Until now, the Federal Insurance Supervisory Office (Bundesaufsichtsamt für das Versicherungswesen - BAV) had rejected insurance for ransom claims in cases of kidnapping or for persons threatened with violence as an offence against public policy (Section 138(1) BGB; Art. 6 EGBGB), as it would foster the risk of kidnapping for the purpose of extortion. An offence against public policy was also assumed in cases in which insurers intended to compensate the company for the payment of "protection money" for the prevention of poisoning etc. within the context of recall and product protection insurance. This general rejection shall no longer be upheld. Particularly owing to experiences in EU/EEA matters, the Federal Insurance Supervisory Office is of the opinion that, under certain conditions, the provision of product extortion and ransom insurance does not contravene public policy. The contrary statement in the Annual Report BAV 1981 p. 31 No. 141 shall no longer apply. Providing this type of insurance in compliance with public policy is, however, only possible if account is taken of the fact that these particularly sensitive contracts require a high degree of confidentiality and must not hinder the investigative work of the police. Furthermore, collusive cooperation between perpetrators, victims, or insurance personnel must be avoided. To ensure this, it is necessary that

• the insurance is not advertised;
• these insurance policies are not offered in conjunction with other insurance policies (referred to in German as "Rundum-Versicherungsschutz", i.e. all-embracing insurance cover) or granted in combination with other insurance segments or types of insurance cover;
• the term of the insurance policies does not exceed one year, thus allowing the associated risk and the adequacy of the amount insured to be reviewed at short intervals;
• the amount insured is appropriate to the financial means of the policyholder, so as not to increase the subjective risk;
• a competent security firm provides the policyholder with preventive consultation on the basis of a security concept;
• the duty of confidentiality regarding the insurance cover is imposed on the policyholder; a maximum of three parties in his confidence should be informed of the existence of the insurance; the insurer must be informed of the names of these parties, who must be held to secrecy by the policyholder;
• a central position directly subordinate to the Management Board is solely responsible for the management and processing of claims. The contract data must be encoded as soon as they are stored or transmitted. The employment contracts of the staff responsible should include a special confidentiality clause. Audits should be undertaken by the Management Board/security firm;
• the policyholder, the confidants, and the insurer are obliged in the event of a claim to report the incident to the police and to support the law enforcement interests of the state.
  

The Federal Insurance Supervisory Office assumes that insurers will inform themselves of the particularities in relation to cases of kidnapping.

The provision of ransom/product extortion insurance policies falls under risk type 16 k of Annex A to the Insurance Supervision Law.

Please confirm receipt of this Circular.