14.08.2014
Insurance Supervision

GDV’s position on the Draft Legislation of the Insurance Supervision Act

With the the Insurance Supervision Act, the Federal Ministry of Finance has presented comprehensive draft legislation for the reform of German insurance supervision. By way of the Act, the regulations from the new European supervisory law, Solvency II, are to be implemented into German national law. In GDV’s opinion, however, some changes are still necessary in the bill (e.g. with respect to additional interest rate reserves).

The German Insurance Association (GDV) assesses the draft legislation of the Insurance Supervision Act presented by the German Federal Ministry of Finance to be a sound basis for the implementation of Solvency II in Germany. In GDV’s opinion, however, changes are still needed in some places. The German insurance supervision law has to be revised from the ground up through the requirements of the EU Solvency II Directive.

The new rules of Solvency II will be applicable as of 2016 and signify a fundamental change in the insurance supervision system. Capital adequacy requirements will be oriented in the future more on the risks assumed by undertakings. Governance and reporting requirements are also to be reformed. Due to the tight schedule, implementation will represent an enormous feat for the insurance companies. Solvency II is one of the largest reform projects.

Measures to depict long term guarantees

Therefore, the draft legislation of the Insurance Supervision Act goes beyond a simple amendment of existing regulations. Key areas of the bill comply with European requirements. GDV welcomes above all that the bill incorporates all measures for the depiction of long term guarantees. The facilitation for small and medium sized undertakings in complying with reporting duties are likewise critical. The consensus reached on an EU level will thus also be anchored in Germany.

In some passages, however, the Amendment goes beyond the European regulations, as is the case with mandatory certification of solvency requirements by independent auditors. In GDV’s view, the German Federal Government should orient itself closely on the Brussels requirements when implementing the law domestically so as to ensure the most uniform rules possible throughout Europe. Otherwise, German enterprises would be placed at a competitive disadvantage.

Link the positive effects from additional interest rate reserves more effectively to Solvency II

GDV believes that the positive effects from additional interest rate reserves should be linked more effectively to Solvency II. With these additional interest rate reserves, life insurers are already establishing additional reserves to comply with German supervisory law. These expedient additional provisions should also be taken into account under Solvency II, which will require risk based provisions as of 2016.

GDV also sees a danger of creating unnecessary bureaucracy. While Solvency II demands a reasonable separation of key functions and responsibilities in insurance companies, it also permits actuarial mathematics to be efficiently coupled with risk management, for example. German lawmakers, too, should take these practical solutions into account instead of creating unnecessary bureaucracy.

The GDV’s complete comments is available in German in the download section.

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GDV's position

on the Draft Legislation of the Insurance Supervision Act

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