      cc) Verbundene Gebäudeversicherung;
      dd) other property damage;
      
   6. transport and aviation;
   7. credit and suretyship;
   8. legal expenses;
   9. assistance;
   10. miscellaneous.

   The breakdown into groups of classes, classes or types of insurance within direct insurance shall not be required if the gross premiums written in the individual groups of classes, classes or types of insurance do not in each case exceed 10 million euros; details shall, however, be provided in any event for the three largest groups of classes, classes or types of insurance. For fire and property damage insurance the reinsurance balance pursuant to sentence 1, letter f), need be disclosed only as an aggregate total.
   

2. Life insurance undertakings shall disclose:

   1. gross premiums written broken down separately into direct insurance business and inward reinsurance business. Separate disclosure shall not be required if gross inward reinsurance premiums written amount to less than 10 per cent of total gross insurance premiums written. Gross direct insurance premiums written shall be disclosed broken down into the following categories:
      
      aa) gross premiums written from:
      
      aaa) individual contracts;
      bbb) collective contracts;
      
      bb) gross premiums written, broken down into:
      

      aaa) regular premiums;
      bbb) single premiums;
      
      cc) gross premiums written, broken down into premiums from
      
      aaa) non-participating contracts;
      bbb) participating contracts;
      ccc) contracts where the investment risk is borne by policyholders.
      
      The breakdowns of gross premiums written in accordance with double letters aa) to cc) above shall not be required if the gross premiums written in the individual sub-categories do not in each case exceed 10 per cent of total gross direct insurance premiums written;
      

   2. the reinsurance balance as defined in no. 1 sentence 1, letter f), plus the change in reinsurers' shares of the gross premium reserve.

3. 'Pensionskassen' and funeral expenses funds shall disclose:

   1. gross premiums written, broken down into the following categories:
      
      aa) gross premiums written from:
      
      aaa) individual contracts;
      bbb) collective contracts;
      
      bb) gross premiums written, broken down into:
      
      aaa) regular premiums;
      bbb) single premiums;
      
      cc) gross premiums written from:
      
      aaa) superannuation insurance;
      bbb) funeral expenses insurance;
      ccc) supplementary insurance;
      
      No. 2, letter a) sentence 4, shall apply mutatis mutandis;
      
   2. the reinsurance balance as defined in no. 2, letter b);
   3. in the case of 'Pensionskassen' in respect of which the supervisory authority has made a determination pursuant to section 156a of the Insurance Supervision Act, in addition:
      gross premiums written, broken down into premiums from
      
      aa) non-participating contracts;
      bb) participating contracts.
      

4. Health insurance undertakings shall disclose:

   1. gross direct insurance premiums written and premiums from the provision for bonuses, broken down in each case into the following categories:
      
      aa) gross premiums written from:
      
      aaa) individual contracts;
      bbb) collective contracts;
      
      bb) gross premiums written, broken down into:
      
      aaa) regular premiums;
      bbb) single premiums;
      
      cc) gross premiums written from:
      
      aaa) comprehensive health insurance;
      bbb) daily benefits insurance;
      ccc) stand-alone daily hospital allowance insurance;
      ddd) other stand-alone partial insurance;
      eee) compulsory long-term care insurance;
      fff) public assistance risk transfer insurance (Beihilfeablöseversicherung)⁴⁾;
      ggg) residual debt / wage continuation insurance;
      hhh) foreign travel health insurance;
      
      dd) the premium surcharge pursuant to section 12 (4a) of the Insurance Supervision Act contained in double letters aa) to cc);
      
   2. the reinsurance balance as defined in no. 2, letter b);
   3. the number of natural persons insured, total and divided into:
      
      aa) comprehensive health insurance;
      bb) daily benefits insurance;
      cc) stand-alone daily hospital allowance insurance;
      dd) other stand-alone partial insurance;
      ee) compulsory long-term care insurance;
      ff) public assistance risk transfer insurance;
      
   4. the breakdown of the provision for bonuses and rebates and the amount specified in section 12a of the Insurance Supervision Act in accordance with model Notes to the Accounts Form 6 annexed hereto.
      Types of insurance stated under sentence 1, letters a) and b) but not operated are not required to be disclosed. Multiple counting in respect of the insurance types specified in sentence 1, letter c) is allowed. For the purpose of calculating the total number of natural persons insured, each person captured in at least one of the insurance types specified in sentence 1, letter c), double letters aa) to ee) shall be counted only once.
      

5. Direct insurance undertakings shall break down gross direct insurance premiums written by origin as follows::

   1. Germany;
   2. the other member states of the European Community and other signatories to the EEA Agreement;
   3. third countries.

   Disclosure shall not be required if the gross premiums written in the individual areas of origin amount in each case to less than 5 per cent of total gross direct insurance premiums written.
   

6. Reinsurance undertakings shall disclose gross premiums written, broken down into property and casualty insurance business and life insurance business.

(5) Instead of the information prescribed in section 285, no. 8, letter b) of the Commercial Code, details shall be provided of the commission and other remuneration paid to insurance representatives in respect of direct insurance business and staff costs in accordance with model Notes to the Accounts Form 2 annexed hereto.

(6) Repealed.

Section 52
Additional compulsory disclosures

The notes to the accounts shall in addition disclose information on balance sheet and profit and loss account items as follows:

1. for all insurance undertakings:

   1. for the book item "Land, land rights and buildings including buildings on third party land": the book value of the land and buildings owned by the insurance undertaking and occupied for its own activities;
   2. for the balance sheet item "Capital represented by participation rights": the amount falling due within two years;
   3. in addition to the information prescribed by section 284 (2), nos. 1 and 3 of the Commercial Code, the methods employed to determine the individual technical provisions, with the exception of the provision for bonuses and rebates, in respect of both the gross amounts and the amounts attributable to outward reinsurance, with each being shown separately for direct insurance business and inward reinsurance; an explanation shall be provided of any material changes in methods from the preceding financial year;

2. for life insurance undertakings and 'Pensionskassen' and funeral expenses funds, in addition:

   1. the actuarial methods and assumptions employed to calculate technical provisions, including the with-profits bonuses included therein
   2. the interest-bearing reversionary with-profits bonuses included in the balance sheet sub-item "Creditors arising out of direct insurance operations: policyholders".

Section 53
Insurance undertakings that engage in direct insurance in more than one class of business

Life insurance undertakings that also engage in direct accident insurance shall also disclose separately the information prescribed for the notes to the accounts relating to their direct accident insurance business. Property and casualty insurance companies that also engage in direct health insurance according to the technical principles of life insurance shall also disclose separately the information prescribed for the notes to the accounts relating to their health insurance business.

Section 54
Current value of investments

Where investments are shown at their purchase price or notional value, the current value of each investment shall be disclosed as one sum in the notes to the accounts. The calculation of the current value shall be determined

1. for land, land rights and buildings including buildings on third party land: in accordance with section 55; and
2. for other investments: in accordance with section 56.

In addition, the aggregate purchase price of the investments to be included in the surplus participation, their aggregate current value and the resulting balance shall be disclosed.

Section 55
Current value of land, land rights and buildings including buildings on third party land

(1) For land, land rights and buildings including buildings on third party land, the current value shall be the market value applicable on the date of valuation, reduced where relevant as provided for in subsections (4) and (5).

(2) Market value shall mean the price obtainable on land or buildings under private contract between a willing seller and an arm's-length buyer on the date of valuation, it being assumed that the land or buildings have been offered on the open market, that market conditions do not prevent orderly disposal and that a normal period, having regard to the nature of the property, is available for the negotiation of the sale.

(3) The market value shall be determined by way of an appraisal carried out for each individual item of land or building at least every five years in accordance with a generally accepted method. For this purpose the scheduled depreciation pursuant to section 253 (3) sentence 1 of the Commercial Code shall be disregarded.

(4) Where the market value of any land or building has diminished since the previous appraisal pursuant to subsection (3), an appropriate value adjustment shall be made. The adjusted market value shall be retained until the market value is next determined as provided for in subsections (2) and (3).

(5) Where on the date on which the accounts are prepared land or buildings have been sold or are to be sold within the short term, the market value arrived at in accordance with subsections (2) and (4) shall be reduced by the actual or estimated realisation costs.

(6) Where it is impossible to determine the market value of a land or buildings item, the value arrived at on the basis of the principle of purchase price or production cost shall be deemed to be the current value.

(7) In addition, the valuation method and the corresponding breakdown of land and buildings by year of valuation shall also be disclosed.

Section 56
Current value of other investments

(1) Subject to the provisions of subsection (5), for other investments the current value shall be their open market value.

(2) Where investments are listed on an official stock exchange the open market value shall be the market value on the balance sheet date or, if the balance sheet date is not a stock exchange trading day, the market value on the last stock exchange trading day before that date.

(3) Where a market exists for investments other than those referred to in subsection (2), the open market value shall be deemed to be the average value at which such investments were traded on the balance sheet date or, if the balance sheet date is not a trading day, on the last trading day before that date.

(4) Where on the date on which the accounts are prepared investments such as referred to in subsection (2) or (3) have been sold or are intended to be sold within the short term, the open market value shall be reduced by the actual or estimated realisation costs.

(5) Having due regard to the principle of prudence, investments shall not be valued at more than their likely realisable value.

(6) In addition, the valuation method adopted in each case and the reason for its adoption shall be disclosed.

Part 6
Management report

Section 57
Management report

(1) In addition to the information prescribed in section 289 of the Commercial Code, the management report shall incorporate the information prescribed in this Section.

(2) All insurance undertakings shall provide the following information:

1. details of all classes and types of business carried on in direct insurance and inward reinsurance;
2. a report on business performance in the individual groups of classes, classes and types of direct insurance business, together with a report on business performance in the individual classes of inward reinsurance business conducted.

(3) Mutual insurance associations shall also indicate how any supplementary contributions levied were calculated.

(4) Life insurance undertakings and 'Pensionskassen' and funeral expenses funds shall also provide a breakdown of their direct insurance portfolios in accordance with model Notes to the Accounts Forms 3 to 5 annexed hereto, as follows:

1. life insurance undertakings: in accordance with Form 3;
2. 'Pensionskassen': in accordance with Form 4; and, if they have funeral expenses policies, other endowment insurance or supplementary insurance policies, also in accordance with Form 5,
3. funeral expenses funds: in accordance with Form 5.

(5) Life insurance undertakings that also engage in direct accident insurance shall also disclose separately the information prescribed for the management report relating to their direct accident insurance business. Property and casualty insurance companies that also engage in direct health insurance according to the technical principles of life insurance shall also disclose separately the information prescribed for the management report relating to their health insurance business.

Part 7
Consolidated accounting

Section 58
Consolidated balance sheet and consolidated profit and loss account

(1) Form 1 shall be used for drawing up the consolidated balance sheet and Form 4 for drawing up the consolidated profit and loss account. This shall not apply if otherwise provided for in the footnotes to the Forms or if the particular characteristics of the group warrant derogations from Form 4. Furthermore, Footnotes 2 and 3, letters a) and b), to Form 2 and Foot¬notes 2, 3 and 4, letter a), to Form 3 shall apply mutatis mutandis.

(2) If a health insurance undertaking is included in the consolidated accounts, in Form 4 for the profit and loss account the headings to Part II and Item II 13 and Item III 1, letter b) shall read as follows:

1. Heading to Part II:
   "Life insurance and health insurance technical account";
2. Item II 13:
   "Life insurance and health insurance underwriting result, net of reinsurance";
3. Item III 1, letter b):
   "Life insurance and health insurance".

(3) In the consolidated profit and loss account total investment income and investment expenses may be shown in the non-technical account. The net balance of investment income and investment expenses, where derived from life insurance and health insurance undertakings included in the consolidated accounts, shall in these cases be allocated to the life insurance and health insurance technical account. The following amendments shall therefore apply to Form 4:

1. Instead of Item II 3 "Investment income", the life insurance and health insurance technical account shall include a new Item II 3: "Allocated interest from the non-technical account".
2. Item II 10 "Investment expenses" in the life insurance and health insurance technical account shall no longer be required. The previous Items II 11 to II 13 shall become Items II 10 to II 12.

(4) in other respects

1. section 3 and
2. sections 4 to 20, 22 to 34 and 36 to 50

shall apply mutatis mutandis to the consolidated balance sheet and the consolidated profit and loss account unless their particular characteristics warrant any derogations therefrom.

Section 59
Notes to the consolidated accounts

(1) In addition to the information prescribed by section 341j (1) in conjunction with section 313 and section 314 (1), nos. 1 ,2 ,2a and 4 to 21 of the Commercial Code, the notes to the consolidated accounts shall incorporate the information prescribed in subsections (2) to (4).

(2) The details shall be disclosed in accordance with model Notes to the Accounts Form 1 but only for the items "Intangible assets" and "Land, land rights and buildings including buildings on third party land" and the sub-items of "Investments in affiliated undertakings and participations" to the extent that this information is not disclosed in the consolidated balance sheet.

(3) Gross premiums written shall be disclosed, broken down into:

1. direct insurance business;
2. inward reinsurance business.

Gross direct insurance premiums written shall also be broken down according to the following types of insurance business:

1. life insurance;
2. health insurance;

3. property and casualty insurance;
   and by origin into the following groups:

   1. Germany;
   2. the other member states of the European Community and other signatories to the EEA Agreement;
   3. third countries.

(4) For the consolidated balance sheet item "Land, land rights and buildings including buildings on third party land" the book value of the land and buildings owned by insurance undertakings and occupied for their own activities shall be disclosed in the notes to the consolidated accounts.

Section 60
Consolidated management report

In addition to the information prescribed in section 315 (1) and (2) of the Commercial Code, the consolidated management report shall incorporate the following information:

1. details of the classes of business carried on in direct insurance and inward reinsurance;

2. a report on business performance in direct life insurance, health, property and casualty insurance and inward reinsurance.

Part 8
Exemptions and simplifications for certain insurance undertakings

Section 61
Exemptions

(1) Section 341k in conjunction with the provisions of Part Three of Chapter Two of the Third Book of the Commercial Code relating to auditing, section 341l in conjunction with the provisions of Part Four of Chapter Two of the Third Book of the Commercial Code relating to disclosure and section 341i and section 341j in conjunction with the provisions of Part Two of Chapter Two of the Third Book of the Commercial Code relating to consolidated accounting shall not apply to the following insurance undertakings:

1. mutual insurance associations which do not engage in either third party liability insurance or credit and suretyship insurance and the articles of association of which stipulate that supplementary contributions are reserved or insurance claims may be reduced, if:

   1. where they are property, casualty and health insurance associations, the gross premiums from insurance business in the twelve months preceding the balance sheet date are at least one half attributable to member insurance business and do not exceed 1 million euros;
   2. where they are life insurance associations, the gross premiums written in three consecutive financial years do not in any of them exceed 500,000 euros; if this amount is exceeded in three successive years, the aforementioned provisions of the Commercial Code shall be applied from the fourth year onwards;
2. insurance undertakings that provide tourist assistance benefits only, if their activities are localised and consist solely of benefits in kind and the annual gross premiums do not exceed 200,000 euros;
3. property, casualty and health insurance associations that have agreed with another insurance association that the latter shall reinsure all insurance contracts or shall assume responsibility for meeting the liabilities arising from the insurance contracts;
4. 'Pensionskassen' and funeral expenses funds the gross premiums of which did not exceed 7.5 million euros in the previous financial year or the balance sheet total of which did not exceed 125 million euros on the balance sheet date at the end of the previous financial year.

(2) (Repealed)

Section 62
Simplifications

(1) Notwithstanding the provisions of section 2, the insurance undertakings referred to section 61 (1) may

1. aggregate those items in Form 1 preceded by Arabic numerals insofar as they do not relate to outward reinsurance; amounts that are material for conveying a true and fair view within the meaning of section 264 (2) of the Commercial Code shall, however, be disclosed separately in the balance sheet or in the notes to the accounts;
2. aggregate those income and expenditure items in Forms 2 to 4 preceded by letters insofar as they do not relate to outward reinsurance; amounts that are material for conveying a true and fair view within the meaning of section 264 (2) of the Commercial Code shall, however, be disclosed separately in the profit and loss account or in the notes to the accounts.

They need

1. apply section 43 (1) only if functions 1 to 3 are included in the "Administration of insurance contracts" function;
2. apply to the management report, in addition to section 289 of the Commercial Code, only section 57 (2);
3. not apply section 52 to section 56.

(2) 'Pensionskassen' and funeral expenses funds in the legal form of a mutual insurance association, with the exception of 'Pensionskassen' in respect of which the supervisory authority has made a determination pursuant to section 156a of the Insurance Supervision Act, may, by way of derogation from section 341f of the Commercial Code and section 25 of the present Regulation and with the consent of the insurance supervisory authority, be exempted from the actuarial calculation of the premium reserve on each balance sheet date. In these cases the calculation shall, however, be carried out at regular intervals not exceeding five years.

Part 9
Administrative offences

Section 63
Administrative offences

An administrative offence within the meaning of section 341n (1), no. 6 of the Commercial Code shall be deemed to have been committed by any person who, as a member of the authorised representative body or supervisory board of an insurance undertaking or the authorised agent of a branch located within the area of application of the present Regulation of an insurance undertaking domiciled outside the area of application of the present Regulation,

1. .in the preparation or approval of the annual accounts

   1. fails to use the prescribed form contrary to section 2 sentence 1,
   2. contrary to section 4, section 5 (1) or (2), section 54 in conjunction with section 55 (1) to (6) or section 56 (1) to (5), section 55 (7) or section 56 (6), fails to disclose any requisite information, fails to disclose it accurately or fails to disclose it in the prescribed manner,
   3. contravenes any provision of section 6 to section 50 relating to the information to be included in individual balance sheet or profit and loss account items or
   4. contravenes any provision of section 51 to section 53 relating to additional explanatory notes, additional compulsory disclosure or other disclosures in the notes to the accounts,
2. contravenes any provision of section 57 relating to additional disclosure in the preparation of the management report,

3. in the preparation of the consolidated accounts,

   1. fails to use the prescribed financial statement form contrary to section 58 (1) sentence 1,
   2. contravenes any provision of section 58 (4), no. 2, relating to the information to be included in individual consolidated balance sheet or consolidated profit and loss account items or,
   3. contrary to section 59 (2) to (4), fails to disclose any requisite information or fails to disclose it accurately or
4. fails to incorporate any requisite information in the consolidated management report contrary to section 60.

Part 10
Final provisions

Section 64
Transitional provisions

(1) With the exception of section 25 and section 54 to section 56, the provisions of the present Regulation shall apply for the first time to annual accounts and management reports and consolidated accounts and consolidated management reports for the financial year beginning after 31 December 1994. For earlier financial years the provisions of the Regulation on Insurance Accounting of 11 July 1973 (Federal Law Gazette I p. 1209), as last amended by Regulation of 23 December 1986 (BGBl. 1987 I p. 2), and Parts Two and Five of the Regulation on the Accounting of Certain Smaller Mutual Insurance Associations within the meaning of section 53 of the Insurance Supervision Act of 27 January 1988 (Federal Law Gazette I p. 104) shall apply.

(2) Section 25 shall apply with effect from 1 July 1994.

(3) Section 54, no. 2, in conjunction with section 56 need not be applied for the first time until the financial year beginning after 31 December 1996.

(4) Section 54, no. 1, in conjunction with section 55 need not be applied for the first time until the financial year beginning after 31 December 1998.

(5) Where, for a financial year ending after 31 December 1998 but in 2001 at the latest, the annual accounts and the consolidated accounts are prepared in deutschemarks in accordance with Article 42 (1) sentence 2 of the Introductory Act of the Commercial Code, the information prescribed in Forms 1 to 4 for the balance sheet and the profit and loss account and in model Notes to the Accounts Forms 1 to 5 shall also be expressed in deutschemarks and labelled "DM" or "DM 000s". For a financial year ending no later than 31 December 1998 the present Regulation shall apply in the version in force on this date.

(6) Where insurance undertakings create a separate liability item in application of Article 43 (1) sentence 2, and Article 43 (2) of the Introductory Act of the Commercial Code, they shall show this in Form 1 as liability item Da. after "Special item with an equity portion". Where they include in their balance sheet an accounting convenience in application of Article 44 (1) sentence 1 of the Introductory Act of the Commercial Code, they shall show this in Form 1 as Asset Item Ba. after "Intangible assets".

(7) Section 61 (1), no. 4, and Part I, no. 1, as well as Part II, no. 3, subsection (1) sentence 2 of the Annex to section 29 in the version in force from 1 January 2002 shall apply for the first time to annual accounts and consolidated accounts for the financial year beginning after 31 December 2001. The ratios determined with regard to the threshold value within the meaning of Part II, no. 3, subsection (1) sentence 2 of the Annex to section 29 applicable up to 31 December 2001 may be extrapolated.

(8) Section 30 (2a) shall apply for the first time to annual accounts and consolidated accounts for the financial year ending after 22 October 2002. Insofar as the determination of the information needed for the initial calculation of provisions pursuant to section 30 (2a) would require a disproportionate amount of effort for that financial year, section 30 (2a) need not be applied for the first time until the following financial year.

(9) Part II, no. 1, subsection (3) sentence 1 and subsection (4), no. 1, letter d) and Part III, no. 2,subsection (1) sentence 1, as well as Part IV of the Annex to section 29 shall apply for the first time to annual accounts and consolidated accounts and to management reports and consolidated management reports for financial years beginning after 31 December 2004.

(10) Section 54 in the version in force from 1 January 2008 shall apply for the first time to annual accounts for the financial year beginning after 31 December 2006.

(11) Section 6 (1), sections 47, 48 and 55 (3), Forms 1 to 4 and model Notes to the Accounts Form 1 in the wording of the Act to Modernise Accounting Law (Bilanzrechtsmodernisierungsgesetz – BilMOG) of 25 May 2009 (Federal Law Gazette I p. 1102) shall apply for the first time to annual accounts and consolidated accounts for the financial year beginning after 31 December 2009. The Forms 1 to 4 and model Notes to the Accounts Form 1 in the version in force until 28 May 2009 shall apply for the last time to annual accounts and consolidated accounts for the financial year beginning before 1 January 2010. Insofar as, in other respects, reference is made in this Regulation to any provisions of the Commercial Code in the wording of the Act to Modernise Accounting Law, the transitional provisions set forth in Article 66 and Article 67 of the Introductory Act of the Commercial Code shall apply mutatis mutandis. Article 66 (3) sentence 6 of the Introductory Act of the Commercial Code shall apply mutatis mutandis.

(12) Section 28, subsections (6) to (8) shall apply for the first time to annual accounts and consolidated accounts for financial years ending after 23 December 2009. Subsection (11) sentences 1, 2 and 4 shall apply mutatis mutandis to the Forms 1 to 4 in the wording of the Regulation amending the Insurance Accounting Regulation and other Accounting Regulations (Verordnung zur Änderung der Versicherungsunternehmens-Rechnungslegungsverordnung sowie zur Änderung weiterer Rechnungslegungsverordnungen RechVersVuaÄndV) of 18 December 2009 (Federal Law Gazette I p. 3934).

Section 65
Entry into force, cessation of effect

The present Regulation shall enter into force on the day after its promulgation.

Concluding formula

The Bundesrat has given its consent.

__________________________

¹⁾ translator's note: Loans granted to cover the discount deducted from mortgage loans; mortgage redemption payments are applied first to repaying the loan, thereby extending the life of the mortgage.

²⁾ translator's note: An industry insolvency protection fund.

³⁾translator's note: An industry fund for assisting victims of traffic accidents where the other driver is unknown or uninsured.

⁴⁾ This form of insurance assumes the financial support payments that public employers (e.g. cities and municipalities) are required to provide to their employees when these are on sick leave

Annex to section 29, Forms 1 to 4, Model Notes to the Accounts Forms 1 to 6