This country-specific Q&A gives a pragmatic overview of the law and practice of insurance & reinsurance law in the Germany.
It addresses topics such as contract regulation, licensing, penalties, policyholder protection, alternative dispute resolution as well as personal insight and opinion as to the future of the insurance market over the next five years.
How is the writing of insurance contracts regulated in the jurisdiction?
Insurance supervision in Germany is mainly regulated by the Insurance Supervisory Act (Versicherungsaufsichtsgesetz, VAG). The VAG contains provisions on, inter alia, authorisation, fund requirements and governance for insurance and reinsurance undertakings. The VAG was reformed in order to transpose the Directive 2009/138/EC ("Solvency II Directive") into domestic law as of 1 January 2016. The Solvency II Directive is supplemented by the Commission Delegated Regulation (EU) 2015/35 of 10 October 2014 which is directly applicable in Germany.
In addition to the provisions of the VAG, insurance and reinsurance undertakings have to comply with a wide range of provisions in German law, e.g. under civil, company and data protection law.
The relevant regulatory body in Germany for insurance and reinsurance activities is the Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht, BaFin). It supervises all private and public insurance undertakings which carry on private insurance business within the scope of the VAG and have their registered office in Germany. In addition, there are supervisory authorities of the Federal States which are mainly responsible for supervising public insurers whose activities are restricted to the particular Federal State and private insurers who are of lesser financial and economic significance.
Insurance and reinsurance undertakings which have their registered office in another EU Member State, or in a state which is party to the Agreement on the European Economic Area (EEA), and conduct business in Germany under the European Passport or Single License Principle are mainly subject to their home country's supervision, especially in prudential matters. Additional requirements apply for establishing a branch. BaFin closely cooperates with foreign supervisory authorities, especially within the European System of Financial Supervision including the European Insurance and Occupational Pensions Authority (EIOPA).
Are types of insurers regulated differently (i.e. life companies, reinsurers)?
The VAG applies to direct life and non-life undertakings. As such, both types of insurers are regulated in the same way in principle, with special requirements applying, however, for example to life insurers given the long-term duration of liabilities for life business and to health insurers. Moreover, the VAG also regulates reinsurers and provides for special rules for insurance groups.
For reinsurance undertakings from third countries, i.e. countries that are not EU or EEA member states, specific authorisation requirements apply, as detailed above.
Are insurance brokers and other types of market intermediary subject to regulation?
German law distinguishes between insurance brokers (Versicherungsmakler) acting for and representing the interests of the policy holder and insurance agents (Versicherungsvertreter) acting on behalf of the insurer. Pursuant to Section 34d of the German Commercial Code (Gewerbeordnung, GewO), both brokers and agents in general need to obtain authorisation from the Chamber of Industry and Commerce (Industrie- und Handelskammer, IHK) of the intermediary's registered seat. BaFin does not directly supervise brokers and other intermediaries, but, due to certain statutory provisions such as Sections 23, 26 and 48 VAG, BaFin is authorised to monitor insurers' sales activities. This includes, but is not limited to, supervision of contractual agreements between insurers and insurance intermediaries.
Is authorisation or a licence required and if so, how long does it take on average to obtain such permission?
In order to carry on (re-)insurance business, an undertaking has to obtain authorisation from BaFin pursuant to Section 8 VAG. Section 9 VAG requires an undertaking to attach an operating plan to its application, disclose the purpose and structure of the business, the region in which business is to be conducted and clearly state the conditions under which the future liabilities of the undertaking are guaranteed. The operating plan has to include, inter alia, the articles of association as well as information about the classes of insurance the undertaking intends to carry on and which risks it intends to cover. Moreover, the operating plan must give evidence of the existence of own funds in the amount of the minimum guarantee fund and provide estimates for the first three financial years of commission expenses and other current operating expenses, expected premiums, the expected expenses for claims incurred and the expected liquidity situation.
If the undertaking has already obtained authorisation to carry on insurance business in another EU/EEA country, the authorisation will be valid in Germany as well as in all other EU/EEA states under the single license regime. After going through a so-called notification procedure, an undertaking may carry on insurance business outside its home country through branches or through cross-border provision of services.
As a general rule, primary insurers and reinsurers from third countries, i.e. countries that are not Member States of...