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Law on the Supervision of Insurance Undertakings (Versicherungsaufsichtsgesetz – VAG)

Short Title: Insurance Supervision Law
Fully amended version as at January 2000

Translation provided by the Bundesaufsichtsamt für das Versicherungswesen (Federal Insurance Supervisory Office) and reproduced with kind permission.


Table of Contents

I. Introductory provisions

Section 1
Section 2
Section 3
Section 4

II. Authorisation to do business

Section 5
Section 6
Section 7
Section 7a
Section 8
Section 8a
Section 9
Section 10
Section 10a
Section 11
Section 11a
Section 11b
Section 11c
Section 11d
Section 11e
Section 12
Section 12a
Section 12b
Section 12c
Section 12d
Section 12e
Section 13
Section 13a
Section 13b
Section 13c
Section 13d
Section 14
Section 14a

III. Mutual Societies

Section 15
Section 16
Section 17
Section 18
Section 19
Section 20
Section 21
Section 22
Section 23
Section 24
Section 25
Section 26
Section 27
Section 28
Section 29
Section 30
Section 31
Section 32
Section 33
Section 34
Section 35
Section 35a
Section 36
Section 36a
Section 36b
Section 37
Section 38
Section 39
Section 40
Section 41
Section 42
Section 43
Section 44
Section 44a to c
Section 45
Section 46
Section 47
Section 48
Section 49
Section 50
Section 51
Section 52
Section 53
Section 53a
Section 53b

IV. Management of insurance undertakings

1. Financial resources, investments

Section 53c
Section 53d
Section 54
Section 54a
Section 54b
Section 54c
Section 54d

1a. Accounting, auditing

Section 55
Section 55a
Section 56
Section 56a
Section 56b
Section 57
Section 58
Section 59
Section 60
Section 61 to 63
Section 64

2. Special provisions on the mathematical provisions and the Deckungsstock in life insurance

Section 65
Section 66
Section 67
Section 68 and 69
Section 70
Section 71
Section 72
Section 73
Section 74
Section 75
Section 76
Section 77
Section 78
Section 79
Section 79a
Section 80

V. Supervision of insurance undertakings

1. Duties and powers of the supervisory authorities

Section 81
Section 81a
Section 81b
Section 81c
Section 81d
Section 81e
Section 82
Section 83
Section 84
Section 85
Section 86
Section 87
Section 87a
Section 88
Section 89
Section 89a

2. Bundesaufsichtsamt für das Versicherungswesen

Section 90
Section 91
Section 92
Section 93
Section 94 to 100
Section 101
Section 102
Section 103
Section 103a

Va. Supervision of the holders of qualifying participations in insurance undertakings

Section 104

VI. Insurance undertakings which have their head office abroad

1. Undertakings whose office is not in an EC Member State or EEA Member State

Section 105
Section 106
Section 106a
Section 106b
Section 106c
Section 107
Section 108
Section 109
Section 110

2. Undertakings which have their head office in an EC Member State or another EEA Member State

Section 110a
Section 110b
Section 110c
Section 110d
Sections 110e to 110i
Section 111

VIa. Cooperation of the Bundesaufsichtsamt für das Versicherungswesen with the competent authorities of the other EC Member States or another EEA Member State in the field of direct insurance

Section 111a
Section 111b
Section 111c
Section 111d
Section 111e

VIb. Notifications to the EC Commission

Section 111 f

VII. Building societies

VIII. Transitional provisions

Section 122
Section 123
Sections 124 to 127
Section 128
Sections 129 to 133e
Section 133f
Section 133g

IX. Provisions concerning offences and administrative fines

Section 134
Sections 135 and 136
Section 137
Section 138
Section 139
Section 140
Section 141
Section 142
Section 143
Section 144
Section 144a
Section 144b
Section 145
Section 145a
Section 145b

X. Final provisions

Section 146
Sections 147 to 149
Section 150
Section 151
Section 152
Section 153
Section 154
Section 155
Section 156
Section 156a
Section 157
Section 157a
Section 158
Section 159
Section 160
Section 161

XI. Transitional provisions for the implementation of the monetary, economic and social union with the German Democratic Republic

Annex

A. Classification of risks according to classes of insurance

B. Description of authorisations granted for more than one class of insurance

C. Matching Rules

D Consumer Information

Section 1
Section 2


I. Introductory provisions

Section 1

(1) Subject to supervision under this law shall be undertakings which carry on insurance business and which do not write social insurance (insurance undertakings).

(2) For the purpose of undertakings which exclusively operate reinsurance business and which do not have the legal form of a mutual society only sections 55 to 59, 83, 89a, 93 below and sections 101 to 103, 137, 138 and 150 below shall apply; section 2 below shall apply accordingly. For the purpose of undertakings under public law of the civil service or the churches which exclusively provide for old age, invalidity or survivor’s benefits only section 13 (1) below, sections 14, 54 (2) below, first sentence, (a), and second sentence, section 55 (1) and (2) below, section 55a below and sections 81, 81a, 82, 83, 86, 88, 89, 89a and 93 below shall apply; for the purpose of insurance undertakings of this kind established under state (Land) law and subject to state supervision, the law of the state may provide otherwise. The Federal Finance Minister shall have the power to exempt from supervision under this law by way of an ordinance not subject to approval by the Bundesrat insurance undertakings under public law within the meaning of the second sentence which are not subject to state supervision if taking into account the legal requirements for the establishment of such undertakings or the agreements existing between the undertakings and their operators it is not deemed necessary to supervise such undertakings for the purpose of safeguarding the interests of the insured.

(3) Not subject to supervision under this law shall be

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

1a. relief funds established by guilds under the Handwerksordnung (Handicrafts Regulation Law);

2. alliances having legal capacity of chambers of industry and commerce and trade associations if the purpose of such alliances is to balance for their members the burden of benefit payments, to which they have committed themselves, by way of assessment and if such alliances have been granted their legal capacity by the government;

3. alliances not having legal capacity of local governments and associations of local governments if their purpose is to balance by way of assessment losses as described in the following resulting from risks taken by their members and by undertakings operated to comply with the duties of public authorities and in which one or several members or – in the case of b) – other regional and/or local authorities hold a share of at least 50 per cent, such as

a) losses for which the members or their staff may be held responsible by third parties in compliance with legal liability provisions,

b) losses arising from keeping motor vehicles,

c) benefits paid under the local government officials’ accident compensation scheme;

4. corporations and public institutions where insurance relationships are established by act of law, or which have to be entered into subject to a legal requirement;

5. undertakings operating within narrow territorial limits which grant benefits in the case of the occurrence of an uncertain event against payment of a lump sum provided such benefits do not consist in cash benefits, taking over of the costs or indemnity against liability with respect to third parties.

(4) Business listed under classes 23 and 24 of part A of the annex shall not be covered by the scope of application of this law unless it is carried on by insurance undertakings which have been authorised to operate the classes of insurance under 19 to 21 of part A of the annex; in this case such business shall be treated in the same way as life insurance business. Capital redemption operations (class 23 of part A of the annex) shall be any business operations where period of time and amount of the single or periodical premiums fixed in advance and of the liabilities have been determined in accordance with an actuarial method. Business for the purpose of class 24 of part A of the annex shall be the management of schemes which pay benefits on death or on reaching a certain age or in the case of impairment of the earning capacity, including the investment and management of the assets. For the purpose of business in accordance with the third sentence the insurance undertakings may in connection with such management also give guarantees with respect to the conservation of the managed capital and a minimum interest rate. Death benefit funds may not operate business specified in the first to fourth sentences, while pension funds may not operate business specified in the first, second and fourth sentences.

Section 2

The supervisory authority shall decide whether an undertaking is subject to supervision in accordance with section 1 above; this decision is binding on the administrative authorities. A decision made by a court or an administrative authority before 1st April, 1931, shall not be deemed to conflict with a decision made by the supervisory authority.

Section 3

If rules relating to the board of directors or the supervisory board have been stipulated in this law and if insurance undertakings under public law do not have bodies so designated the relevant executive body shall take the place of the board of directors and the relevant supervisory body shall take the place of the supervisory board.

Section 4

(repealed)

II. Authorisation to do business

Section 5

(1) Insurance undertakings may not carry on business unless authorised to do so by the supervisory authority.

(2) The operating plan shall be submitted together with the application for authorisation; it shall disclose the purpose and organisation of the undertaking, the area of the intended business operations and in particular clearly state the conditions which shall secure that the future liabilities of the undertaking can permanently be met.

(3) As part of the operating plan shall be submitted

1. the articles of association in so far as they do not refer to general insurance policy conditions,

2. information about the classes of insurance it intends to carry on and which risks of a class of insurance it intends to cover including designation and object of the insurance coverage; in the case of pension and death benefit funds the general insurance policy conditions and documents such as in particular the rates and principles for the calculation of the premiums and mathematical provisions including the calculation bases and mathematical formulas used,

3. affiliation agreements as specified under sections 291 and 292 of the Aktiengesetz (Public Limited Companies Law)

4. agreements for the purpose of permanently transferring distribution, management of the portfolio of insurance contracts, handling of claims, accounting, investments or asset management of an insurance undertaking wholly or an essential part of it to another undertaking (outsourcing).

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

(5) In addition, the following shall be submitted

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

1a. as regards health insurance within the meaning of section 12 (1) below the principles for the calculation of the premiums and mathematical provisions including the calculation bases and mathematical formulas used,

2. information about the intended reinsurance,

3. an estimate of the expenses for setting up the administrative services and the organisation for securing business; the undertaking shall prove that it disposes of the necessary funds for this purpose (organisation fund),

4. if an application is filed for authorisation to carry on insurance class 18 of part A of the annex information about the means of which the undertaking disposes to provide the promised assistance,

5. as regards the managers and directors the information necessary to judge their good repute and qualification (section 7a (1) below),

6. if any qualifying participations are held in an insurance undertaking (section 7a (2) below, third sentence)

a) disclosure of the holders and amounts of such participations,

b) information about the facts necessary to judge the requirements under section 7a (2) below, first and second sentences,

c) if such holders have to establish annual accounts, the annual accounts of the last three financial years including the audit reports of independent auditors if such reports have to be established, and

d) if such holders belong to a group of undertakings, information about the structure of the group and if annual accounts have to be established the consolidated accounts of the last three financial years including the audit reports of independent auditors if such reports have to be established,

6a. information about close relations existing between the insurance undertaking and another natural or legal person (section 8 (1), fourth sentence),

7. as regards the responsible actuary information necessary to judge his good repute and qualification (section 11a (1) below, sections 11e and 12 (2) below, second sentence).

(6) The Federal Finance Ministry shall have the power to lay down, by way of ordinance, provisions with respect to the nature, extent, and date of submission of the information to be provided in accordance with subsection 5 (5) and (6) above, section 13d (1) (2) (4) and (5) below to the extent that this is required for the supervisory authority to fulfil its duties. The above power may be transferred by ordinance to the BAV which shall stipulate the regulations in consultation with the supervisory authorities of the Länder (states).

Section 6

(1) The authorisation shall not be granted for a limited period of time unless otherwise provided for in the operating plan. It shall be granted, notwithstanding any limitation of the application, for the territory of all Member States of the European Community (EC) and all the other Member States of the European Economic Area (EEA) as provided for in the Anpassungsprotokoll (Adjustment Protocol) of 17th March, 1993 (BGBl. (Federal Law Gazette) 1993 II, p. 1294).

(2) The authorisation shall be granted for each class of insurance separately. It shall cover the entire class of insurance unless the undertaking intends to cover only part of the risks of such class of insurance in accordance with its operating plan.

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

(4) The authorisation granted for one or several classes of insurance shall also include coverage of additional risks of other classes of insurance if these risks relate to the risk of a class of insurance operated, concern the same object and are covered by the same contract. Risks of classes 14, 15 and 17 of part A of the annex shall not be deemed to be additional risks for the purpose of an authorisation granted for other classes of insurance. Risks of class 17 of part A of the annex which meet the requirements of the first sentence shall be covered by an authorisation granted for other classes of insurance if they refer to disputes or claims arising from the operation of ships on sea or relating to such operation or if the authorisation is granted for carrying on class 18 (a) of part A of the annex.

Section 7

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

(1a) The head office must be located within the country.

(2) The insurance undertakings shall be permitted to carry on in addition to insurance business only such other business as is directly related to it. Such a relationship shall be deemed to exist if in the case of dealings in futures, options and other financial instruments these are to serve as security against the risk of changes in market prices and interest rates of existing assets or of future purchases of securities or if any additional return is to be realised on existing securities without this resulting in any insufficient representation of the restricted assets when delivery commitments are met.

Section 7a

(1) The directors and managers of insurance undertakings shall be of good repute and professionally qualified. A prerequisite of professional qualification shall be sufficient theoretical and practical knowledge of insurance business and management experience. This shall be deemed to be the case if the director or manager can furnish proof of having held a managerial position with an insurance undertaking of comparable size and type of business for at least three years. Directors and managers shall be the natural persons who have been appointed in accordance with the law or articles of association or as authorised agents of a branch in an EC Member State or another EEA Member State to manage the business affairs and represent the insurance undertaking.

(2) The holders of a qualified participation in the insurance undertaking shall meet the requirements for the purpose of a sound and prudent management of the insurance undertaking and in particular be of good repute. If the participation is held by legal persons or partnerships the same shall apply to the natural persons who have been appointed in accordance with the law or articles of association to manage the business affairs and represent the insurance undertaking and the personally liable partners. A qualified participation shall be deemed to exist if either directly or indirectly through one or several subsidiaries at least 10 per cent of the nominal capital or voting rights of an insurance undertaking are held, or if at least 10 per cent of the members funds of a mutual society (section 22 below) have been subscribed, or if even though this percentage is not reached a decisive influence can be exercised on the management. As regards computation of the share of the voting rights, article 7, first sentence, of Council directive 88/627/EEC of 12th December 1988, on the information to be disclosed for the purchase and sale of a qualified participation in a listed undertaking (OJ of the EC No. L 348, p. 62) shall apply. Full allowance shall be made of the indirectly held participations for the purpose of the undertaking holding the indirect participations. Subsidiaries shall be deemed to be undertakings which are subsidiaries within the meaning of section 290 of the Handelsgesetzbuch (Commercial Code) irrespective of their legal form and head office; every subsidiary of a subsidiary shall also be deemed to be a subsidiary of the parent undertaking which exercises common control. Parent undertakings shall be deemed to be undertakings which are parent undertakings within the meaning of section 290 of the Handelsgesetzbuch irrespective of their legal form and head office.

Section 8

(1) Authorisation shall not be granted if

1. there are facts from which it may be concluded that the directors and managers do not meet the requirements under section 7a (1) above,

2. there are facts from which it may be concluded that the requirements of section 7a (2) above, first and second sentences, have not been met,

3. it has become apparent from the operating plan and the documents submitted in accordance with section 5 (4), third and fourth sentences, and subsection 5 above that the interests of the insured are not adequately safeguarded or the liabilities under the insurance contracts cannot be sufficiently deemed to be permanently fulfilled.

Authorisation may be refused if the insurance undertaking is affiliated to the holder of a qualified participation (section 7a (2) above, third sentence) and if because of this affiliation (section 15 of the Aktiengesetz) or the structure of the affiliation of the holder of the qualified participation to other undertakings does not permit any effective supervision of the insurance undertaking. The same shall apply if effective supervision of the insurance undertaking is not possible due to close links with another natural or legal person or due to the laws, regulations and administrative provisions of a non-EEA Member State applying to such a person. Close links shall be deemed to exist if

1. the insurance undertaking and a natural or another legal person are linked by virtue of a participation of at least 20 per cent of the nominal capital, voting rights or members funds, held either directly or indirectly through one or several subsidiaries;

2. the insurance undertaking and another undertaking are parent undertaking and subsidiary according to section 7a (2), sixth and seventh sentences, or if the insurance undertaking is linked in a similar way to a natural or another legal person.

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

(1a) The authorisation to carry on life insurance (classes 19 to 24 of part A of the annex) and the authorisation to carry on other classes of insurance shall be mutually exclusive. The same shall apply to the granting of an authorisation to carry on health insurance within the meaning of section 12 (1) below and of an authorisation to carry on other classes of insurance.

(2) An authorisation may be granted subject to certain requirements having been met.

(3) The supervisory authority shall defer decision on the application for authorisation or limit the authorisation following a decision by the Commission or Council of the European Communities which was taken in pursuance of article 29b (4) of the first Council directive 73/239/EEC of 24th July, 1973, on the coordination of laws, regulations and administrative provisions relating to the taking-up and pursuit of the business of direct insurance other than life assurance (OJ of the EC No. L 228, p. 3), or article 32b (4) of the first Council directive 79/267/EEC of 5th March, 1979, on the coordination of laws, regulations and administrative provisions relating to the taking-up and pursuit of the business of direct life assurance (OJ of the EC No. L 63, p. 1). Such deferral or limitation shall not exceed three months from the date on which such decision was taken. The first and second sentences shall also be applicable to proposals for authorisation submitted after the date when the decision was taken. If the Council of the European Communities decides to prolong the period of time according to the second sentence the supervisory authority shall observe such prolongation.

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

Section 8a

(1) An insurance undertaking which carries on legal expenses insurance together with other classes of insurance shall transfer the handling of claims under legal expenses insurance to another undertaking whose legal form is as specified under section 7 (1) above or that of another corporation (loss adjustment firm). Any such transfer shall be deemed to be an act of outsourcing.

(2) The loss adjustment firm shall not carry on any classes of insurance other than legal expenses insurance and not handle any claims in other classes of insurance.

(3) Section 7a (1) above shall apply accordingly to the directors and managers of the loss adjustment firm. They shall not carry out activities for an insurance undertaking which operates other classes of insurance in addition to legal expenses insurance. Employees entrusted with the handling of claims shall not be permitted to carry out any similar activity for such an insurance undertaking.

(4) The members of the board of directors and the employees of an insurance undertaking pursuant to subsection 1 above shall not give any instructions to the loss adjustment firm with respect to the handling of individual claims. The directors and managers and the employees of the loss adjustment firm shall not supply any such insurance undertaking with information which could lead to clashes of interests to the disadvantage of the insured.

(5) Subsections 1 to 4 above shall not apply to legal expenses insurance if it concerns disputes or claims resulting from the operation of ships on sea or if it is related to such operation.

Section 9

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

Section 10

(1) The general insurance policy conditions shall contain full information about:-

1. the events upon the occurrence of which the insurer shall be liable to pay benefits and the cases where for special reasons this liability shall be excluded or suspended;

2. the nature and size of the benefits of the insurer and when they fall due;

3. the date when the premium falls due and the legal consequences of a delay in payment;

4. the rights of the applicant and the insurer to influence the contents of the contract and the obligations and duties to disclose before and after loss occurrence;

5. the forfeiture of an insurance claim if periods stipulated are not observed;

6. the domestic jurisdictions;

7. the principles and standards according to which the insured participate in the surplus.

(2) The provisions of subsection 1 above may be incorporated in the articles of association of mutual societies and insurance undertakings under public law instead of the general insurance policy conditions.

(3) Subsection 1 above shall not be applicable to reinsurance and the large risks mentioned in article 10 (1) of the Einführungsgesetz zu dem Gesetz über den Versicherungsvertrag (Introductory Law of the Insurance Contract Law).

Section 10a

(1) The insurance undertakings shall ensure that the policyholder, if he is a natural person, is informed by way of information given to the consumer about the essential facts and rights under the insurance contract before the insurance contract is concluded and during the term of the contract in accordance with part D of the annex. In the case of large risks pursuant to article 10 (1) of the Einführungsgesetz zu dem Gesetz über den Versicherungsvertrag it shall be sufficient to mention the applicable law and the competent supervisory authority.

(1a) Prior to the conclusion of a private health insurance contract, the person interested in taking out the insurance shall confirm receipt of an official information sheet issued by the Federal Insurance Supervisory Office and explaining the different principles on which the public and private health insurance systems are based.

(2) The consumer information shall be clearly listed in writing and provided in unambiguous and comprehensible German language or native language of the policyholder.

(3) The number of proposals for the conclusion of legally independent insurance contracts covered by any proposal form shall only be such as not to affect clarity, legibility and comprehensibility. The applicant shall be informed in writing emphasising, in particular, the legal independence of the contracts for which proposals have been submitted including the relevant insurance policy conditions, and the periods of validity of the proposals and the terms of the contracts.

Section 11

(1) Premiums in life insurance shall be sufficient on reasonable actuarial assumptions for the insurance undertakings to meet all their liabilities, and, in particular to establish adequate mathematical provisions for the individual contracts. For this purpose, the financial situation of an insurance undertaking may be taken into account, without any systematic and permanent use of input from resources other than premiums being permitted.

(2) If the prerequisites are the same, the same principles shall be used to calculate both premiums and benefits.

Section 11a

(1) Every life insurance undertaking shall appoint a responsible actuary. He shall be of good repute and professionally qualified. To meet the qualification requirement the actuary shall dispose of adequate knowledge in the field of actuarial theory and professional experience. He shall be deemed to dispose of adequate professional experience if he can furnish proof of having carried on an activity as actuary for at least three years.

(2) Before appointing the envisaged responsible actuary the insurance undertaking shall inform the supervisory authority and provide it with the necessary information to judge his good repute and professional qualification in accordance with subsection 1 above. If there is evidence of the envisaged responsible actuary not meeting the good-repute or qualification requirement, the supervisory authority may require that another person be appointed. If after the appointment there should be evidence of certain circumstances which would have prevented his appointment or if the responsible actuary does not properly fulfil his duties set out in this law, the supervisory authority may require that another responsible actuary be appointed.

If in the cases mentioned in the second and third sentences also the envisaged or the freshly appointed responsible actuary does not meet the requirements or if no fresh appointment is made, the supervisory authority may appoint a responsible actuary itself. Whenever the appointment of the responsible actuary comes to an end, the supervisory authority shall be informed without delay.

(3) The duties of the responsible actuary shall be as follows:-

1. He shall ensure that both the premiums and mathematical provisions are calculated in accordance with the principles of section 11 above and the ordinances issued pursuant to section 65 (1) below and section 341f of the Handelsgesetzbuch. He shall investigate the financial situation of the undertaking in particular as to whether the undertaking is in a position to meet its liabilities under the insurance contracts at any time and whether it disposes of adequate resources in the amount of the solvency margin.

2. Other than in the case of a kleinerer Verein (mutual society with limited activity) (section 53 (1) below, first sentence) he shall certify at the end of the balance sheet that the mathematical provision has been established in accordance with section 341f of the Handelsgesetzbuch and the ordinances issued in accordance with section 65 (1) below (actuarial certification); section 341k of the Handelsgesetzbuch relating to auditing shall not be affected. He shall specify in a report to the board of directors of the undertaking the underlying calculation bases and any additional assumptions for his certification.

3. As soon as he realises on performing his legal duties that he will possibly not be able to grant a certification in accordance with paragraph 2 above or be able to grant only a qualified certification, he shall inform the board of directors and, if the board does not take any remedial action immediately, the supervisory authority without delay.

4. For the purpose of insurance contracts with profit participation he shall submit to the board of directors proposals for adequate participation in such profits.

(4) The board of directors of the undertaking shall be obliged

1. to make available to the responsible actuary all the necessary information which will enable him to fulfil his duties properly in pursuance of subsection 3 above, and

2. to deposit with the supervisory authority the report with respect to actuarial certification in accordance with subsection 3 (2) above.

(5) Death benefit and pension funds which do not meet the requirement of section 156a (3) below, fifth sentence, shall not be subject to subsection 3 (1), first sentence and paragraph 2, second sentence, and subsection 4 (2) above. The obligation to investigate pursuant to subsection 3 (1) above, second sentence, shall also apply in these cases. Subsection 3 (2) above, first sentence, shall apply subject to the requirement that the certification mentioned is replaced by a certification to the effect that the mathematical provision has been established in compliance with the approved operating plan (actuarial certification).

(6) The Federal Finance Ministry shall have the power to lay down by ordinance the wording of the actuarial certificate and any further details regarding the contents and scope of the report to which subsection 3 (2) and subsection 5 above relate and the period available for submission of the report. This power may be transferred by ordinance to the BAV which shall stipulate regulations in consultation with the supervisory authorities of the states (Länder).

Section 11b

If the insurance policy conditions of life insurance contracts concluded after 28th July, 1994, permit to change the premiums and the provisions concerning profit participation of existing insurance contracts, any such changes may not become effective unless they have been approved by an independent trustee. Section 12b (3) and (4) below and section 12d (2) below shall apply to the trustee accordingly. Approval by an independent trustee shall not be required if changes in accordance with the first sentence have to be approved by the supervisory authority.

Section 11c

As regards life insurance contracts concluded before 29th July, 1994, (existing contracts) the operating plan approved by the supervisory authority before that date shall remain fully applicable. Section 13 (1) below in conjunction with section 8 (1), first sentence, paragraph 3 above shall apply to changes of the operating plan. Section 11a (1) (2) and (4) above shall apply accordingly and subsection 3 above subject to the requirement that the mathematical provision has to be calculated in accordance with the applicable operating plan.

Section 11d

If accident insurance undertakings write insurances with premium refunds sections 11 to 11c above shall apply accordingly

Section 11e

Für die Berechnung der Deckungsrückstellung von Renten in der Allgemeinen Haftpflichtversicherung, der Kraftfahrzeug-Haftpflichtversicherung, der Kraftfahrt-Unfallversicherung sowie der Allgemeinen Unfallversicherung ohne Rückgewähr der Prämie gilt § 11a entsprechend.

Section 12

(1) To the extent that health insurance is appropriate to be a substitute for compulsory health insurance (substitutive health insurance) wholly or partly it shall be treated in the same way as life insurance within the country, whereby

1. the premiums shall be calculated in accordance with actuarial principles on the basis of probability tables and other pertinent statistical data taking into account, in particular, any relevant assumptions with respect to the invalidity and sickness risk, mortality, dependence of the risk on age and sex and probability of cancellation and taking into account safety loadings and other loadings and a maximum technical interest rate of 3.5 per cent,

2. the old age provision shall be established in accordance with section 341f of the Handelsgesetzbuch,

3. in the insurance contract the right of the insurance undertaking to a contractual or statutory notice of termination, in hospital daily allowance insurance from the fourth year of insurance at the latest, shall be excluded and a premium increase shall be permitted,

4. the policyholder shall be granted in the insurance contract the right to modify the contract by choosing other rates with comparable coverage while the rights and old age provision entitlements acquired so far under the contract shall be maintained.

(2) Insurance undertakings writing substitutive health insurance shall appoint a responsible actuary. Section 11a (1), second to fourth sentences, and subsection 2 above shall apply accordingly.

(3) The duties of the responsible actuary shall be as follows:-

1. He shall ensure that in calculating both the premiums and mathematical provisions in particular old age provision the actuarial methods (subsection 1 (1) and (2) above) are followed and the regulations of the ordinance issued in pursuance of section 12c below are observed. He shall investigate the financial situation of the undertaking in particular as to whether the undertaking is in a position to meet its liabilities under the insurance contracts at any time and whether it disposes of adequate resources in the amount of the solvency margin.

2. He shall certify at the end of the balance sheet that the old age provision has been calculated in accordance with paragraph 1 above (actuarial certification). This does not apply to kleinere Vereine (section 53 (1) below, first sentence).

Section 11a (3) (3) and subsection 4 (1) above shall apply accordingly.

(4) As regards substitutive health insurance section 11 (2) above shall apply accordingly. The premiums for new business shall not be lower than the premiums for the insured of the same age under the existing portfolio of insurance contracts leaving out of account their old age provision.

(4a) In substitutive medical expenses insurance, at the latest at the beginning of the calendar year following the year of the insured’s attaining the age of 21 and ending in the calendar year of the insured person’s attaining the age of 60, a loading of 10 per cent of the annual zillmered gross premium shall be charged to the insured, allocated annually and directly to the old-age provision pursuant to section 341 f (3) of the Handelsgesetzbuch, and used for the purpose of premium reduction in old age in accordance with section 12a (2a) below. The first sentence above shall not apply to health insurance involving agreed contract terms covering the insured during periods of training or education, stays abroad, or travels, and to tariffs terminating at the latest upon the insured’s attaining the age of 65.

(5) If the non-substitutive health insurance is treated in the same way as life insurance subsections 1 to 4 above shall apply accordingly.

Section 12a

In medical expenses insurance and voluntary nursing care insurance (nursing care medical expenses and nursing care daily benefit insurance) operated in accordance with the technical principles of life insurance, the insurance undertaking shall directly credit annually to the insured investment income attributable to the sum of the respective positive old-age provision of the insurances concerned available at the end of the preceding financial year. The amount credited shall be 90 per cent of the average yield exceeding the yield obtained by applying the technical interest rate (excess yield from interest payments).

(2) The full share of the amount determined in accordance with subsection 1 above which is attributable to the share of the old-age provision that has been accumulated from the loading shall be credited annually to the insured who paid the loading under section 12 (4a) above, until the end of the financial year of their attaining the age of 65. Of the remaining amount, 50 per cent shall be credited directly to the old-age provision of all insured persons. The percentage rate referred to in the second sentence above shall increase annually by two per cent, from the financial year of the insurance undertaking beginning in 2001, until it attains 100 per cent.

(2a) The amounts referred to in subsection 2 above shall be used, from the moment the insured attains the age of 65, to fund, for an unlimited period, the additional premiums arising from premium increases, or a portion of the additional premiums, insofar as the available funds are not sufficient to fund the additional premiums fully. Amounts which have not been used up shall be used for a premium reduction from the moment the insured attains the age of 80. Any subsequent allocations shall be used for an immediate premium reduction. In voluntary nursing care daily benefit insurance the insurance policy conditions may provide for increased benefits instead of a premium reduction.

(3) The share of the investment income determined in accordance with subsection 1 above which remains after deduction of the amounts used in accordance with subsection 2 above shall be set aside in favour of the insured who, by the balance sheet date, have attained the age of 65 for a profit-unrelated premium refund and be used within a period of three years to avoid or limit premium increases, or to reduce premiums. In derogation of the first sentence above, 25 per cent may be used, until the balance-sheet date following January 1, 2010, also for insured persons who have attained the age of 55 but not yet the age of 65. The premium reduction as per the first sentence above may be limited to prevent that the premium of the insured will fall below the initial premium paid at the age at entry; the portion of the amount credited which has not been used up shall be credited additionally in accordance with subsection 2 above.

Section 12b

(1) As regards health insurance treated in the same way as life insurance premium adjustments in compliance with a premium adjustment clause shall not be made unless an independent trustee has approved of the adjustment. The trustee shall verify whether the premium has been calculated in accordance with the existing legal requirements. For this purpose, he shall be made available all technical calculation bases required to verify the premium adjustments including the necessary supporting documents and data. The technical calculation bases shall comprise all the principles for the calculation of the premiums and old age provision including the calculation bases and mathematical formulas used. Approval shall be granted if the requirements of the second sentence have been met.

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

1. The date and the amount of the withdrawal and the use of funds from the provision for profit-unrelated premium refunds to the extent that they are to be used in accordance with section 12 a (3);

2. The use of the funds from the provision for profit-related refunds.

Where the first sentence, nos. 1 and 2, above applies, the trustee shall see to it that the conditions provided in the articles of association and the insurance policy conditions are met and that the interests of the insured are sufficiently safeguarded. In respect of the use of funds to limit premium increases, he shall in particular see to an appropriate distribution on the groups of the insured who paid the loading to the premium under section 12 (4a) and those who did not, and he shall sufficiently take into account the aspect of reasonableness of the premium increases in per cent and in absolute figures for the older insured

(2) The insurance undertaking shall for every rate calculated in the same way as in life insurance compare at least annually the required insurance benefits with the calculated insurance benefits. If the comparison to be submitted to the supervisory authority and the trustee shows a deviation of more than 10 per cent for a certain rate, provided the general insurance policy conditions do not require a lower percentage, the undertaking shall examine all premiums under this rate and, if the deviation may be considered not to be only temporary, adjust them with the approval of the trustee. There shall be no adjustment if the insurance benefits were insufficient when they were calculated for the first time, or recalculated, and a prudent and conscientious actuary should have recognised this. In this connection the fixed amount of any retention may also be adjusted and any agreed premium loading changed accordingly if this has been stipulated in the contract. If in the opinion of the trustee premium increases or reductions are necessary for a rate wholly or partly and if no agreement can be reached with the undertaking the trustee shall inform the supervisory authority without delay.

(3) Only persons shall be appointed trustee who are of good repute and professionally qualified and not linked with the insurance undertaking and who in particular do not have concluded with the insurance undertaking or any associated undertaking an employment contract or other service contract. To meet the qualification requirement the trustee shall dispose of adequate knowledge in the field of premium calculation in health insurance.

(4) Before appointing the designated trustee the supervisory authority shall be informed and provided with the necessary information to judge the requirements in accordance with subsection 3 above. If there is evidence of the designated trustee not meeting the good- repute or professional qualification requirement, the supervisory authority may require that another person be appointed. If after the appointment there should be evidence of certain circumstances which would have prevented his being appointed in accordance with subsection 3 above or if the trustee does not properly fulfil his duties set out in this law, in particular if he approves of any premium adjustment which does not comply with the legal requirements, the supervisory authority may require that another trustee be appointed. If in the cases mentioned in the second and third sentences also the designated or the freshly appointed trustee does not meet the requirements or if no fresh appointment is made, the supervisory authority itself may appoint a trustee.

Section 12c

(1) The Federal Finance Ministry shall have the power to lay down by ordinance for health insurance treated in the same way as life insurance

1. the actuarial methods for the calculation of the premiums including premium adjustments and the mathematical provisions mainly the old age provision taking into account in particular the relevant assumptions with regard to the invalidity and sickness risk, mortality, dependence of the risk on age and sex, and probability of cancellation as well as the amount of the safety loading and interest rate and the principles for the assessment of the other loadings,

2. more detailed provisions with regard to the similarity of the insurance coverage and allowance for the acquired rights and old age provision entitlements in case of change to a different rate in accordance with section 12 (1) (4) above,

3. provisions on how to determine the excess yield from interest payments in accordance with section 12a (1) above, how to distribute the amounts among the entitled insured in accordance with section 12a (2) and (3) above, and how to determine the initial premium at the age at entry,

4. the procedure to compare the required insurance benefits with the calculated insurance benefits in accordance with section 12b (2) above, first and second sentences, and the period available for submitting this comparison to the supervisory authority and the trustee.

This power may be transferred by ordinance to the BAV which shall stipulate regulations in consultation with the supervisory authorities of the states (Länder).

(2) Ordinances in accordance with subsection 1, first sentence, paragraph 1 above shall be issued in agreement with the Federal Ministry of Justice. This shall also apply to ordinances in accordance with subsection 1 above, second sentence, if they serve to transfer the power to issue ordinances in accordance with subsection 1, first sentence, paragraph 1 above.

Section 12d

(1) If with regard to health insurance treated in the same way as life insurance the premiums for insurance contracts concluded before 29th July, 1994, may be adjusted under an adjustment clause with the approval of the supervisory authority, such approval by the supervisory authority shall be replaced by the consent of the trustee (section 12b (1) and (2) above).

(2) If the insurance undertaking does not appoint for health insurance treated in the same way as life insurance a trustee who meets the requirements under section 12b (3) above, the supervisory authority may assume the duties of the trustee at the expense of the insurance undertaking. The first sentence shall no longer be applicable if a sufficient number of trustees who meet the requirements under section 12b (3) above offer their services within the country. The Federal Finance Minister shall have the power to determine by way of an ordinance not requiring approval by the Bundesrat when the requirements of the second sentence shall be deemed to have been met.

Section 12e

(1)As regards insurance contracts concluded before January 1, 2000, section 12 (4a) shall apply subject to the requirement that

1. the loading shall be charged for the first time on the 1st of January of the calendar year which follows the 1st of January 2000;

2. in the first year, the loading shall be two per cent of the gross premium and increase on each 1st of January of the following years by two per cent to an amount not exceeding 10 per cent of the gross premium, unless it is dropped because of the insured’s attaining the age of 60;

3. the insurance undertaking is obliged of inform the policyholder in good time before the loading is charged for the first time of its amount and the annual increases;

4. the loading shall only be charged if the policyholder does not object in writing within three months after receipt of the information as per no. 3 above.

Section 13

(1) Any change in the operating plan shall not become effective until it has been approved by the supervisory authority. The first sentence shall not apply to amendments to the articles of association whose purpose it is to increase capital. Section 8 above shall apply accordingly.

(1a) Subsection 1 above shall not apply to outsourcing contracts (section 5 (3) (4) above). Any such contracts concluded with insurance undertakings subject to supervision under this law shall not become effective until they have been submitted to the supervisory authority. Any such contracts concluded with other undertakings shall not become effective until three months have elapsed from their deposit with the supervisory authority provided the latter did not object on the grounds mentioned in section 8 (1) above. The supervisory authority shall be authorised to extend this period to six months where this is justified by circumstances. This period of time shall end earlier as soon as the supervisory authority finds that the contracts are unobjectionable. The second to fifth sentences shall not apply if only the remuneration has been changed. Changes of remuneration in contracts with affiliated undertakings (section 15 of the Aktiengesetz) and undertakings treated like them in accordance with section 53d (3) below shall not become effective until the amended contract has been deposited with the supervisory authority. Section 53d below shall not be affected.

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

(3) If business operations are to be extended to an area not located in the EC Member States and other EEA Member States proof shall be given that also after the intended extension of its business operations the undertaking will meet the financial resources requirements of the EC Member States and the other EEA Member States and that if it establishes a branch in an area not located in the EC Member States and the other EEA Member States the undertaking has been granted the authorisation to carry on business required there; in addition, it shall specify which classes and types of insurance it intends to operate.

Section 13a

(1) The insurance undertaking shall be permitted to operate direct insurance business on an establishment or services basis in the other EC Member States and the other EEA Member States according to sections 13b and 13c below. A branch shall also be deemed to exist if insurance business is operated through an independent person though permanently in charge of such business from a facility in such other EC or EEA Member State. The first and second sentences shall not apply to pension and death benefit funds; section 13 (3) above shall apply to them subject to the requirement that it shall be applicable to any activity carried out abroad.

(2) Provision of services within the meaning of this law shall mean that the insurance undertaking whose head office is in an EC or EEA Member State covers from its head office or its branch in an EC or EEA Member State by way of direct insurance risks located in another EC or EEA Member State without the undertaking making use there of a branch. An EC or EEA Member State in which the risk is located shall mean

1. as regards the insurance of risks with respect to immovables in particular buildings and plants and equipment installed there covered by the same contract, the EC or EEA Member State where these are located,

2. as regards the insurance of risks with respect to vehicles of any kind to be entered into an official or officially recognised register and provided with a distinguishing number in an EC or EEA Member State, such EC or EEA Member State,

3. as regards the insurance of travel and holiday risks in insurance contracts of a maximum term of four months, the EC or EEA Member State in which the applicant performed the legal acts required for the conclusion of the contract,

4. in all the other cases,

a) if the policyholder is a natural person, the EC or EEA Member State in which he has his habitual residence,

b) if the policyholder is not a natural person, the EC or EEA Member State in which the undertaking, facility or relevant installation is located to which the contract refers.

Section 13b

(1) The insurance undertaking shall notify to the supervisory authority the intended establishment of a branch and mention the relevant EC or EEA Member State. This notification shall include:-

1. the information and estimations under section 5 (3) (2), subsection 4, third and fourth sentences, and subsection 5 (3) and (4) above; if health insurance is to be written within the meaning of article 54 (2) of the Council directive 92/49/EEC of 18th June, 1992, on the coordination of laws, regulations and administrative provisions for direct insurance (other than life insurance) and amendment of directives 73/239/EEC and 88/357/EEC (third non-life directive) (OJ of the EC No. L 228, p. 1), additionally the information in accordance with section 5 (5) (1a) above,

2. information about the organisational structure,

3. the name of the designated authorised agent who shall possess sufficient powers to bind the undertaking in relation to third parties and to represent it in relations with the authorities and courts of the other EC or EEA Member State,

4. the prospective address which shall also be the business address of the authorised agent,

5. if the risks mentioned in part A (10) (a) of the annex are to be covered through the branch, a statement to the effect that the undertaking has become member of the national indemnity fund for the victims of road accidents caused by uninsured or unidentified motor vehicles and of the national bureau in the other EC or EEA Member State.

(2) The supervisory authority shall examine for the purpose of the above within a period of three months of receipt of the documents mentioned under subsection 1 above, second sentence, in addition to the lawfulness, the adequacy of the administrative structures and the financial situation of the undertaking and if the authorised agent and responsible managers or directors of the branch meet the requirements of section 7a (1) above. If no objection can be made it shall send, before the above period has expired, to the supervisory authority of the other EC or EEA Member State

1. these documents, and

2. a certificate to the effect that the undertaking disposes of own funds in the amount of the solvency margin or of the minimum guarantee fund required for the classes of insurance operated, whichever is the greater, and inform the undertaking accordingly. In the contrary case it shall inform the undertaking before the above period has expired that approval for the establishment of a branch will not be granted and give the grounds for not granting it.

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

(4) The insurance undertaking shall notify to the supervisory authority any changes in the information provided in accordance with subsection 1, second sentence, paragraphs 1 to 4 above not later than one month before it is intended to put such changes into effect. Otherwise, subsection 2 above shall apply accordingly.

Section 13c

(1) The insurance undertaking shall notify to the supervisory authority that it intends to carry on business under the freedom of services provision mentioning the relevant EC or EEA Member State. It shall also state which classes of insurance it intends to operate and which risks of an insurance class it intends to cover there; if health insurance is to be written within the meaning of article 54 (2) of the third non-life directive the information in accordance with section 5 (5) (1a) above shall additionally be provided. As regards the coverage of risks pursuant to part A (10) (a) of the annex the notification shall to the extent that this is required in compliance with the laws of the other EC or EEA Member State also include:-

1. a declaration in accordance with section 13b (1), first sentence, paragraph 5 above,

2. the name and business address of a representative (representative for the settlement of losses) residing or established in the other EC or EEA Member State to whom section 7a (1) above, first sentence, shall apply accordingly and who

a) collects all the necessary information about losses and disposes of the necessary furniture and fixtures for this purpose,

b) disposes of adequate powers to represent the undertaking with respect to persons making claims in and out of court in particular vis-à-vis administrative authorities and to confer any relevant authority,

c) until final settlement of the claim disposes of adequate powers to pay the amounts due in respect of such claims, and

d) has the power to represent the undertaking in relations with the authorities of the other EC or EEA Member State as regards the existence and validity of the insurance contracts.

(2) The supervisory authority shall examine within a period of one month of receipt of the documents mentioned in subsection 1 above, second and third sentences, the lawfulness of the intended business. If no objection can be made it shall send before the above period has expired to the supervisory authority of the other EC or EEA Member State

1. these documents,

2. a certificate about the classes of insurance the undertaking shall be permitted to operate and the risks of an insurance class it shall be permitted to cover,

3. a certificate pursuant to section 13b (2), second sentence, paragraph 2 above and inform the undertaking accordingly. In the contrary case it shall inform the undertaking before the above period has expired that approval for operating direct insurance business by way of provision of services will not be granted and give the grounds for not granting it. Approval shall be deemed to have been denied if a notification of the supervisory authority has not been received by the end of the above period of time.

(3) In the case of subsection 2 above, second sentence, the undertaking may take up its activity on receipt of the relevant notification.

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

Section 13d

The insurance undertakings shall inform the supervisory authority immediately about

1. the appointment of a manager or director stating all essential facts to judge his good repute and qualification (section 7a (1) above),

2. the resignation of a manager or director,

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

4. the acquisition or sale of a qualifying participation in an insurance undertaking, incidents where the participation limits of 20 per cent, 33 per cent and 50 per cent of the voting rights or nominal capital have been reached, exceeded or not been reached as well as the fact that the insurance undertaking will become or no longer is a subsidiary (section 7a (2) above, sixth sentence) of another undertaking as soon as the insurance undertaking has been informed about such changes in the participations,

4a. the existence, modification or abandonment of any other close link pursuant to section 8 (1), fourth sentence,

5. the name and address of the holder of a qualifying participation in an insurance undertaking and the amount of the participation annually as soon as the undertaking has been informed about it,

6. the principles for the calculation of the premiums and mathematical provisions including the calculation bases and mathematical formulas used, which they shall also submit, after having been granted an authorisation to operate life insurance; this shall also apply when new or changed principles are used,

7. the intended use of new or changed general insurance policy conditions, which they shall also submit, with respect to health insurance within the meaning of section 12 (1) above and compulsory insurances,

8. the intended use of new or changed principles within the meaning of section 5 (5) (1a), which they shall also submit, with respect to health insurance within the meaning of section 12 (1) above.

Section 14

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

(1a) If a domestic insurance undertaking transfers wholly or partly a portfolio of insurance contracts concluded in accordance with section 13a above on an establishment or services basis to an undertaking which has its head office in an EC Member State or another EEA Member State only the approval of the responsible supervisory authority of the transferor undertaking shall be required in derogation of subsection 1 above, first sentence. The approval shall be granted, provided there is no ground on which to deny it in accordance with subsection 1 above, third sentence, only if

1. it has been proved by a certificate made out by the supervisory authority of the home Member State that after the transfer the transferee undertaking will dispose of own funds in the amount of the solvency margin,

2. the supervisory authorities of the EC or EEA Member States in which the risks of the portfolio of insurance contracts are located have given their approval, and

3. in the case of transfer of the portfolio of insurance contracts of a branch the supervisory authority of the EC or EEA Member State of the branch has been consulted.

The first and second sentences of paragraph 1 above shall also apply to the transfer of a portfolio of insurance contracts concluded within the country. In the cases of the first and third sentences subsection 1 above, fourth sentence shall apply accordingly.

(2) The contract covering a portfolio transfer shall be concluded in writing; section 311 of the Bürgerliches Gesetzbuch shall not be applicable.

(3) Approval of the portfolio transfer shall be published in the Bundesanzeiger (Federal Gazette). If only supervisory authorities of the states (Länder) are concerned publication in the relevant gazettes of the states (Länder) shall be sufficient.

Section 14a

Any transformation of an insurance undertaking in accordance with section 1 of the Umwandlungsgesetz (Law regulating Transformation of Undertakings) shall be subject to approval by the supervisory authority. Section 14 (1), second to fourth sentences, shall apply accordingly. Approval may also be rejected if the transformation requirements have not been met.

III. Mutual Societies

Section 15

A society which intends to insure its members according to the mutuality principle shall acquire legal capacity by receiving from the supervisory authority permission to carry on business as a “mutual society”.

Section 16

The requirements of the first and fourth books of the Handelsgesetzbuch with respect to merchants shall, with the exception of sections 1 to 7 above, apply to mutual societies accordingly unless otherwise provided in this law. As regards accounting the requirements of the second subsection of the fourth section in conjunction with the requirements of the first and second sections of the third book of the Handelsgesetzbuch shall apply accordingly.

Section 17

(1) The statutory framework of a mutual society shall be laid down in its articles of association unless otherwise provided in this law.

(2) The articles of association shall be certified by a notary.

Section 18

(1) The articles of association shall lay down the name and head office of the society.

(2) It shall be possible to infer from the name where the society is located. It shall also be stated in the name or in a supplement that insurance is carried on on a mutual basis.

Section 19

As regards the liabilities of the mutual society its creditors shall only be entitled to the assets of the mutual society. The members shall not be liable for claims of the creditors.

Section 20

The articles of association shall include provisions about the beginning of membership. A requirement for membership shall be to conclude an insurance contract with the mutual society. Membership shall end on termination of the insurance contract unless otherwise provided in the articles of association

Section 21

(1) Contributions to be paid by the members and benefits payable to the members shall under similar conditions be determined only on an equality basis.

(2) The mutual society shall not be entitled to carry on insurance business against fixed premiums without the policyholder having to become a member unless this has been expressly permitted by the articles of association.

Section 22

(1) The articles of association shall provide for the establishment of members funds to cover the cost of the foundation of the mutual society and serve as guarantee and operational funds. The articles of association shall contain the conditions on which the members funds shall be at the disposal of the society and in particular stipulate how they shall be repaid and if and to what extent the persons who made available the funds shall be entitled to participate in the management of the mutual society.

(2) For the purpose of paying in the members funds, only legal tender, checks certified by the Deutsche Bundesbank, payments into a domestic account with the Deutsche Bundesbank or a credit institution or postal giro account of the society or its board of directors, available at its free disposal, shall be permitted. Any claims of the board of directors against these paid-in funds shall be deemed to be claims of the society. The articles of association may permit promissory notes instead of the above payments.

(3) The persons who made available the funds shall not be granted a right to call for repayment. In the articles of association they may be entitled, in addition to interest payments on the annual income, to participation in the profit as shown in the annual balance sheet; it is within the discretion of the supervisory authority to decide on the maximum percentage by which both interests and total payments received may exceed the paid-in cash amount. The members funds may be divided into shares for which share certificates may be issued.

(4) The members funds may be repaid only out of the annual income and only to the extent that the loss reserve under section 37 below has increased; repayment shall begin as soon as the capitalised expenses for starting operations have been fully written off.

Section 23

(repealed)

Section 24

(1) The articles of association shall stipulate whether the expenses are to be covered by single or recurring contributions to be paid in advance or by contributions distributing the actually required amount among the members (required contributions).

(2) If the contributions are to be paid in advance the articles of association shall also specify whether a right to collect supplementary contributions is reserved or excluded; if it is to be excluded it shall also be specified whether the benefits may be reduced.

(3) The articles of association may provide maximum amounts for supplementary contributions and required contributions. Any restriction to the effect that payments of supplementary contributions or required contributions may only be invited to cover the claims of the members shall not be permitted

Section 25

(1) Members who left or joined the mutual society during the financial year shall also be liable to pay supplementary contributions or required contributions. Their obligation to pay contributions shall depend on the length of time they have been members in the financial year.

(2) If the supplementary contribution or the required contribution of a member is determined on the basis of the contribution paid in advance or the sum insured and if the contribution or sum insured has been increased or reduced during the financial year the higher amount shall be taken as a basis for the calculation.

(3) Subsections 1 and 2 above shall apply unless otherwise provided in the articles of association.

Section 26

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

Section 27

(1) The articles of association shall specify the conditions under which supplementary contributions or required contributions may be invited, in particular, to what extent other funds (members’ funds, reserves) shall be used first.

(2) The articles of association shall also specify how the supplementary contributions or required contributions are to be invited and collected.

Section 28

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

(2) Notices to be published in the press shall also be included in the Bundesanzeiger (Federal Law Gazette) if the business operations of the mutual society extend beyond a single state (Land); the supervisory authority may, however, grant exemptions. If business operations are limited to a single state (Land) the highest authority of that state may designate another paper instead of the Bundesanzeiger. Other papers shall be designated by the articles of association.

Section 29

The articles of association shall specify how a board of directors, a supervisory board and supreme representation (supreme body; assembly of members or of representatives of the members) shall be established.

Section 30

(1) All members of the board of directors and supervisory board shall apply for registration of the mutual society with the court of the district where the society has its head office. The application shall state the power of the individual members of the board of directors to represent the society.

(2) The supervisory authority shall inform the registration court of any authorisation to carry on business granted in accordance with section 15 above.

Section 31

(1) The application shall be accompanied by

1. the document authorising the society to carry on business;

2. the articles of association;

3. the document relating to the appointment of the board of directors and the supervisory board;

4. the document relating to the establishment of the members funds together with a statement by the board of directors and the supervisory board as to how and to what extent the members funds have been paid in and that the paid-in amount is definitely at the free disposal of the board of directors.

(2) The members of the board of directors shall deposit their signatures with the court.

(3) Originals or certified copies of the documents accompanying the application shall be deposited with the court.

Section 32

(1) It shall be entered into the commercial register the name and head office of the mutual society, the classes of insurance to be operated, the amount of the members funds, the date on which authorisation to carry on business was granted, and the names of the members of the board of directors. The powers of the members of the board of directors to represent the society shall also be entered.

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

Section 33

The following shall be published together with the contents of the entry:

1. whether the expenses shall be covered by contributions paid in advance or distributed among the members later and if in the case of contributions to be paid in advance a right to collect supplementary contributions is reserved or excluded, whether the obligation to pay contributions is limited and whether insurance benefits may be reduced (section 24 above);

2. the provisions under section 28 above;

3. how the bodies to represent the society shall be appointed and composed;

4. the members (name, status and place of residence) of the first supervisory board;

5. how the supreme representation shall be appointed.

Section 34

The board of directors shall consist of at least two persons. Section 76 (1) and (3) and sections 77 to 91, 93 and 94 of the Aktiengesetz shall apply to the board of directors accordingly. The provisions contained therein with regard to decisions taken by the general assembly shall apply here to the decisions taken by the supreme representation. Section 93 (3) of the Aktiengesetz shall be replaced by the following provision:-

The members of the board of directors shall in particular be liable to indemnification if in defiance of the law

1. the members’ funds are repaid or interest is paid thereon,

2. the assets of the mutual society are distributed,

3. payments are made after the society has become insolvent or any debt overload has become apparent; this shall not apply to payments which also thereafter are consistent with the care and diligence of a manager or director,

4. credit is granted.

Section 35

(1) The supervisory board shall consist of three members. The articles of association may specify a higher number. It shall be possible to divide this number by three. The maximum number of board members shall be twenty-one.

(2) The supervisory board of mutual societies to which section 76 of the Betriebsver-fassungsgesetz applies in accordance with section 77 (2) of the Betriebsverfassungsgesetz (Works Constitution Law) shall be composed of members elected by the supreme representation of the society and members representing the employees; as regards other societies it shall be composed only of members elected by the supreme representation.

(3) Section 30 (2) and (3), first sentence and first half of the second sentence, section 96 (2), sections 97 to 100, section 101 (1) and (3), sections 102, 103 (1), (3) to (5) and sections 104 to 116 of the Aktiengesetz shall apply to the supervisory board accordingly. The duties assigned there to the shareholders meeting shall in this case be performed by the supreme representation. Every member of the supreme representation shall have the right to file motions in accordance with section 98 (2) (3) and section 104 (1), first sentence, of the Aktiengesetz. Section 113 (3) of the Aktiengesetz shall be replaced by the following provisions which shall apply in addition to section 116 of the Aktiengesetz:-

1. If the members of the supervisory board are entitled to profit participations these shall be calculated on the basis of the annual surplus less accumulated losses brought forward and transfers to earnings reserves; the shares in the surplus to which pursuant to section 22 (3) above the persons are entitled who made available the members funds shall be deducted. Any provisions to the contrary shall be void.

2. The members of the supervisory board shall in particular be liable to indemnification if any of the acts under section 34 above, fourth sentence, are performed with their knowledge and without their taking any actions.

Section 35a

Section 117 of the Aktiengesetz shall apply accordingly.

Section 36

The provisions of sections 118, 119 (1) (1) to (3), (5), (7) and (8) and subsection 2, sections 120, 121 (1) to (3) and (4), first sentence, sections 122, 123 (1), sections 124 to 127, 129 (1) and (4), sections 130 to 133, 134 (4) and sections 136, 142 to 147, 241 to 253 and 257 to 261 of the Aktiengesetz applicable to the shareholders meeting shall apply to the supreme representation accordingly. Section 256 of the Aktiengesetz shall apply accordingly. If the supreme representation is the general assembly of members, section 134 (3) of the Aktiengesetz shall also apply accordingly. Subordinated loans (section 53c (3a) below) shall not be granted unless the supreme representation has taken a relevant decision. A majority of three quarters of the votes cast shall be required to take a decision. A different majority and additional requirements may be stipulated in the articles of association.

Section 36a

(repealed)

Section 36b

If the provisions of the Aktiengesetz, which in accordance with sections 34, 35a and 36 above shall apply accordingly, grant rights to a minority of shareholders (section 93 (4), third sentence, section 117 (4), section 120 (1), sections 122, 142 (2) and (4), sections 147, 258 (2), third sentence, section 260 (1), first sentence, and subsection 3, fourth sentence, of the Aktiengesetz) the articles of association shall specify the required minority of the members of the supreme representation.

Section 37

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

Section 38

(1) Any surplus shown in the balance sheet shall be distributed among the members specified in the articles of association unless such surplus shall be allocated to the loss reserve or any other reserve or used for the payment of remunerations or carried forward to the next financial year in accordance with the articles of association. Section 53c (3a) below of this law and section 269 of the Handelsgesetzbuch shall not be affected.

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

Section 39

(1) Only the supreme representation shall be entitled to amend the articles of association.

(2) It shall be entitled to delegate the power to make amendments which only affect the form to the supervisory board.

(3) It may authorise the supervisory board in case the supervisory authority requires any changes to be made before it approves of an amendment decision to make such changes.

(4) For the purpose of a decision of the supreme representation to abandon a class of insurance or to introduce a new one a majority of three quarters of the votes cast shall be required; the articles of association may, however, stipulate otherwise. As regards other decisions in accordance with subsections 1 to 3 above any such majority shall not be required unless otherwise specified in the articles of association.

Section 40

(1) An application for registration in the commercial register shall be filed for any amendment to the articles of association. The application shall be accompanied by the certificate of approval. The complete text of the articles of association shall also be submitted and provided with a certification by a notary to the effect that the amended provisions of the articles of association comply with the decision to amend the articles of association and that the unattended provisions comply with the latest version of the articles of association submitted for the purpose of registration in the commercial register.

(2) On registration reference may be made to the documents submitted to the court and relating to the amendment unless the amendment concerns information in accordance with section 32 above. Any provisions shall be published to which the publications prescribed under section 33 above relate.

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

Section 41

(1) Section 39 (1) and (2) above shall, subject to subsection 2 below, apply to amendments to the general insurance policy conditions under section 10 above accordingly.

(2) The articles of association may authorise the board of directors to introduce or amend general insurance policy conditions with the approval of the supervisory board. If neither the board of directors nor the supervisory board are authorised by the articles of association to amend the general insurance policy conditions, the supreme representation may authorise the supervisory board to make preliminary amendments to the general insurance policy conditions if there is an urgent need; the amendments shall be submitted to the supreme representation at its next meeting and repealed if so required.

(3) Any amendment to the articles of association or the general insurance policy conditions shall not affect any existing insurance contract unless the insured explicitly approves of any such amendment. This shall not apply to provisions where it has been expressly stipulated in the articles of association that any amendment thereto may also have effect on the existing contracts.

Section 42

The mutual society shall be dissolved:-

1. after expiry of the period of time specified in the articles of association;

2. on decision taken by the supreme representation;

3. by instituting insolvency proceedings against the assets of the mutual society;

4. from the date the order becomes final by which the institution of insolvency proceedings is rejected due to the bankrupt’s assets being inadequate to cover the expenses of the proceedings.

Section 43

(1) The decision of the supreme representation to dissolve the society (section 42 (2) above) shall be taken by a majority of three quarters of the votes cast unless otherwise provided in the articles of association. Members of the supreme representation who voted against the dissolution may have their objection to the dissolution recorded.

(2) The decision shall be approved by the supervisory authority which shall inform the registration court of its approval.

(3) If the mutual society has been dissolved by a decision of the supreme representation the insurance contracts concluded between the members and the society shall be terminated on the date specified in the decision, at the earliest, however, after expiration of a period of four weeks. Any claims which have accrued by that date may be asserted; on the other hand, as regards any contributions paid in advance for future periods of insurance these may be reclaimed only after deduction of the accrued expenses. These provisions shall not apply to life insurance contracts; they shall not be affected unless otherwise provided in the articles of association.

Section 44

Contracts for the purpose of transferring the portfolio of a mutual society wholly or partly to another company shall be subject to approval by the supreme representation to become effective. Any such decision shall require a majority of three quarters of the votes cast if not otherwise provided in the articles of association.

Section Section 44a to c

(repealed)

Section 45

The board of directors shall apply for registration of the dissolution of the mutual society in the commercial register. This shall not apply if insolvency proceedings have been instituted or their institution has been rejected. In these cases (section 42 (3) and (4) above) the court shall register the dissolution of the society and the grounds thereof in its official capacity; the office of the insolvency court shall send to the registration court a certified copy of the order to institute insolvency proceedings or a certified copy of the order to reject the institution of insolvency proceedings certifying the date the order has become final.

Section 46

(1) After dissolution the mutual society shall be wound up unless insolvency proceedings have been instituted against the assets of the mutual society.

(2) During winding up the same provisions shall apply as before winding up unless otherwise provided in the following provisions or implied from the purpose of the winding up. In particular supplementary contributions or required contributions (sections 24 to 27 above) may be invited and collected. New insurances may no longer be written, the existing insurances may not be increased or renewed.

Section 47

(1) Winding up shall be performed by the members of the board of directors as liquidators unless other persons have been designated by the articles of association or a decision of the supreme representation. Also a legal person may be liquidator.

(2) The registration court shall, if there are any important reasons for this, appoint and dismiss liquidators at the request of the supervisory board or a minority of the members to be specified in the articles of association. Section 146 of the Reichsgesetz über die Angelegenheiten der freiwilligen Gerichtsbarkeit (Reich Law on Matters of Non-contentious Jurisdiction) shall apply accordingly. Any liquidators who have not been appointed by the court may be dismissed by the supreme representation at any time. As regards claims arising from the employment contract the general rules shall be applicable.

(3) Otherwise, section 265 (4), sections 266 to 269, section 270 (1) and (2), first sentence, sections 272, 273 of the Aktiengesetz shall apply in the case of winding-up accordingly. Notwithstanding section 270 (2), third sentence, and (3) of the Aktiengesetz to be applied accordingly, the provisions applicable to the establishment and auditing of the annual accounts and annual report of the mutual society and sections 175, 176 of the Aktiengesetz and sections 325, 328 of the Handelsgesetzbuch shall apply accordingly to the opening balance sheet, the explanatory report, the annual accounts and annual report.

Section 48

(1) The members funds may not be repaid unless the claims of all the other creditors, in particular the claims of the members under insurance contracts have been met or security has been furnished. No supplementary contributions or required contributions shall be allowed for repayment purposes.

(2) The assets of the mutual society remaining after the obligations have been met shall be distributed among the members existing at the time of dissolution using the same criteria as for profit distribution.

(3) The articles of association may stipulate otherwise with regard to the distribution of the assets. They may authorise the supreme representation to designate other eligible recipients.

Section 49

(1) If a mutual society has been dissolved due to expiration of time or a decision taken by the supreme representation, the supreme representation may elect to continue operation of the society unless distribution of the assets among those eligible has not yet been started. The decision shall require a majority of three quarters of the votes cast unless otherwise provided in the articles of association. It shall be approved by the supervisory authority which shall inform the registration court of its approval.

(2) The same shall apply if the mutual society has been dissolved following the institution of insolvency proceedings, but if the proceedings have been discontinued at the request of the mutual society, or set aside after an insolvency plan providing the continued operation of the mutual society has been confirmed.

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

(4) The decision to continue operations shall not become effective unless it has been entered in the commercial register of the place where the mutual society has its head office.

Section 50

(1) If existing or former members are required to pay contributions under the law or articles of association (sections 24 to 26 above) they shall if insolvency proceedings are instituted be liable for the society’s debts.

(2) Members who left the society in the year before or after the petition to institute insolvency proceedings was filed shall be liable for the society’s debts as if they were still members.

Section 51

(1) Any claims for repayment of the members funds shall rank after all the other debts in insolvency. Among these any claims under insurance contracts to which members who were members at the time the insolvency proceedings were instituted or who had left the society in the year preceding of following the petition for the institution of insolvency proceedings are entitled shall rank after the claims of any other creditors.

(2) No supplementary contributions or required contributions may be allowed for the purpose of repayment of the members funds.

Section 52

(1) Any supplementary contributions or required contributions needed for the insolvency proceedings shall be fixed and invited by the receiver. He shall calculate immediately after the balance sheet has been filed with the court (section 153 of the Insolvenzordnung (Insolvency Law)) the amounts to be advanced by the members in accordance with their contributory obligations to cover the deficit shown in the balance sheet. As regards the calculation of any such advance payments and additional payments section 106 (1), second sentence, sub-sections (2) and (3), as well as sections 107 to 113 of the Genossenschaftsgesetz (Cooperative Societies Law) shall apply accordingly.

(2) Soon after final distribution has been started (section 196 of the Insolvenzordnung) the receiver shall calculate the final contributions to be paid by the members. As regards this calculation and any further procedure, section 114 (2) and sections 115 to 118 of the Genossenschaftsgesetz shall apply accordingly.

Section 53

(1) As regards mutual societies with limited operation as to type of business, territory or group of persons (kleinere Vereine) only sections 15, 16 above, second sentence, section 17 (1) above, section 18 (1) above, sections 19, 20, 21 (1) above, sections 22 to 27, 28 (1) above, sections 37, 38 (1) and (2) above, section 39 (1) to (3) above and sections 41 to 44, 48 and 50 to 52 above under part III shall apply. Insurance contracts for fixed premiums may not be written unless the policyholders become members.

(2) Except as otherwise provided in subsection 1 above, “kleinere Vereine” are subject to the general provisions concerning societies of sections 24 to 53 of the Bürgerliches Gesetzbuch. However, in the cases of sections 29 and 37 (2) of the Bürgerliches Gesetzbuch the Local Court will be replaced by the supervisory authority.

(3) If the articles of association provide for a supervisory board, section 34 (1) and (2), first sentence, and (6), section 36 (2) and (3) and sections 37 to 40 of the Genossenschaftsgesetz shall apply accordingly.

(4) The supervisory authority shall decide whether a society is a “kleinerer Verein”.

Section 53a

(repealed)

Section 53b

The supervisory authority may permit that kleinere Vereine intending to operate life insurance need not establish members funds if security is otherwise provided by the particular nature of the business or by special arrangements. It may permit on the same grounds that a loss reserve need not be established.

IV. Management of insurance undertakings

1. Financial resources, investments

Section 53c

(1) To ensure that their liabilities under the insurance contracts can permanently be met the insurance undertakings shall be obliged to establish free uncommitted own funds in an amount not less than the solvency margin which depends on the total volume of business. One third of the solvency margin shall be deemed to be the guarantee fund.

(2) For the purpose of implementing EC Council insurance directives the Federal Finance Minister shall have the power to lay down by way of ordinances provisions on

1. the calculation and amount of the solvency margin,

2. the minimum guarantee fund for the individual classes of insurance,

3. the calculation of own funds not shown in the balance sheet of life insurance undertakings and to what extent they may be taken into account for solvency and guarantee fund purposes.

(2a) As regards undertakings writing life insurance in the form of pension and death benefit funds, subsection 2 above securing an adequate solvency shall apply accordingly. Undertakings which have been authorised by 28th July, 1994, and which do not meet the requirements of the ordinance under subsection 2 above, first sentence, shall meet the solvency requirements not later than by the end of the financial year following 31st December, 1998.

(3) Own funds for the purpose of subsection 1 above shall comprise in particular,

1.

a) as regards public limited companies the share capital less the amount of their own shares and less half of the amount not paid up;

b) as regards mutual societies the members funds less the amount not paid up; if at least 25 percent of the members funds have been paid up only half of the amount not paid up shall be deducted;

c) as regards insurance undertakings under public law the items corresponding to the share capital of public limited companies less the amount not paid; if at least 25 percent have been paid up only half of the amount not paid up shall be deducted;

2. the capital reserves and the revenue reserve;

3. the profit carried forward;

3a. the capital paid up in exchange for the granting of subordinated loans according to subsections3a and 3c below;

3b. the capital paid up due to the incurring of subordinated liabilities according to subsections 3b and 3c below;

4. upon request and with the approval of the supervisory authority hidden reserves resulting from the valuation of the assets, in so far as the hidden reserves in question are not of an exceptional nature;

5. as regards mutual societies and public mutual insurance undertakings, provided they do not operate life insurance, half of the supplementary contributions permissible in a financial year in accordance with the articles of association in so far as they do not exceed half of the total own funds;

6. as regards life insurance undertakings

a) the provision for premium refunds if it may be used to cover losses and to the extent that it does not represent any predetermined bonuses,

b) on request, in accordance with the provisions under subsection 2 above and with the approval of the supervisory authority the value of future surplus and the value of acquisition costs included in the premium to the extent that these have not been taken into account for the mathematical provision.

The total of the amounts as specified in sentence 1, paragraphs 1 to 6, shall be reduced by the loss carried forward and the intangible assets shown in the balance sheet, in particular

1. the capitalised start-up and expansion costs (section 269 of the Handelsgesetzbuch),

2. the capitalised goodwill (section 255 (4) of the Handelsgesetzbuch).

(3a) Capital paid up in exchange for the granting of subordinated loans (subsection 3, first sentence, paragraph 3a above) shall not be included in the own funds under section 1 above unless

1. it is fully applicable to cover losses and the insurance undertaking is obliged in case of loss to defer interest payments,

2. it has been agreed that in the case of the institution of insolvency proceedings or the liquidation of the insurance undertaking it shall not be repaid until all non-subordinated creditors have been satisfied,

3. it has been made available to the insurance undertaking for a period of at least five years and must not be repaid prematurely at the request of the creditor; this five-year period need not be observed in the case of early cancellation of subordinated loans due to changed taxation which would result in additional payments to the holder of subordinated loans and if, before being repaid, the capital has been replaced by other, at least equivalent own funds,

4. the claim for repayment falls due within a period of not less than two years or may fall due within that period under the terms of the contract, and

5. the insurance undertaking has explicitly referred to the legal consequences in the second and third sentences, in writing, when the contract was concluded.

Any subsequent change to the requirement to cover the losses, subsequent limitation of the subordination requirement and subsequent reduction of the above periods of time with respect to maturity and cancellation shall not be permitted. Any early repayment shall be refunded to the insurance undertaking irrespective of any agreement to the contrary, unless the capital has been replaced by the deposit of other at least equivalent own funds. If securities are issued for the subordinated loans reference shall be made to the legal consequences in sentences 2 and 3 in the terms of issue and subscription. The insurance undertaking shall not acquire securities representing its own subordinated loans. The obligation to repay shall not be an obligation within the meaning of subsection 1 above, first sentence.

(3b) Capital which has been paid up due to the incurring of subordinated liabilities (subsection 3, first sentence, paragraph 3b above) shall not be included in the own funds under subsection 1 above unless

1. it is repaid after all non-subordinated creditors have been satisfied in the case of the institution of insolvency proceedings or the liquidation of the insurance in accordance withtaking,

2. it has been made available to the insurance undertaking for a period of at least five years and must not be repaid prematurely at the request of the creditor; this five-year period need not be observed in the case of early cancellation of bonds due to changed taxation which would result in additional payments to the holder of the bonds and if, before being repaid, the capital has been replaced by other, at least equivalent own funds,

3. setting off the repayment claim against claims of the insurance undertakings is excluded and as regards the liabilities no contractual securities are provided by the insurance undertaking or any third parties, and

4. the claim for repayment falls due within a period of not less than two years or may fall due within that period under the terms of the contract.

Any subsequent limitation of the subordination requirement and subsequent reduction of the above periods of time with respect to maturity and cancellation shall not be permitted. Any early repayment shall be refunded to the insurance undertaking irrespective of any agreement to the contrary, unless the insurance undertaking has been wound up or the capital has been replaced by other at least equivalent own funds. On conclusion of the contract the insurance undertaking shall expressly draw attention to the legal consequences in sentences 2 and 3 in writing; if securities are issued for the subordinated liabilities reference shall be made to the legal consequences only in the terms of issue and subscription. The insurance undertaking shall not acquire securities representing its own subordinated liabilities. The obligation to repay shall not be a commitment within the meaning of subsection 1 above, first sentence.

(3c) The total amount of the subordinated loan capital under subsection 3a above and of the subordinated liabilities under subsection 3b above shall be included in the own funds under subsection 1 above only if it does not exceed 25 per cent of the paid-up own funds under subsection 3, sentence 3, paragraphs 1 to 3 above; the supervisory authority may permit a higher percentage which, however, shall not exceed 50 per cent of the solvency margin if the payment of subordinated loan capital or the incurring of subordinated liabilities serve to meet the requirements of a solvency or financial scheme (section 81b below).

(4) The calculation of the solvency margin and a statement of the undertaking’s own funds shall be submitted to the supervisory authority annually, together with the annual accounts and status report required by section 341a, subsection 1 of the Handelsgesetzbuch.

Section 53d

(1) If an insurance undertaking makes use of the services of an affiliated undertaking (section 15 of the Aktiengesetz) which is not an insurance undertaking under a contract for work and services, a tenancy and lease agreement and contracts of a similar nature, remuneration shall be limited to the amount which a manager or director who meets the fit and proper requirement would also negotiate with a non-affiliated undertaking taking into account the interests of the insured. The insurance undertaking shall be informed annually about the expenses under these contracts and the way in which these expenses have been calculated. (2) Contracts under subsection 1 above shall be concluded in writing. (3) Subsections 1 and 2 above shall apply to contracts with non-affiliated companies accordingly if a majority interest is held, either directly or indirectly, by the same person or persons in both parties to the contract (section 16 of the Aktiengesetz).

Section 54

(1) The assets of the Deckungsstock (section 66 below) and the other restricted assets of an insurance undertaking shall, taking into account the type of insurance business carried on and the structure of the undertaking, be invested in a way which ensures maximum security and profitability, while maintaining its liquidity at all times, through adequate diversification and spread.

(2) The supervisory authority shall notwithstanding the provision under section 54d below be informed of

a) the acquisition of real property and equivalent rights;

b) the acquisition of interests in other undertakings, however, if these interests consist of shares and other participations, only if the interest exceeds 10 per cent of the nominal capital of the other undertaking; for the purpose of this provision, the interests of several insurance undertakings belonging to a single group of undertakings within the meaning of section 18 of the Aktiengesetz and of the controlling undertaking in another undertaking are consolidated;

c) investments of an insurance undertaking in an affiliated undertaking within the meaning of section 15 of the Aktiengesetz and investments of a pension or death benefit fund in an undertaking whose staff are insured with the fund;

d) investments in units of special funds managed by an investment company and in units issued by an investment company unless they have been coordinated by Council directive 85/611/EEC of 20th December, 1985, on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (OJ of the EC No. L 375, p.3)

The information shall be given by the end of the month following the acquisition or investment.

Section 54a

(1) The restricted assets (section 54 (1) above) may be invested only in accordance with the following subsections; member states of the EEA shall be treated on an equal footing with EC member states. The other restricted assets comprise assets not included in the Deckungsstock to an amount equal to the technical provisions and the liabilities and deferrals under insurance contracts; the shares of reinsurers shall be disregarded. For the calculation of the other restricted assets amounts of up to 50 per cent of the outstanding premiums, which have become due during the last three months from direct insurance business, reduced by value adjustments, may be disregarded. As regards life insurance, the provision for premium refunds shall be included in the restricted assets only in an amount equal to the profit participations expected to be payable by the end of the following financial year; for the calculation of the other restricted assets amounts up to the incurred and actuarially covered acquisition costs shown in the last annual balance sheet may be disregarded with the consent of the supervisory authority. Liabilities and provisions under reinsurance contracts shall be disregarded for the calculation of the restricted assets if they are matched by claims under the same reinsurance contracts.

(2) The restricted assets may be invested in

1. debts secured by a mortgage on real property or similar rights located in an EC Member State, if the mortgage meets the requirements of sections 11 and 12 of the Hypothekenbankgesetz (Law on Mortgage Banks), and if hereditary building rights meet, in addition, the requirements of section 21 of the Verordnung über das Erbbaurecht (Ordinance regarding hereditary building rights) or the relevant regulations of the other EC Member State;

2. debts secured by a ship mortgage on a ship or ship under construction registered in an EC Member State, if the mortgage meets the requirements of sections 10 to 12 of the Schiffsbankgesetz (Law on Ship Mortgage Banks) or the relevant requirements of the other EC Member State;

3.

a) bearer bonds issued in an EC Member State which are admitted for official trading at a stock exchange or dealt in on another recognised and properly operating regulated market open to the public (regulated market) in an EC Member State,

b) mortgage bonds, municipal bonds and other bearer and registered bonds issued in an EC Member State and meeting the requirements of section 8a (1), third sentence, of the Gesetz über Kapitalanlagegesellschaften (Law on Investment Companies) (special fund of assets existing by virtue of the law),

c) bonds issued in a non-EC Member State which are admitted for official trading at a stock exchange or dealt in on a regulated market in an EC Member State or admitted for official trading at a stock exchange of a non-EC Member State; the percentage of these bonds may not exceed 5 per cent of the restricted assets;

4. debts entered in the debt register of the Federal Republic of Germany, one of its states (Länder) or any similar list of another EC Member State, and liquidity papers (section 42 (1) of the Gesetz über die Deutsche Bundesbank (Law on the German Federal Bank);

5. fully paid-up shares and subordinated loans admitted in an EC Member State for official trading at a stock exchange or dealt in on a regulated market, the other restricted assets may also be invested in fully paid-up shares and subordinated loans admitted for official trading at a stock exchange of a non-EC Member State. Shares and subordinated loans of the same undertaking shall be acquired only to the extent that the capital stock and subordinated loans capital attributable to them together with the shares and subordinated loans of the same undertaking already included in the restricted assets do not exceed 10 per cent of the capital stock of this undertaking. Shares and subordinated loans of undertakings whose head office is not in an EC Member State shall not exceed 20 per cent each of the amount permitted under subsection 4 above, first sentence, for the assets of the Deckungsstock and the other restricted assets.

5a. fully paid-up shares and subordinated loans other than those mentioned under paragraph 5 above and participations in a limited liability company, limited partnership, participations as silent partner within the meaning of the Handelsgesetzbuch and amounts due from subordinated liabilities. This shall be conditional on the undertaking having its head office in an EC Member State and its making available to the insurance undertaking its annual accounts which were established and audited in accordance with the provisions applicable to corporations and its engaging to submit such annual accounts at each balance sheet date also in future. Paragraph 5, second sentence shall apply accordingly on condition that investments pursuant to paragraphs 5 and 5a in the same undertaking shall be added up. If participations are held in an undertaking whose sole object is the holding of shares of another undertaking, the third sentence shall refer to a detailed estimate of the investments of the insurance undertaking in the other undertaking. The provisions of this paragraph shall not apply to investments in undertakings to which the insurance undertaking has transferred its business operations wholly or partly by way of outsourcing (section 5 (3) (4) above) or which carry out activities for the insurance undertaking directly related to insurance business;

6. units of special securities funds managed by an investment company, which has its head office in an EC Member State, if these funds are in accordance with the terms of the contract composed of mainly fully paid-up shares or subordinated loans admitted for official trading at a stock exchange or dealt in on a regulated market in an EC Member State, or bonds mainly issued in an EC Member State within the meaning of paragraph 3 (a) and (b). The other restricted assets may, in addition, be invested in units of special securities funds managed by an investment company, which has its head office in an EC Member State, if these special funds have been invested, in accordance with the terms of the contract, mainly in fully paid-up shares or subordinated loans admitted for official trading at a stock exchange of a non-EC Member State. The portfolio of units under the first and second sentences shall, if the special funds have mainly been invested in shares or subordinated loans of undertakings, whose head office is not in an EC Member State, together with direct investments of this type not exceed 20 per cent each of the amount permitted for the assets of the Deckungsstock and the other restricted assets as per subsection 4 above, first sentence. The first and third sentences shall apply accordingly to units issued by an investment company subject to the laws of another EC Member State and to special public supervision to protect its holders, if the investments are made in accordance with the principles of proper diversification and spread of the risk in compliance with its articles of association and if the holder may require to be paid out the equivalent of any such unit;

7. debts for which have been given as a pledge or transferred by way of security

 

a) mortgages which meet the requirements of paragraph 1, ship mortgages within the meaning of paragraph 2,b) securities referred to in another provision of this subsection and issued in an EC Member State which are eligible to serve as security for the Deutsche Bundesbank (German Federal Bank) or the central bank of another EC Member State if the limits of section 19 (1), paragraph 3 of the Gesetz über die Deutsche Bundesbank or any relevant law of the other EC Member State are observed,

c) registered bonds for which a special fund of assets exists by virtue of the law;

d) deposits or securities for a loan on collateral securities as per section 9b (1) and (2) of the Gesetz über Kapitalanlagegesellschaften (Law on Investment Companies) or any similar provisions of another EC Member State. Amounts due from loans on collateral securities shall not exceed 15 per cent each of the assets of the Deckungsstock and the other restricted assets;

8. loans

a) to

aa) the Federal Republic of Germany, its states (Länder), communities and associations of local governments,

bb) another EC Member State or its regional governments or local authorities for which the competent authorities prescribed a zero weighting as per article 7 of Council directive 89/647/EEC of 18th December, 1989, on a solvency coefficient for credit institutions (OJ of the EC No. L 386, p. 14), the EC Member State having informed the EC Commission and the Commission having publicised this weighting,

cc) an international organisation of which also the Federal Republic of Germany is a full member;

b) to other regional governments and local authorities of another EC Member State for which the competent authorities fixed a 20 per cent weighting as per article 6 (1) (b) (5) of the directive under a) above, and loans fully guaranteed by one of the above bodies; the percentage of loans, where it is not certain that the privilege under section 77 (4) below will apply, shall not exceed 10 per cent of the assets of the Deckungsstock;

c) whose interest payment and repayment have been fully guaranteed by one of the bodies mentioned under a) above or by a suitable credit institution within the meaning of paragraph 9 (c) whose head office is in an EC Member State;

d) to undertakings whose head office is in an EC Member State excluding credit institutions, if on the basis of the past and expected future development of the profits and assets of the undertaking the contractual interest payment and repayment appear to be guaranteed and if the loans are adequately secured

aa) by first mortgages,

bb) by pledged accounts receivable or claims transferred by way of security or securities admitted for official trading at a stock exchange or dealt in on a regulated market or

cc) in a similar manner. A formal commitment issued by the borrower to the insurance undertaking (negative commitment) shall serve as a security instead only if and to the extent that the mere status of borrower is a guarantee for interest payment and repayment of the loan;

9. with

 

a) the Deutsche Bundesbank,b) the central bank of another EC Member State,

c) a credit institution whose head office is in an EC Member State which is subject to the requirements of the second Council directive 89/646/EEC of 15th December, 1989, on the coordination of laws, regulations and administrative provisions relating to the taking-up and pursuit of the activity of credit institutions and the amendment of directive 77/780/EEC (OJ of the EC no. L 386, p. 14), if the credit institution confirms the insurance undertaking in writing that it observes the own funds and liquidity requirements applicable to credit institutions in its home country (suitable credit institution). Current credit balances shall also be deemed investments;

d) public credit institutions which in accordance with article 2 (2) of the first Council directive 77/780/EEC of 12th December, 1977, on the coordination of laws, regulations and administrative provisions relating to the taking-up and pursuit of the activity of credit institutions (OJ of the EC, no. L 322, p. 30) do not come under this directive;

10. in developed real estate, real estate in the process of being built upon or to be built upon in the near future located in an EC Member State, in similar rights located in this EC Member State and in participations in an undertaking the sole object of which is the acquisition, development and management of real estate or similar rights located in such a State. The insurance undertaking shall verify on the basis of the opinion of a sworn expert or in a similar way whether the purchase price is adequate. From the investments in real estate shall be deducted without prejudice to the provision of section 66 (3a) below, fourth sentence, any mortgage charges;

11. in units in special funds made up of real estate managed by an investment company whose head office is in an EC Member State and which mainly comprise in accordance with the terms of the contract real estate or similar rights located in such a State, if the special funds meet at the time of investment the requirements of section 27 (1) (3) and section 28 of the Gesetz über Kapitalanlagegesellschaften or the applicable requirements of the relevant EC Member State. The first sentence shall apply accordingly to units issued by an investment company subject to the legislation or another EC Member State and to special public supervision to protect the holders of such units if the investments are made in accordance with the principles of proper diversification and spread of the risk in compliance with the articles of association and if the holder may require to be paid out the equivalent of any such unit;

12. in advance payments or loans granted by an insurance undertaking on its own insurance policies up to an amount equal to the surrender value;

13. in units of special funds made up of holdings which are managed by an investment company whose head office is in an EC Member State if these special funds comprise in accordance with the terms of the contract in addition to dormant equity holdings mainly fully paid-up shares or subordinated loans admitted for official trading at a stock exchange or dealt in on a regulated market in an EC Member State. The other restricted assets may also be invested in units of special funds made up of holdings which are managed by an investment company whose head office is not in an EC Member State if these special funds comprise in accordance with the terms of the contract in addition to dormant equity holdings mainly fully paid-up shares or subordinated loans admitted for official trading at a stock exchange of a non-EC Member State. The portfolio of units according to the first and second sentences shall, to the extent that the special funds have been invested in addition to dormant equity holdings in shares and subordinated loans of undertakings whose head office is not in a member state, together with direct investments of this kind not exceed 20 per cent each of the portfolio permitted for the assets of the Deckungsstock and the other restricted assets pursuant to subsection 4 above, first sentence. The first and third sentences shall apply accordingly to units issued by an investment company subject to the legislation of another EC Member State and to special public supervision to protect the holders of such units, if the investments are made in accordance with the principles of proper diversification and spread of the risk in compliance with the articles of association and if the holder may require to be paid out the equivalent of any such unit;

14. in investments which have not been mentioned in paragraphs 1 to 13 above, which do not meet the requirements thereunder or exceed the limits of subsections 2 to 4a above, up to an amount equal to 5 per cent each of the assets of the Deckungsstock and of the other restricted assets; the limitation to 10 per cent in paragraphs 5 and 5a shall not be affected. Investments in consumer credits, credits for operating funds, movables or titles to movables and intangible assets shall be excluded; the same shall apply to an investment which in accordance with article 21 or 22 of the third Council non-life directive or article 21 or 22 of Council directive 92/96/EEC of 10th November 1992, on the coordination of laws, regulations and administrative provisions relating to direct life assurance and amending directives 79/267/EEC and 90/619/EEC (third life assurance directive) (OJ of the EC No. L 360, p. 1) shall not be permitted.

(3) The restricted assets shall according to part C of the annex be invested in assets expressed in the same currency in which the liabilities under the insurance contracts have to be met (matching rules). Real property and similar rights shall be deemed to have been invested in the currency of the country where they are located. Shares and participations shall be deemed to have been invested in the currency in which they are admitted for official trading at a stock exchange or dealt in on a regulated market; shares and participations not admitted for official trading at a stock exchange or not dealt in on a regulated market shall be deemed to have been invested in the currency of the country where the issuer of the securities or participations has its head office.

(3a) (repealed)

(4) The percentage of investments under subsection 2 (5), (5a), (6) and (13) above taken together shall not exceed 30 per cent each of the assets of the Deckungsstock and the other restricted assets, the percentage of investments under subsection 2 (5a) and (13) above shall not exceed one third each of these percentages; not included are units in funds which are managed by an investment company whose head office is in an EC Member State and which in accordance with the terms of the contract or articles of association only comprise bonds within the meaning of subsection 2 (3) (a) and (b) above. For the purpose of subsection 2 (5a) above, fourth sentence, the indirect investments of the insurance undertaking through investments in the other undertaking shall be included in the percentage for investments in accordance with subsection 2 (5), (5a), (6) and (13) above. The supervisory authority may in the case of new insurance companies reduce this limit and the limit under subsection 2 (5), third sentence, and (6) above, third sentence, to 10 per cent for a maximum period of three years from authorisation to carry on business. The percentage of investments pursuant to subsection 2 (10) and (11) above taken together shall not exceed 25 per cent of the assets of the Deckungsstock and the other restricted assets.

(4a) Bearer bonds within the meaning of subsection 2 (3) (a) and (b) above which are neither admitted for official trading at a stock exchange nor dealt in on a regulated market may be included in the restricted assets in an amount equal to 2.5 per cent each of the assets of the Deckungsstock and the other restricted assets. They may taken together with investments pursuant to subsection 2 (5a) above, in so far as they are securities, not exceed 10 per cent each of the assets of the Deckungsstock and the other restricted assets.

(4b) All investments issued by one and the same issuer (debtor) shall not exceed the sum of 2 per cent of the restricted assets and 25 per cent of the own funds of the insurance undertaking in accordance with section 53c (3), first sentence, paragraphs 1 to 3b and 6 (a) above in conjunction with the second sentence, but in the aggregate not exceed 5 per cent of the restricted assets. Subordinated loans granted by an issuer to an insurance undertaking and claims of the insurance undertaking against the issuer from subordinated liabilities within the meaning of subsection 2 (5a) above shall also be taken into account for the purpose of these percentages. If an issuer has assumed full warranty for an insurance undertaking with respect to liabilities of any third party, also this warranty liability shall be taken into account for the purpose of these percentages. Investments in special funds or in units issued by an investment company shall not be deemed to be investments with one and the same issuer (debtor) if such investments of the special funds or of the investment company are sufficiently spread. Instead of the percentages mentioned in the first sentence, a percentage of 30 per cent of the restricted assets shall apply

a) to bonds placed on the market by one and the same credit institution if they have been secured by special cover funds by virtue of the law pursuant to subsection 2 (3) (b) above,

b) to investments with one and the same issuer according to subsection 2 (8) (a) above, and

c) to investments with one and the same suitable credit institution in accordance with subsection 2 (9) (c) above, whose head office is in an EC Member State if and to the extent that such investments have actually been secured by an extensive bank guarantee of the credit institution or a deposit guarantee scheme; the exclusion of any entitlements under the deposit guarantee scheme in the articles of association shall not exclude that such a guarantee actually exists.

For the calculation of the percentages in accordance with the first to fifth sentences investments with the issuer and the undertakings of the group to which the issuer belongs shall be combined within the meaning of section 18 of the Aktiengesetz.

(4c) Up to 10 per cent each of the assets of the Deckungsstock and the other restricted assets may be invested in a single real estate or similar right or in participations in an undertaking whose sole object is the acquisition, development and management of real estate or similar rights located in an EC Member State. The same limit shall apply to several legally independent real estates taken together if they form an economic unit.

(5) The supervisory authority shall also permit an insurance undertaking to invest in assets which have not been mentioned above or do not meet the requirements as mentioned above, and to exceed the limits stipulated in subsections 2 and 4 to 4c above if the interests of the insured are thereby not impaired and if the EC Member States may allow any such exemptions pursuant to article 21 or 22 of the third non-life insurance directive and article 21 or 22 of the third life insurance directive. If the latter is not the case, the investment may be permitted only in exceptional cases and for a limited period of time. The supervisory authority shall take these exceptional cases on record.

(6) To the extent that the restricted assets represent technical provisions with respect to risks located or life insurance contracts written in the European Community they may, subject to the second sentence, only be located in the European Community or held in safe custody in non-EC Member States in accordance with section 5 (4) of the Depotgesetz (Law on the Deposit and Acquisition of Securities). As regards the assets mentioned in the first sentence, 5 per cent of the assets of the Deckungsstock and 20 per cent of the other restricted assets may be located in non-EC Member States; the investments permitted in accordance with subsection 2 above and located in non-EC Member States shall be counted against these percentages. The supervisory authority may in individual cases grant an insurance undertaking further exemptions from the regulations of this law relating to the location of assets, on request, if this does not impair the interests of the insured. The matching rules under subsection 3 above shall not be affected.

Section 54b

(1) If life insurance contracts provide for insurance benefits in

1. units in a special fund managed by an investment company,

2. units issued by an investment company,

3. assets admitted for the purpose of the special fund of an investment company other than cash,

the relevant investments shall be made for the assets of the separate account of the Deckungsstock (investment fund) to be established for this purpose.

(2) Where the benefits provided by life insurance contracts are directly linked to a share index or some other reference value other than the one mentioned in subsection 1 above, a separate account shall be established for each type of investment. The assets of these separate accounts shall be invested in units representing the reference value or if no units are established in assets which correspond to the assets on which the particular reference value is based and which are sufficiently secure and marketable.

(3) Section 54a above shall not be applicable to the assets of the separate accounts mentioned in subsections 1 and 2 above. If, however, the insurance benefits mentioned in subsections 1 and 2 above include a guaranteed minimum benefit, section 54a above shall be applied to the assets representing the additional technical provisions for this purpose.

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

Section 54c

If insurance contracts are part of a separate portfolio of an insurance undertaking in a non-EC and another non-EEA Member State, sections 54a and 54b above shall be applied to the restricted assets generated under these insurance contracts as appropriate unless otherwise provided for under foreign law.

Section 54d

The insurance undertakings shall report in the forms and within the periods required by the supervisory authority about all their investments broken down into new and existing investments. The obligations under section 66 (6) below, sixth sentence, shall not be affected.

1a. Accounting, auditing

Section 55

(1) The provisions of part 4 (2) in conjunction with the provisions of parts 1 and 2 of the third book of the Handelsgesetzbuch shall apply accordingly to undertakings under public law which operate insurance business and do not write social insurance.

(2) Insurance undertakings shall immediately deposit with the supervisory authority the annual accounts established by the legal representatives and later the certified annual accounts and status report. Insurance undertakings which establish consolidated annual accounts or a consolidated status report shall submit these records to the supervisory authority immediately.

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

Section 55a

(1) The Federal Finance Minister shall have the power to lay down by way of an ordinance not requiring approval by the Bundesrat regulations for insurance undertakings not subject to supervision by the supervisory authorities of the states (Länder) with respect to

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

1a. the contents, form and number of copies of the internal interim report to be submitted to the supervisory authority every three months, comprising a compilation of the latest accounting and portfolio data and information about the number of claims to the extent that this is necessary for supervisory purposes in accordance with this law;

2. the periods available for submitting of the internal reports to the supervisory authority;

3. the contents of the audit reports in accordance with section 341k of the Handelsgesetzbuch to the extent that this is necessary for supervisory purposes in accordance with this law.

The power according to the first sentence may be transferred wholly or partly by ordinance, which is not subject to approval by the Bundesrat, to the BAV for insurance undertakings subject to supervision by the BAV.

(2) Provisions in accordance with subsection 1 above for insurance undertakings subject to supervision by the BAV shall be adopted in consultation with the supervisory authorities of the states (Länder); the Versicherungsbeirat (Insurance Advisory Council) shall be heard before they are adopted.

(3) The governments of the states (Länder) may in consultation with the BAV adopt by way of ordinances provisions in accordance with subsection 1 above applicable to insurance undertakings subject to supervision by the supervisory authorities of the states (Länder). They may transfer this power by ordinance to the supervisory authority of the state (Land).

Section 56

(repealed)

Section 56a

In the case of public limited insurance companies the board of directors shall with the consent of the supervisory board fix the amounts to be set aside for profit participation of the insured. However, amounts which do not have to be set aside because of a legal title of the insured to such amounts shall not be made available for profit participation unless dividends in the amount of at least 4 per cent of the share capital may still be distributed out of the remaining net earnings shown in the balance sheet. The amounts destined for profit participation of the insured shall, provided they have not been directly distributed among the insured, be allocated to a provision for premium refunds. The amounts allocated to the provision for premium refunds may be used only for the purpose of profit participation of the insured. The insurance undertaking shall, however, be entitled with the consent of the supervisory authority to use the provision for premium refunds in certain exceptional cases to avoid an emergency situation in the interest of the insured to the extent that such provision has not yet been destined for profit participation.

Section 56b

(repealed)

Section 57

(1) The auditor shall when auditing the annual accounts ascertain if the insurance undertaking has complied with the disclosure requirements imposed under section 13b (1) and (4), section 13c (1) and (4), section 13d (1) to (5) and the obligations in accordance with section 15 of the Gesetz über das Aufspüren von Gewinnen aus schweren Straftaten (Law Relating to the Tracing of Profits Generated by Serious Criminal Offences). The results shall be included in the auditor’s report. An auditor who audits an undertaking that has close links with the direct insurance undertaking arising from a controlling influence pursuant to section 8 (1), fourth sentence, paragraph 2, and who also audits the direct insurance undertaking shall inform the supervisory authority of any facts pursuant to section 321 (2) of the Handelsgesetzbuch detected at the associated undertaking if such facts are liable to have a considerable negative effect on the activities of the insurance undertaking. The auditor shall at the request of the supervisory authority provide information about any other facts of which he has become aware during auditing and which are an indication of the business of the undertaking not being run properly.

(2) The Federal Finance Ministry shall have the power to lay down by way of ordinance provisions about the contents of the auditor’s reports in accordance with subsection 1 above, first sentence, to the extent that this is required by the supervisory authority to fulfil its duties, in particular to obtain standardised records to judge the insurance business carried out by the insurance undertakings. This power may be transferred by ordinance to the BAV which will stipulate regulations in consultation with the supervisory authorities of the states (Länder).

Section 58

(1) (repealed)

(2) The board of directors shall immediately advise the supervisory authority of any auditor appointed by the supervisory board. The supervisory authority may, if it has any objections to the auditor of the annual accounts, require that another auditor be appointed within a reasonable period of time. If no fresh appointment is made or if it has objections also to the freshly appointed auditor, it shall appoint an auditor itself. In this case section 318 (1), fourth sentence, of the Handelsgesetzbuch shall apply which stipulates that the legal representatives shall immediately require the auditor appointed by the supervisory authority to proceed with the audit.

(3) (repealed)

Section 59

The board of directors shall, immediately after the auditor’s report has been adopted, deposit a copy of the report, which has been provided with its own comments and those of the supervisory board, with the supervisory authority which may discuss the report with the auditor and, if necessary, require additional audits and supplements to the report at the expense of the insurance undertaking.

Section 60

Sections 58 and 59 above shall not apply to insurance undertakings under public law established under the laws and subject to the supervision of the insurance supervisory authorities of the states (Länder). Additional requirements with respect to the auditing of the annual accounts of these undertakings have been imposed under the laws of the relevant states (Länder) in accordance with section 341k of the Handelsgesetzbuch.

Section 61 to 63

(repealed)

Section 64

If in pursuance of section 330 (1), (3) and (4) of the Handelsgesetzbuch and the ordinance delivered in compliance with this power insurance undertakings are not subject to the requirement to have their annual accounts audited, sections 58 and 59 above of this law shall not be applicable. The supervisory authority may determine if and how these undertakings shall be audited.

2. Special provisions on the mathematical provisions and the Deckungsstock in life insurance

Section 65

(1) The Federal Finance Ministry shall for the purpose of calculating the mathematical provisions in accordance with the principles of proper accounting have the power to fix by ordinance

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

a) the rate on the bond issues by the State in whose currency the contract is denominated, with this maximum rate not exceeding 60 per cent; unit-linked contracts, single-premium contracts of terms of up to eight years, without-profits contracts and annuity contracts with no surrender value may be excluded or higher maximum values may be fixed for them, or

b) the yield on the assets currently held by the life insurance undertaking and the anticipated yield on future assets with adequate safety loadings having to be made;

2. the maximum amounts for zillmerising;

3. the actuarial calculation bases for the calculation of the mathematical provisions to the extent that this is required for the implementation of the EC Council directives.

This power may be transferred by ordinance to the BAV which shall stipulate the regulations in consultation with the supervisory authorities of the states (Länder).

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

(3) Before a maximum interest rate is fixed in accordance with subsection 1, first sentence, paragraph 1 (a) above and provided the contracts are denominated in the currency of another Member State of the European Community or another Member State of the EEA the supervisory authority of this State shall be consulted.

Section 66

(1) The board of directors of the undertaking shall already during the financial year allocate to the Deckungsstock and lawfully invest amounts which correspond to the expected increase of the minimum Deckungsstock in accordance with subsection 1a below. The supervisory authority may prescribe further details.

(1a) The Deckungsstock shall at least correspond to the sum made up of the balance sheet values of the mathematical provisions taking into account the premium reserve, of the proportionate mathematical provisions of the individual insurance contracts included in the provision for outstanding claims and surrenders, and of the credited profit participations. Balance sheet values within the meaning of the first sentence shall be the gross amounts before the amounts for ceded reinsurance business have been deducted.

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

(3) The supervisory authority may require that further allocations be made to the Deckungsstock in addition to the minimum requirement under subsection 1a above if this is deemed necessary to safeguard the interests of the insured.

(3a) For the purpose of the Deckungsstock, unencumbered real property and similar rights shall be rated at their balance sheet value. If the balance sheet value is higher than the market value the latter shall be used. The supervisory authority may permit an adequate increase in this value if and in so far as it has been proved by an expert opinion that the market value exceeds the balance sheet value by at least 100 per cent. In the case of encumbered real property and similar rights the supervisory authority shall determine the value on a case-by-case basis. The supervisory authority shall be informed about the values used in compliance with the reporting requirement under section 54d above.

(4) There shall not be any allocation requirement with respect to the Deckungsstock only in cases where a special security deposit has to be made abroad for certain insurances out of the premium income.

(5) The Deckungsstock (cash, securities, deeds, etc.) shall be managed separately from all the other assets and kept at the head office of the undertaking; the supervisory authority shall be informed about the manner in which it is kept; it may permit the Deckungsstock to be kept at a different place.

(6) The individual assets of the Deckungsstock shall be entered into a list. The rules regulating the Deckungsstock shall apply to all assets in the list. Any usufruct in connection with the assets of the Deckungsstock shall be deemed to be part of the Deckungsstock even if this has not been entered in the list. Any claims with respect to advances or loans on the policies of an undertaking may, in so far as they are part of the assets of the fund, be entered in aggregate amounts. As regards claims secured by an encumbrance on real property and repayable in instalments the list shall be amended as prescribed by the supervisory authority; the same shall apply to encumbrances on real property not securing any personal claims. At the end of the financial year the supervisory authority shall be submitted a copy of the entries made during that year; the board of directors shall certify the accuracy of the copy. The supervisory authority shall keep the copy.

(7) Separate accounts may be established for the Deckungsstock with the approval of the supervisory authority. The rules regulating the Deckungsstock and the claims against it shall apply to each of the separate accounts accordingly.

Section 67

As regards reinsurance arrangements, the reinsured undertaking shall also keep and manage the assets of the Deckungsstock above for ceded insurance business in accordance with section 66.

Section 68 and 69

(repealed)

Section 70

A trustee and a deputy trustee shall be appointed to control the Deckungsstock. This shall not be applicable to kleinere Vereine (section 53 above) unless otherwise provided by the supervisory authority.

Section 71

(1) The trustee shall be appointed by the supervisory board. If a kleinere Verein does not have a supervisory board the trustee shall be appointed by the board of directors.

(2) Before the appointment the supervisory authority shall be informed about the name of the proposed trustee. If it has objections to the appointment it may require that another person be designated within a reasonable period of time. If this requirement is not met or if the supervisory authority also has objections to the freshly proposed trustee it may appoint the trustee itself.

(3) Subsection 2 above, second and third sentences, shall also be applicable if the supervisory authority has objections to an appointed trustee continuing in office.

Section 72

(1) The Deckungsstock shall be secured in such a way that disposition is possible only with the consent of the trustee; any further details shall be fixed by the supervisory authority.

(2) The trustee shall, in particular, keep the assets of the fund in joint custody with the insurance undertaking. He may not release any assets unless he is permitted to do so under this law; however, section 31 (2) and (3) of the Hypothekenbankgesetz shall apply accordingly.

(3) The trustee may approve any disposition only in writing; if an item is to be cancelled in the list of assets of the Deckungsstock it shall be sufficient for the trustee to write his name beside or underneath the notice of cancellation.

Section 73

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

Section 74

The trustee shall be authorised to inspect the books and records of the undertaking at any time in so far as they relate to the Deckungsstock.

Section 75

The supervisory authority shall decide disputes between the trustee and the insurance undertaking concerning the trustee’s duties.

Section 76

Sections 71 to 75 above shall also be applicable to the deputy trustee.

Section 77

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

(2) Disposition of the assets of the Deckungsstock by execution or execution of attachment or arrest (Arrestvollziehung) shall not be permitted unless allocations to the Deckungsstock have been prescribed (section 66 (1) to (4) above) and actually been made with respect to the claim for the purpose of which any such execution has been ordered.

(3) Life insurance contracts shall be terminated with the institution of insolvency proceedings; the insured may claim the amounts of the mathematical provision due to them at the time of institution of bankruptcy proceedings; any additional claims arising out of the insurance contracts shall thereby not be affected.

(4) In the case of satisfaction out of the assets of the Deckungsstock (section 66 (6) above) any claims to the mathematical provision shall, to the extent that allocations to the Deckungsstock have been prescribed for them (section 66 (1) to (4) above), rank before the claims of any other creditors. All such claims shall have the same ranking. As regards the insured’s right to satisfaction out of the other assets of the undertaking the provisions of sections 52, 190, and 192 of the Insolvenzordnung relating to the creditors entitled to preferential treatment shall apply accordingly.

(5) Preferential rights in favour of the insured of a life insurance undertaking and of the insured of a health and accident insurance undertaking of the kind specified under section 12 which have their head office in an EC Member State or another EEA Member State shall be recognized for the purpose of domestic insolvency proceedings if the ranking requirement of subsection (4) above has been met and reciprocity has been guaranteed.

Section 78

(1) The bankruptcy court shall appoint a guardian for the insured to protect their rights in accordance with section 77 above. For the purpose of guardianship the insolvency court shall take the place of the guardianship court.

(2) The guardian shall determine the size of the existing Deckungsstock and determine and file claims of the insured.

(3) The guardian shall to the extent that this is feasible consult the insured before filing a claim and notify them after filing and inform them, on request, about any facts relevant to their claims. The right of the individual insured to file himself a claim shall not be affected. If there is a difference between the claim filed by the insured and the claim filed by the guardian the filing which is more favourable to the insured shall be applicable until the difference has been eliminated.

(4) The receiver shall permit the guardian to inspect all books and records of the debtor and disclose to him all the assets of the Deckungsstock on request.

(5) The guardian shall be entitled to a reasonable remuneration for discharging his duties. His recoverable expenses and remuneration shall be charged to the Deckungsstock.

(6) The supervisory authority shall be consulted prior to the appointment of the guardian and the fixing of his remuneration.

Section 79

For the purpose of health insurances of the kinds specified under section 12 above, sections 66 to 78 above shall apply while for the purpose of accident insurances of the kinds specified under section 11d above and pension payments within the framework of accident insurance, sections 65 to 67, 77 and 78 above shall apply accordingly.

Section 79a

Sections 70 to 76 shall not apply to insurance undertakings under public law.

Section 80

(repealed)

V. Supervision of insurance undertakings

1. Duties and powers of the supervisory authorities

Section 81

(1) The supervisory authority shall control all business operations of insurance undertakings within the framework of general legal supervision and specific financial supervision. It shall ensure that the interests of the insured are adequately safeguarded and the laws applicable to the operation of insurance business are observed. It shall perform the duties assigned to it under this law and other laws only in the interest of the public. The objective of legal supervision shall be proper operation of insurance business including observance of the supervisory provisions, provisions concerning the insurance contracts and any other provisions concerning the insured as well as of the legal bases of the operating plan. The supervisory authority shall ensure within the framework of financial supervision that the liabilities under the insurance contracts may be fulfilled at any time and, in particular, adequate technical provisions are established and invested in proper assets, the principles of good business practice including sound administrative and accounting procedures and adequate internal control mechanisms are complied with, the undertakings dispose of an adequate solvency and that the other financial bases of the operating plan are observed.

(2) The supervisory authority may with respect to the undertakings, the members of their board of directors and other managers or directors, or controllers take any orders which are appropriate and necessary to prevent or remedy any irregularities. An irregularity shall be deemed to be any conduct of an insurance undertaking which conflicts with the supervisory objectives under subsection 1 above. The supervisory authority may, in particular, prohibit combinations of loan transactions and insurance contracts to the extent that the sum insured exceeds the loan. It may also prohibit the insurance undertakings or the intermediaries of insurance contracts, either generally or for individual classes of insurance, from granting the policyholders any special allowances in some form or other; it may also prohibit the insurance undertakings, either generally or for individual classes of insurance, from concluding and renewing beneficiary contracts. The orders in accordance with the third sentence shall become effective one month from their publication in the Bundesanzeiger (Federal Gazette); as regards insurance undertakings subject to supervision by the states (Länder) publication in the journal designated for official publications of the governments of the states (Länder) shall be sufficient.

(2a) If in the cases referred to in subsection 2 above and section 89 below the interests of the insured cannot be safeguarded otherwise, the supervisory authority may transfer powers which the bodies of the undertaking hold in accordance with the law or articles of association wholly or partly to a special representative who is suited to execute these powers. The insurance undertaking shall be charged with any costs arising from the appointment of the special representative, including the remuneration to be paid to him. The amount of this remuneration shall be fixed by the supervisory authority. If the insurance undertaking is temporarily not in a position to pay this remuneration, the supervisory authority may make advance payments to the special representative. If the special representative is not entitled to any remuneration for his activities, he shall be liable only for damage caused intentionally or by gross negligence.

(3) (repealed)

(4) The supervisory authority may give orders according to subsection 2 above, first sentence, also directly to other undertakings if they perform on behalf of an insurance undertaking

a) activities which may be the subject matter of an outsourcing contract (section 5 (3) (4) above) or

b) services under contracts according to section 53d above.

The supervisory authority shall have the same power with respect to publishers that took out insurances with an insurance undertaking to cover the subscribers of newspapers or magazines published by them.

Section 81a

The supervisory authority may require that the operating plan be amended before new insurance contracts are entered into. The supervisory authority may amend or annul an operating plan with effect on existing insurance contracts or those not yet terminated if this is considered necessary to safeguard the interests of the insured.

Section 81b

(1) If the own funds of an insurance undertaking fall below the solvency margin the insurance undertaking shall submit, on request, to the supervisory authority a plan for the restoration of a sound financial position (solvency plan) for approval. Are there any indications of the financial position continuing to deteriorate the supervisory authority may notwithstanding the measures permitted under section 81 (2) above restrict or prohibit free disposal of the assets of the undertaking under exceptional circumstances.

(2) If the own funds of an insurance undertaking fall below the assets of the guarantee fund or cannot be allowed for this fund to the required extent the undertaking shall deposit with the supervisory authority, at its request, a plan for the short-term procurement of the necessary own funds (financial plan) for approval. In addition the supervisory authority may notwithstanding the measures permitted under section 81 (2) above limit or prohibit free disposal of the assets of the undertaking.

(3) If there is a risk of an investment jeopardising the solvency of the insurance undertaking the supervisory authority may also give orders in cases where the investment is not part of the restricted assets.

(4) Subsection 2 above, second sentence, shall apply accordingly if an insurance undertaking does not establish adequate technical provisions, not properly represent its technical provisions or if it derogates from the localisation requirement of section 54a (6) above without this having been permitted by the supervisory authority.

Section 81c

(1) In life insurance an irregularity jeopardising the interests of the insured shall also be deemed to exist if no adequate allocations are made to the provision for premium refunds for the purpose of with-profit insurances. This shall particularly be assumed to be the case if the allocations to the provision for premium refunds of a life insurance undertaking, taking into account direct crediting and the technical interests, do not meet the minimum allocation requirement subject to the investment returns. Development of the mortality risk and the solvency requirement of the life insurance undertakings shall be taken into account for this purpose. Notwithstanding the measures permitted under section 81 (2) above, first sentence, and section 87 below the supervisory authority may require that the life insurance undertaking submit a plan which will secure that adequate allocations are made to the provision for premium refunds if the allocations to the provision do not comply with the minimum requirements of the ordinance.

(2) As regards life insurances written before 29th July, 1994, an irregularity jeopardising the interests of the insured shall in particular be deemed to exist notwithstanding subsection 1 above, second sentence, if the average refund rate of a life insurance undertaking in the last three financial years does not correspond with the standard refund rate established on the basis of the average rate for all life insurance undertakings. Notwithstanding the measures permitted under section 81 (2) above, first sentence, and section 87 below the supervisory authority may in this case require the undertaking to submit for approval a plan which will secure that adequate allocations are made to the provision for premium refunds. The refund rate shall correspond to the relation, expressed as a percentage, between the amount made up of the technical interests, directly credited bonuses and allocations to the provision for premium refunds and the amount made up of the normal mortality gain and normal interest earnings.

(3) The Federal Finance Ministry shall have the power for the purpose of safeguarding the interests of the insured while taking into account the market conditions with respect to subsection 1 above to lay down by ordinance provisions concerning allocations to the provision for premium refunds, in particular minimum allocations subject to investment returns, and with respect to subsection 2 above to fix the amount of the standard refund rate and to stipulate provisions concerning the calculation of the normal mortality gain and normal interest earnings. The above power may be transferred by ordinance to the BAV which shall lay down the provisions in consultation with the supervisory authorities of the states (Länder).

(4) Subsections 1 and 3 above shall also apply to pensions funds in accordance with section 156a (3) below, fifth sentence. Otherwise subsections 1 to 3 above shall not be applicable to pension and death benefit funds.

Section 81d

(1) An irregularity jeopardising the interests of the insured shall also be deemed to exist in health insurance treated in the same way as life insurance if no adequate allocations are made to the provision for profit-related premium refunds. This shall, in particular, be deemed to be the case, unless there is no profit participation due to the type of business operated, if the allocations to the provision for profit-related premium refunds of a health insurance undertaking do not comply with the rate stipulated for allocations by ordinance in accordance with subsection 3 above. The rate for such allocations shall be a percentage of the sum made up of the annual profit and the expenditure for profit-related premium refunds. For this purpose any direct crediting and an average solvency requirement of the health insurance undertakings shall be taken into account.

(2) Notwithstanding the measures permitted under section 81 (2) above, first sentence, and section 87 below the supervisory authority may require the health insurance undertaking to submit a plan which will secure adequate allocations to the provision for profit-related premium refunds if the allocations to the provision do not comply with the minimum requirement of the ordinance in accordance with subsection 3 above.

3) The Federal Finance Ministry shall have the power to lay down by ordinance for the purpose of safeguarding the interests of the insured provisions concerning the minimum allocation to the provisions for profit-related premium refunds, in particular the rate of such allocations. This power may be transferred by ordinance to the BAV which shall lay down the provisions in consultation with the supervisory authorities of the states (Länder).

Section 81e

An irregularity within the meaning of section 81 (2) above shall also be deemed to be rate provisions and premium calculations on the basis of the nationality of the policyholder or insured or his belonging to an ethnic group.

Section 82

(1) If an insurance undertaking holds a participation in another undertaking which is not subject to supervision and if the participation is due to its nature and size able to imperil the insurance undertaking, the supervisory authority may prohibit the insurance undertaking from maintaining its participation or permit to maintain it only on condition that the undertaking consents to an inspection being carried out at its own expense or at the expense of the insurance undertaking in accordance with section 341k of the Handelsgesetzbuch and sections 58 and 59 above of this law. If the undertaking refuses to be so inspected or if the inspection gives rise to any objections to holding a participation the supervisory authority shall prohibit the insurance undertaking from maintaining its participation.

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

Section 83

1) The supervisory authority shall be authorised

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

2. to carry out inspections of the business operations of the undertakings on their premises, even without any particular reason,

3. also to carry out inspections by way of taking part in an inspection performed by the insurance undertaking in accordance with section 341k of the Handelsgesetz-buch and obtaining itself the information it requires; this shall not apply to insurance undertakings which have been recognised as “kleinere Vereine” (section 53 above),

4. to have persons take part in the inspections according to paragraphs 2 and 3 who may be appointed inspectors according to section 341k in conjunction with section 319 of the Handelsgesetzbuch; the provisions of section 323 of the Handelsgesetzbuch regarding auditors shall apply to these persons accordingly,

5. to send to meetings of the supervisory board and general meetings of shareholders or meetings of the supreme representation representatives who shall be granted the right to speak on request,

6. to require that the meetings under paragraph 5 above are called and certain subjects are put on the agenda on which to take decisions.

The undertakings shall be required to tolerate measures taken in accordance with the first sentence, paragraphs 2 to 4.

(2) If there is reason to assume that a person is carrying on insurance business without permission the supervisory authority may, to clarify the matter, require that any such person and, in case of any legal person, also the members of its executive bodies supply information and submit documents about the business activities. In these cases it may, to clarify the matter, also perform inspections on the premises where the relevant activities are assumed to be carried out.

(3) The staff of the supervisory authority and any persons pursuant to subsection 1 (4) above shall be permitted access to the premises of the insurance undertaking to perform the inspections in accordance with subsection 1 (2) and (3) above and in the cases mentioned in subsection 1 (5) above. The basic right of article 13 of the Grundgesetz (Basic Law) shall be limited accordingly.

(4) The staff of the supervisory authority shall have access to the premises mentioned in subsection 2 above, second sentence, to perform the inspections in accordance with subsection 2 above. Subsection 3 above, second sentence, shall apply accordingly. If the premises mentioned in the first sentence are also used for residential purposes, a judicial search warrant shall be required. This warrant shall be issued by the competent court of the area where the premises to be searched are located. Sentences 2 and 3 shall also apply to the inspections under subsection 3 above if the premises are also used for residential purposes or if the business documents are located at other premises which are used for residential purposes by the persons required to supply information according to subsection 1 (1) above.

(5) If a person

1. intermediates or has intermediated insurance contracts for an insurance undertaking in his capacity as insurance agent or insurance broker, or

2. carries on for an insurance undertaking activities which may be the subject matter of an outsourcing contract (section 5 (3) (4) above), or

3. renders services under contracts in accordance with section 53d above,

subsection 1 (1), (2), and4) above and subsection 3 above shall apply accordingly. As regards the cases under paragraph 1, this shall apply only in so far as it is essential to judge the business operations and financial position of the insurance undertaking.

6) Any person who is required to supply information in accordance with subsections 1, 2 or 5 above may refuse to answer any questions which would subject him or any of his relatives in accordance with section 383 (1) (1) to (3) of the Zivilprozeßordnung (Code of Civil Procedure) to the risk of prosecution or a procedure according to the Gesetz über Ordnungswidrigkeiten (Law on Administrative Offences).

Section 84

(1) The personnel employed or authorised by the supervisory authorities and the members of the Versicherungsbeirat (section 92 below) shall not pass on any confidential information obtained in connection with their activity to any other person or authority. This shall also apply to any other persons who get access to the information mentioned in the first sentence by way of official reporting. The first and second sentences shall not apply to information passed on in summary or aggregate form where it is not possible to identify the individual insurance undertakings.

(2) The secrecy requirement in accordance with subsection 1 above, first sentence, shall not prohibit the exchange of information with the competent authorities of other EC Member States and other EEA Member States and the Commission in compliance with the EC Council directives applicable to the insurance undertakings. The information obtained for the purpose of such exchange shall come under the secrecy requirement of subsection 1 above, first sentence. An exchange of information with the competent authorities of foreign States which are not EC and EEA Member States shall only be permitted if these authorities and the persons authorised by them are subject to secrecy in accordance with subsection 1 above, first sentence.

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

1. for the examination of an application for authorisation of an insurance undertaking,

2. for the control of the activity of an insurance undertaking,

3. for orders of the supervisory authority and for handling and punishing administrative offences by the supervisory authority,

4. within the framework of an administrative procedure concerning remedies against a decision by the supervisory authority,

5. within the framework of proceedings in administrative courts, insolvency courts, at public prosecutor’s offices or in the competent courts for administrative fine and criminal matters.

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

1. public prosecutor’s offices or the competent courts for administrative fine and criminal matters,

2. bodies and persons authorised by them which have been entrusted by virtue of the law or by public order with the control of insurance undertakings, credit institutions and other financial institutions or the financial markets,

2a. central banks,

3. bodies entrusted with the liquidation or insolvency of an insurance undertaking,

4. persons entrusted with the legal auditing of the accounts of insurance undertakings or other financial institutions, or

5. institutions for the management of guarantee funds, to the extent that these bodies require the information to fulfil their duties. The secrecy requirement in accordance with subsection 1 above, first sentence, shall apply to persons employed by them accordingly. If the body in question is situated in another state the information shall not be passed on unless the body in question and the persons authorised by it are subject to the secrecy requirement under subsection 1 above, first sentence.

(5) Confidential information which the supervisory authority obtained from the bodies mentioned in subsection 2 above, first sentence, and subsection 4 (2) to (4) above may not be passed on by way of official reporting (subsection 1 above, second sentence) unless the competent authority which has given the information has approved. The same shall apply to information obtained during on-site inspection of a branch in another EC or EEA Member State (section 13b above); in this case approval by the competent authority of the EC or EEA Member State, where the on-site inspection has been carried out, shall be required.

Section 85

Supervision shall not be limited to domestic business but also cover business carried on in other EC Member States and other EEA Member States through branches or on a freedom of services basis. While financial supervision shall be the sole responsibility of the BAV, any supervisory function other than financial supervision shall be performed in cooperation with the supervisory authority of the other Member State.

Section 86

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

Section 87

(1) The supervisory authority may withdraw authorisation for certain classes of insurance or for the entire business operations if

1. the undertaking no longer meets the authorisation requirements,

2. the undertaking fails seriously in its obligations under the law or its operating plan, or

3. there is evidence of irregularities which are so serious that continuation of business will endanger the interests of the insured,

4. the insurance undertaking does not make use of the authorisation within a period of twelve months or expressly renounces it or ceased doing business more than six months ago.

(2) The supervisory authority shall be authorised to withdraw authorisation for the entire business operations, if the undertaking is not in a position to take within the specified period the measures envisaged in the solvency plan or financing plan in accordance with section 81b (1) or (2) above.

(3) In consequence of the withdrawal of authorisation the undertaking shall be prohibited from writing new business, increasing the insured sums of or renewing existing insurance contracts.

(4) If the authorisation is withdrawn the supervisory authority shall take all the measures necessary to safeguard the interests of the insured. It may, in particular, restrict or prohibit free disposal of the assets of the undertaking and entrust qualified persons with the management of the assets.

(5) For the purpose of mutual societies a withdrawal of authorisation for the entire business activities shall have the same effect as an order to liquidate. The withdrawal of authorisation shall be entered in the commercial register upon notification by the supervisory authority.

(6) If the supervisory authority becomes aware of any facts which would left an authorisation to be refused in compliance with section 8 (1), first sentence, paragraph 1 above it may instead of withdrawing the authorisation require the dismissal of the directors or managers responsible for such facts and also prohibit them from continuing to exercise their functions.

Section 87a

If an insurance undertaking abuses of the possibility under section 111 (2) below to have as leading insurer insurance undertakings from other EC Member States or other EEA Member States participate in co-insurances, the supervisory authority may with respect to this insurance undertaking give any order necessary to remedy the abuse. In serious cases the supervisory authority may also prohibit the insurance undertaking from writing such co-insurances or take the measures specified under section 87 (1) above. Section 87 (3) to (5) above shall apply accordingly. There shall, in particular, be abuse in cases where an insurance undertaking does not fulfil the duties generally attributable to a leading insurer or where it invites insurance undertakings to join the contract which are not entitled to do so in accordance with section 111 (2) below.

Section 88

(1) A petition for the institution of insolvency proceedings against the assets of an insurance undertaking may only be filed by the supervisory authority.

(2) The board of directors shall notify the supervisory authority as soon as the insurance undertaking has become insolvent. This shall apply accordingly if the assets of the insurance undertaking are no longer sufficient to cover its liabilities. This duty to disclose shall supersede the duty of the board of directors in accordance with other legal requirements to file a petition for the institution of insolvency proceedings in the case of insolvency or overindebtedness. If in the case of mutual societies and insurance undertakings under public law operating on the mutuality principle which are subject to the payment of supplementary or required contributions any such payments of supplementary or required contributions have been outstanding for five months after their due date, the board of directors shall determine whether there will be overindebtedness if the supplementary or required contributions not paid in cash are disregarded; if there is overindebtedness the board shall inform the supervisory authority within one month after expiry of the specified period of time. Liquidators shall be subject to the same duties.

Section 89

(1) If it appears from an investigation into the management and financial situation of an undertaking that it will no longer be able to meet its liabilities in the long run but that it seems to be in the best interest of the insured to avoid insolvency proceedings, the supervisory authority may give the necessary orders and also require the representatives of the undertaking to change the bases for carrying on business within a certain period of time or otherwise to remedy any irregularities. All kinds of payments, in particular the payment of insurance benefits, profit distributions and for the purpose of life insurance surrenders or policy loans or advances on same may temporarily be prohibited.

(2) Subject to the conditions under subsection 1 above, first sentence, the supervisory authority may, if necessary, reduce the liabilities of a life insurance undertaking under its insurance contracts in accordance with its financial situation. The supervisory authority may, in doing so, require different reductions if this is justified by the circumstances, in particular if in the case of several groups of insurances the individual groups have contributed differently to the emergency situation of the undertaking. For the purpose of reductions in a first step the mathematical provisions shall be reduced in cases where mathematical provisions are established for the individual insurance contracts, and in a second step the sums insured shall be freshly determined, while in the absence of such provisions there shall be direct reduction of the sums insured. The obligation of the policyholders to continue payment of the agreed premiums shall not be affected by the reduction.

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

Section 89a

Any objection to and action to rescind measures in accordance with section 81 (2a) above, section 81b (1), second sentence, subsection 2, second sentence, and subsection 4 above, sections 83, 87 (1) (2) and (3) and subsection 4 above, sections 88 and 89 above shall not have any suspensive effect.

2. Bundesaufsichtsamt für das Versicherungswesen

Section 90

(1) (repealed)

(2) The president of the BAV shall be nominated by the Federal Government and appointed by the Federal President. The Federal President shall also appoint permanent members of the BAV who have been nominated by the Federal Finance Minister. The permanent members shall be appointed for life.

(3) The other officials shall be appointed by the Federal Finance Minister.

(4) The members of the BAV may not be managers or employees of insurance undertakings under public law at the same time.

Section 91

(repealed)

Section 92

(1) A Versicherungsbeirat inside the BAV composed of insurance experts shall assist the BAV with its supervisory functions; the members of the Versicherungsbeirat shall be nominated by the Federal Finance Minister and appointed by the Federal President for a period of five years.

(2) The members of the Versicherungsbeirat shall give expert advice when important decisions are prepared and participate in decisions of the Beschlußkammern (decision taking sections) by exercising a right to vote.

(3) They shall serve in an honorary capacity without remuneration; for the purpose of attendance of the meetings they shall be entitled to daily allowances and reimbursement of their travel expenses the rates of which shall be fixed by the Federal Finance Minister.

Section 93

(1) The BAV may ensure compliance with injunctions which it grants within the scope of its legal powers using the means to enforce administrative acts of which it disposes under the provisions of the Verwaltungs-Vollstreckungsgesetz (Law on Enforcement in Administrative Procedure). It may make use of means to enforce administrative acts also with respect to insurance undertakings which are legal persons under public law.

(2) Administrative fines of up to DM 50,000 may be imposed.

Section 94 to 100

(repealed)

Section 101

(1) The costs with respect to the BAV and its procedures shall be reimbursed to the Federal Government by the insurance undertakings subject to its supervision through the payment of fees in accordance with subsection 2 below; the costs also include the expenses arising from the employment of inspectors in accordance with section 83 (1) (4) above. To the costs shall be added any fees which were not received in the preceding year.

(2) The total amount of the fees shall equal nine tenths of the costs under subsection 1 above. A rate of one thousandth of the premium income subject to the payment of fees shall not be exceeded. The fees shall be determined on the basis of the gross income (gross premiums, contributions, advance and supplementary contributions, required contributions) which the direct insurance undertakings realised in the last financial year under insurance contracts concluded in the EC Member States and other EEA Member States and which undertakings exclusively operating reinsurance business realised under insurance contracts concluded within the country, however, after deduction of any returned surplus or profit participations.

(3) The BAV shall annually determine the rate of the fee as a certain thousandth rate of the premium income subject to fees. In doing so it may round off the income subject to fees and the fees in accordance with principles to be approved by the Federal Finance Minister. The Federal Finance Minister may fix a minimum fee.

(4) The fees shall be determined by the BAV; it shall send to the undertakings a plan showing distribution of the fees and require them to deposit their fees with the Bundeshauptkasse (Federal Chief Cash Office) within a period of one month. After expiration of this period any amounts due may be collected like public charges.

Section 102

The BAV may in the case of a procedure of taking evidence initiated by unfounded petitions or complaints and in the case of an unsuccessful appeal charge any cash expenses wholly or partly to the applicants.

Section 103

(1) The BAV shall annually publish information about the state of affairs of the insurance undertakings subject to its supervision and its observations with respect to the insurance sector.

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

Section 103a

(1) As of 1st January, 1996, at the latest the BAV shall publish general probability tables not linked to special rates and other relevant statistical data for the purpose of health insurance within the meaning of section 12 (1) above.

(2) Insurance undertakings operating health insurance with their head offices within the country shall be required annually to notify to the BAV the data required for publication in pursuance of subsection 1 above on the basis of data obtained from their insurance portfolios. It shall be stipulated in the ordinance under section 12c above the kind of insurance portfolios and data to be taken into account.

Va. Supervision of the holders of qualifying participations in insurance undertakings

Section 104

(1) Any person who intends to hold a qualifying participation (section 7a (2) above, third sentence) in an insurance undertaking shall notify to the supervisory authority the amount of the intended participation without delay. This notice shall contain all the facts necessary to judge whether the requirements under section 7a (2) above, first and second sentences, have been met; the documents mentioned under section 5 (5) (6) (c) and (d) above shall be deposited with the supervisory authority on its request and audited by an auditor to be designated by the supervisory authority at the expense of the prospective holder. If the holder is a legal person or partnership it shall during the entire period it holds such qualifying participation immediately give notice of any newly appointed legal or statutory representative or new personally liable partner including all the facts necessary to judge his good repute. Furthermore, the holder of a qualifying participation shall immediately notify the supervisory authority if it intends to increase its participation by an amount resulting in the limits of 20 per cent, 33 per cent or 50 percent of the voting rights or nominal capital being reached or exceeded or in the insurance undertaking becoming a subsidiary (section 7a (2) above, sixth sentence). The supervisory authority may prohibit the intended acquisition of a qualifying participation or its increase within a period of three months of receipt of the notice if there are facts from which it may be concluded that the prospective holder giving such notice or, if the holder is a legal person or partnership, the legal or statutory representatives or personally liable partners are not of good repute; this shall also apply if there are any other facts which would entitle the supervisory authority not to grant authorisation in accordance with section 8 (1) above, first sentence, paragraph 2 or second sentence. If acquisition is not refused the supervisory authority may determine a period of time after the expiration of which the prospective holder shall notify the supervisory authority without delay if it has not complied with the intention expressed in the first or fourth sentence above.

(2) If there are facts which give reason to doubt that the holder of a qualifying participation meets the requirements under section 7a (2) above, first and second sentences, or that the structure of the affiliation of undertakings (section 15 of the Aktiengesetz) allows an effective supervision of the insurance undertaking the supervisory authority may take the measures permitted under subsection 1 above, second half of the second sentence. The supervisory authority may prohibit the holder of a qualifying participation from exercising its voting rights if

1. there are facts from which it may be concluded that the influence of the participating undertaking exercised by the holder, or by legal or statutory representatives or personally liable partners may be detrimental to the insurance undertaking,

2. there are facts from which it may be concluded that the requirements under section 7a (2) above, first and second sentences, are not complied with,

3. there are facts from which it may be concluded that there is an affiliation between the insurance undertaking and the holder of a qualifying participation and that due to this affiliation of undertakings or the structure of the affiliation of the undertaking holding a qualifying participation with other undertakings an effective supervision of the insurance undertaking is not possible, or

4. any such participation has been acquired or increased notwithstanding an enforceable refusal in accordance with subsection 1 above, fifth sentence.

In the cases of the second sentence exercise of the voting rights may be transferred to a trustee. The trustee shall in executing his voting right take into account the need to ensure a sound and prudent management of the insurance undertaking. The trustee shall be appointed at the request of the insurance undertaking, a holder in the undertaking or the supervisory authority by the competent court of the place where the insurance undertaking has its head office. If the requirements of the second sentence are no longer applicable the supervisory authority shall file an application for cancellation of the appointment of the trustee. The trustee shall be entitled to being refunded his reasonable expenses and to a remuneration for this services. The court shall determine the amount of the expenses and the remuneration at the request of the trustee; the decision shall not be subject to further appeal. The Federal Government shall advance the expenses and remuneration; the holder of the qualifying participation and the insurance undertaking shall be jointly and severally liable for the payments made by the Federal Government.

(3) Any person who intends to give up a qualifying participation in an insurance undertaking or to reduce the amount of a qualifying participation such that it falls below the levels of 20 per cent, 33 per cent or 50 per cent of the voting rights or nominal capital or to change the participation in such a way that the insurance undertaking is no longer a subsidiary, shall notify the supervisory authority accordingly stating the amount of the remaining participation.

(4) The supervisory authority shall provisionally prohibit or limit the acquisition of a direct or indirect participation in an insurance undertaking as a result of which the insurance undertaking would become the subsidiary of an undertaking located outside the EC and the other EEA Member States if a decision has been taken by the Commission or Council of the European Communities to this effect in accordance with article 29b (4) of the first directive 73/239/EEC of 24th July 1973, on the coordination of laws, regulations and administrative provisions relating to the taking-up and pursuit of the business of direct insurance other than life assurance (OJ of the EC no. L 228, p. 3) or article 32b (4) of the first directive 79/267/EEC of 5th March 1979, on the coordination of laws, regulations and administrative provisions relating to the taking up and pursuit of the business of direct life assurance (OJ of the EC no. L 63, p. 1). Any provisional prohibition or limitation shall not exceed a period of three months from the date the decision was taken. If the EC Council decides to prolong the period mentioned in the second sentence the supervisory authority shall comply with this prolongation.

(5) Any objection to and action to rescind measures in accordance with subsection 1 above, fifth sentence, subsection 2 above, second sentence, and subsection 4 above shall not have any suspensive effect.

(6) The Federal Finance Ministry shall have the power to lay down by way of ordinance any provisions with respect to the nature, extent, and date of submission of the information to be provided in accordance with subsections 1 and 3 above to the extent that this is required for the supervisory authority to fulfil its duties. The above power may be transferred by ordinance to the BAV which shall stipulate the regulations in consultation with the supervisory authorities of the states (Länder).

VI. Insurance undertakings which have their head office abroad

1. Undertakings whose office is not in an EC Member State
or EEA Member State

Section 105

1) Insurance undertakings whose head office is not in an EC Member State or EEA Member State and which carry on direct insurance business within the country through persons acting on behalf of the undertaking shall be subject to authorisation.

(2) The special requirements of sections 106 to 110 below shall apply to these undertakings in addition to the other requirements of this law which shall apply accordingly.

Section 106

(1) (repealed)

2) The undertakings shall establish within the territory of application of this law a branch where they shall keep all records concerning the branch. The provisions of sections 13d to 13f of the Handelsgesetzbuch relating to branches shall be applied accordingly. Separate accounts shall be established for business activities of the branch. Sections 55 and 55a above shall be applicable on condition that

1. also the annual accounts and status report of the principal branch are sent to every insured in German, on request,

2. the internal report comprises the annual accounts and status report published in the home country of the undertaking in the language of the home country and in German and the report submitted to the supervisory authority of the home country in the language of the home country.

(3) An authorised agent shall be appointed for the branch who shall have his domicile and permanent residence in the territory of application of this law. He shall meet the same obligations and personal requirements which this law prescribes for the board of directors of an undertaking whose head office is in the country. He shall be deemed to have power to bind the undertaking in relation to third parties, in particular to write insurance contracts with policyholders in the territory of application of this law and referring to real estates located in the country and to represent the undertaking in relations with the authorities and courts. The authorised agent shall be entered into the commercial register.

(4) If securities have to be provided in accordance with the provisions below the BAV may reserve the right in the repayment conditions to dispose of these securities in the interest of the insured.

Section 106a

(repealed)

Section 106b

(1) The Federal Finance Minister shall decide any proposal to take up insurance business to be submitted to the BAV. The following shall be submitted together with the proposal

1. the operating plan and the information and records mentioned in section 5 (4), third and fourth sentence, and subsection 5 above for the branch including the articles of association of the undertaking; at the same time the members of the body which is the legal representation of the undertaking and of a supervisory body shall be appointed;

2.a certificate of the competent authority in the home country stating

a) that the undertaking may, in its home country, acquire rights and incur liabilities, sue and be sued in court, under its own name,

b) which classes of insurance the undertaking may operate and which types of risks it actually covers;

3. the balance sheet and the profit and loss account for each of the last three financial years; if the undertaking has been in business for less than three years these documents shall be deposited for each of the financial years in which it has been in business.

(2) The financial resources requirements of section 8 above shall be met. The undertaking shall be obliged to establish own funds at least in the amount of a solvency margin which is determined in accordance with the volume of business of the branch. These funds shall be located in an amount equal to the guarantee fund in the territory of application of this law, otherwise in the territory of the EC Member States or another EEA Member State. The minimum amount of the guarantee fund shall not be less than 50 per cent of the amount specified in accordance with section 53c (2) above. Moreover, the undertaking shall be obliged to furnish the required securities (fixed and variable guarantee deposits). The fixed guarantee deposit shall amount to at least 25 per cent of the minimum guarantee fund specified in section 53c (2) above. The fixed guarantee deposit shall be counted towards the own funds.

(3) If business operations are to be extended to other classes of insurance or to another area within the territory of application of this law, subsections 1 and 2 above shall apply accordingly.

(4) Authorisation may be granted if

1. the BAV, after consulting the Versicherungsbeirat, issues an opinion to the effect that none of the grounds of section 8 (1) above for denying the authorisation exists,

2. the requirements of section 106 (2) and (3) above have been met, and

3. the amount required as fixed guarantee has been deposited.

(5) For the purpose of an undertaking which has been authorised or has applied for authorisation to carry on business in another EC Member State or another EEA Member State it may be permitted, upon request and subject to revocation

1. that the solvency margin is calculated on the basis of its total business operations in the EC Member States or the other EEA Member States,

2. that own funds in an amount equal to the guarantee fund may be located in another EC Member State or another EEA Member State in which the undertaking is doing business,

3. that the undertaking is relieved of the obligation to deposit a security guarantee within the territory of application of this law.

The Federal Finance Minister shall grant the authorisation to carry on business while in all the other cases the authorisation shall be granted by the BAV. Authorisation shall be withdrawn by the BAV.

(6) (repealed)

(7) The BAV shall withdraw authorisation if

1. the undertaking has been withdrawn authorisation to do business in its home country,

2. in the case of subsection 5 above the authorisation to do business is withdrawn in another EC Member State or another EEA Member State because of insufficient own funds.

Section 87 above shall not be affected. The Federal Finance Minister may withdraw authorisation if this is deemed to be in the public interest.

(8) If the competent authority which controls the financial resources of the undertaking for its entire business activities in the EC Member States or another EEA Member State has limited the right to dispose of the assets of the undertaking because of insufficient own funds, the BAV shall, at the request of this authority, take appropriate measures with respect to the assets located in the territory of application of this law. Section 81b (4) above shall not be affected.

Section 106c

Insurance undertakings operating life insurance together with other classes of insurance shall not be authorised to operate life insurance business in the territory of application of this law. Whether this provision shall also be applicable to health insurance depends on section 8 (1), first sentence, paragraph 3 above.

Section 107

Foreign insurance undertakings which have been granted authorisation to carry on business according to section 105 above shall be permitted to conclude insurance contracts with policyholders who have their usual residence in the territory of application of this law and insurance contracts covering real estate located there only through authorised agents residing in the territory of application of this law.

Section 108

(1) If the insurance portfolio of a domestic branch (section 106 (2) above) is transferred to the domestic branch of another insurance undertaking which has its head office not in an EC Member State or another EEA Member State, and if the financial resources of the branch of such latter insurance undertaking are controlled by the supervisory authority of another EC Member State or another EEA Member State, availability of the required own funds of the transferee undertaking in accordance with section 105 (2) above, in conjunction with section 14 (1) above, shall be proved by a certificate made out by this authority. The securities furnished by a branch for the transferred portfolio shall be maintained unless the competent authority of the transferee undertaking decides otherwise.

(2) A contract by which the insurance portfolio of a branch (section 106 (2) above) is to be transferred wholly of partly to an undertaking whose head office is in another EC Member State or in another EEA Member State shall be approved by the BAV. This approval shall not be granted unless it has been proved by a certificate made out by the supervisory authority of the home country that the transferee company will dispose of own funds in an amount equal to the solvency margin after the transfer.

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

Section 109

(repealed)

Section 110

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

(2) A trustee in pursuance of sections 70 to 76 above shall not be appointed. The Deckungsstock for these insurances shall be secured in accordance with more detailed specifications by the BAV in such a way that it can only be disposed of with its approval.

2. Undertakings which have their head office in an EC Member State or another EEA Member State

Section 110a

(1) Insurance undertakings which have their head office in another EC Member State or another EEA Member State (home Member State) may, with the exception of the undertakings mentioned in section 110d below, carry on direct insurance business in the country via a branch or under the freedom of services provision through persons acting on behalf of the undertaking only according to subsection 2 below. Section 13a (1), second sentence and subsection 2 above shall apply accordingly.

(2) An undertaking shall not be permitted to take up business activity unless

1. the supervisory authority of the home Member State has submitted to the BAV,

a) for the purpose of an undertaking carrying on activities through a branch, the documents mentioned in article 10 (2), (3) (2) and paragraph 6 of the first Council directive of 24th July, 1973 (73/239/EEC) on the coordination of laws, regulations and administrative provisions relating to the taking-up and pursuit of the business of direct insurance other than life assurance (OJ of the EC no. L 228, p. 3) and in article 10 (2), (3) (2) and paragraph 6 of the first directive of 5th March, 1979 (79/267/ EEC) on the coordination of laws, regulations and administrative provisions relating to the taking-up and pursuit of the business of direct life assurance (OJ of the EC No. L 63, p. 1) and informed the undertaking accordingly, and unless in the case of the establishment of a branch, two months have elapsed since the undertaking has received any such information provided the BAV has not advised the undertaking of an earlier date,

b) for the purpose of an undertaking carrying on activities by way of provision of services, the documents mentioned in article 16 (1) and article 17 of the second Council directive of 22nd June, 1988 (88/357/EEC) on the coordination of laws, regulations and administrative provisions relating to direct insurance other than life assurance and laying down provisions to facilitate the effective exercise of freedom to provide services and amending directive 73/239/EEC (OJ of the EC no. L 172, p. 1) and in article 14 (1) and article 17 of the second Council directive of 8th November, 1990 (90/619/EEC) on the coordination of laws, regulations and administrative provisions relating to direct life assurance and laying down provisions to facilitate the effective exercise of freedom to provide services and amending directive 79/267/EEC (OJ of the EC no. L 330, p. 50), and informed the undertaking accordingly, and,

2. for the purpose of an undertaking operating health insurance within the meaning of section 12 (1) above and compulsory insurances, the undertaking has deposited the general insurance policy conditions with the BAV.

(3) Financial supervision of any such business activities shall be the sole responsibility of the supervisory authority of the home Member State, while otherwise supervision shall also be the responsibility of the BAV. The supervisory authority of the home Member State shall, for the purpose of financial supervision, be entitled to perform on the premises of the branch inspections of its business operations either by its own staff or persons who act on its behalf after prior information of the BAV; section 81 (1) above, third sentence, and section 83 (3) and (6) above shall apply accordingly.

(4) For the purpose of supervision by the BAV according to subsection 3 above the following shall apply in addition to the provisions of subsections 1 and 2 above:-

1. concerning the introductory provisions (I.), section 1 (1), (3) and (4) above and section 2 above

2. concerning the provisions on the authorisation to take up business (II.), sections 10 and 10a above, subject to the requirement that the consumer information to be supplied in accordance with part D, section I (1) (h) of the annex shall also contain the address of any other body which the policyholder may contact in case of complaints about the insurer under foreign law, sections 11b, 11c, 12 (1), (4) and (5) above, sections 12a, 12b (1) to (3) above, sections 12c to 12e and 13d (7) above,

3. concerning the provisions on the duties and powers of the supervisory authorities (V.1.),

a) section 81 (1), second, third, and fourth sentences, subsection 2 above, section 83 (1), first sentence, paragraphs 1 to 4, second sentence, subsections 2, 4 and 5, paragraphs 1 and 2, subsection 6 above, sections 89a and 93 above,

b) section 81 (4), first sentence, paragraph a above, and section 83 (3) above, in addition to the above, for an existing branch,

4. concerning the provisions on insurance undertakings which have their head office abroad (VI.), section 106 (3) above, fourth sentence and section 111b (1) above, second and third sentences.

Section 110b

(1) The underwriters of the Lloyd’s association of underwriters may not carry on business unless in the case of an execution against the assets of the underwriters located in the country the association renounces on behalf of the underwriters to derive any right from the fact that this is an execution also against the assets of underwriters to which this title is not applicable; this declaration of renunciation shall be irrevocable until the insurance contracts concluded in the country have been completely run off.

(2) Any claims in connection with insurance business carried on by the underwriters of the Lloyd’s association of underwriters through a branch in the country may only be enforced by legal action by and against the authorised agent. A title obtained according to the first sentence shall have an effect on the individual underwriters taking part in the insurance business, either in their favour or to their disadvantage. Section 727 of the Zivilprozeßordnung has to be applied accordingly. If a title is obtained against the authorised agent, it shall be possible to execute against the assets managed by him and located in the country of all underwriters of the Lloyd’s association of underwriters.

Section 110c

(repealed)

Section 110d

(1) Insurance undertakings which have their head office in another EC Member State or another EEA Member State and which are not subject to the EC Council insurance directives and wish to operate direct insurance business through a branch shall require an authorisation. The BAV shall decide the application of the undertaking.

(2) The provisions of sections 1 to 104 above shall be applied to these undertakings accordingly subject to the following:

1. the articles of association of the undertaking, and the balance sheet and profit and loss account for each of the last three financial years shall also be deposited; if the undertaking has been in business for less than three years, these documents shall be deposited for each of the financial years in which it has been in business;

2. the names of the members of the body authorised to legally represent the undertaking shall be disclosed;

3. the documents concerning the branch shall be kept there;

4. the requirements with respect to the financial resources are those defined in section 8 (1), first sentence, paragraph 3 above; section 53c (2a) above shall not be affected;

5. section 14 (1a) above shall not be applied.

In addition, section 106 (3) above and sections 106c and 110 (1) above shall apply accordingly. (3) Subsections 1 and 2 above shall also apply if business is to be carried on by way of the freedom of services provision through persons entitled to act on behalf of the undertaking; the provisions of subsection 2 above shall, however, not apply as they require the existence of a branch.

Sections 110e to 110i

(repealed)

Section 111

(1) Undertakings which only write the classes of insurance mentioned in part A (4) to (7) and (12) and the types of risks mentioned under 10 (b) shall not be subject to the provisions of this law.

(2) Further shall not be subject to the provisions of this law any undertakings which participate in insurance business in accordance with article 10 (1) of the Einführungs-gesetz zu dem Gesetz über den Versicherungsvertrag to be covered by co-insurance if they carry on business within the territory of application of the present law only through the leading insurer and not from the head office or a branch and if such co-insurance does not refer to compulsory third party liability insurance in connection with damage caused by nuclear energy or drugs. (3) The Federal Finance Minister shall have the power by way of an ordinance which is not subject to approval by the Bundesrat

1. to declare that subsections 1 and 2 above shall be applicable to insurance undertakings which have their head office not in an EC Member State or another EEA Member State if the interests of the insured are adequately safeguarded and the interests of the Federal Republic of Germany are not affected,

2. to rule that the provisions with respect to foreign undertakings which have their head offices in an EC or EEA Member State shall also be applicable to undertakings whose head offices are not in an EC or EEA Member State to the extent that this is necessary under agreements concluded between the European Community and non-Community Member States by virtue of the freedom of establishment or freedom of services legislation.

(4) If the requirements of subsection 3 (1) above have been met the Federal Finance Minister may also grant exemptions in individual cases by means of an administrative act.

VIa. Cooperation of the Bundesaufsichtsamt für das Versicherungswesen with the competent authorities of the other EC Member States or another EEA Member State in the field of direct insurance

Section 111a

(1) The BAV shall permanently inform the supervisory authorities of the other EC or EEA Member States about such legal provisions which the insurance undertakings having their head office in these States have to observe, when they carry on business in accordance with section 110a (1) above and the observance of which it controls within the framework of its supervisory duties excluding financial supervision (section 110a (3) above, first sentence, section 81 (1) above, first sentence). Provisions which the BAV has not disclosed pursuant to the first sentence shall be communicated to the supervisory authority of the home Member State within a period of two months from receipt of the information mentioned under section 110a (2) (1).

(2) The BAV shall disclose the information about health insurance published in accordance with section 103a (1) above to the supervisory authorities of the home Member States.

Section 111b

(1) If in the case of business activity according to section 110a (1) above, the undertaking does not comply with the requirements or orders of the BAV in accordance with section 81 (2) above, the BAV shall inform the supervisory authority of the home Member State about measures it intends to take in compliance with the second sentence and ask it for its cooperation. If this request does not show any results and if attempts to enforce orders by administrative acts or fines are futile or unsuccessful, the BAV may prohibit the undertaking from continuing to do business in the country wholly or partly if other measures are inadequate to reach the objective or impracticable (section 81 (2) above, section 110a (4) (3) above). In urgent cases the orders mentioned in the second sentence may be taken without informing the supervisory authority of the home Member State.

(2) If the supervisory authority of the home Member State intends to inspect a branch in accordance with section 110a (3) above, second sentence, the BAV shall provide administrative assistance on request. It may take part in the inspection; section 83 (3) and (6) above shall apply accordingly.

(3) If the BAV has reasons to believe that financial security of an undertaking carrying on activities in accordance with section 110a (1) above could be impaired it shall inform the competent authority performing financial supervision of the home Member State.

(4) If the supervisory authority of the home Member State imposes on an undertaking any limitations of free disposal in accordance with article 20 (1), (2) (2) or paragraph 3 (2) of the first Council directive of 24th July 1973 (73/239/EEC) on the coordination of laws, regulations and administrative provisions relating to the taking-up and pursuit of the business of direct insurance other than life assurance (OJ of the EC no. 228, p. 3) or article 24 (1), (2) (2) or paragraph 3 (2) of the first Council directive (79/267/EEC) of 5th March, 1979 on the coordination of the laws, regulations and administrative provisions relating to the taking-up and pursuit of the business of direct life assurance (OJ of the EC no. L 63, p. 1), the BAV shall, at the request of this authority, take the same measures with respect to the assets of the undertaking located in the country and covered by the request.

(5) If the authorisation of an undertaking, which carries on business in the country according to section 110a (1) above, is withdrawn the BAV shall, after it has been informed by the supervisory authority of the home Member State, take the adequate measures required to prevent any further business activities in the country.

Section 111c

(1) Before limiting disposal of the assets of the undertaking in accordance with section 81b (4) above and after limiting disposal of such assets pursuant to section 81b (1), second sentence, or subsection 2 above, second sentence, the BAV shall inform the supervisory authorities of the EC or EEA Member States in which the undertaking has a branch or carries on business by way of freedom to provide services. It may request these authorities to submit the assets located in their territory and specified in the request to the same limitations.

(2) If the BAV intends within the framework of financial supervision to perform inspections by its own personnel or persons whom it has so authorised on the premises of a branch it shall inform the supervisory authority of the other EC or EEA Member State accordingly. The same shall apply if it takes orders with respect to a business activity carried out in accordance with subsection 1 above, first sentence. If the supervisory authority of another EC or EEA Member State seeks cooperation of the BAV for the purpose of supervision the BAV shall take the adequate measures in pursuance of sections 81, 83, 84 and 93 above and shall inform the authority seeking such cooperation accordingly.

(3) If the supervisory authority of another EC or EEA Member State intends to send an undertaking, which carries on business in such other EC or EEA Member State and has its head office in the country, a document for the purpose of proceedings in accordance with the insurance supervisory provisions applicable in such other EC or EEA Member State it shall be permitted to send such document by post in compliance with the rules applicable to postal relations with such other EC or EEA Member State. Sending the document by registered letter to which has been added “personal” and “advice of receipt” shall be sufficient to prove that the document has been delivered. If the document cannot be directly delivered by post or if this should not be expedient due to the nature and content of the document, the BAV shall take care of its delivery.

(4) The BAV shall inform the supervisory authorities of all EC or EEA member states about any withdrawal of authorisation according to section 87 above. It shall also contact the supervisory authorities of the Member States in which business is carried on with respect to any necessary measures pursuant to section 87 (4) above.

Section 111d

Any contract by which an insurance undertaking, which has its head office in another EC or EEA Member State, intends to transfer its portfolio of insurance contracts, which it concluded in accordance with section 110a (1) above through a branch or on a services basis, wholly or partly to an undertaking whose head office is in an EC Member State or another EEA Member State shall for the purpose of obtaining approval by the competent supervisory authority of the transferor undertaking in the home Member State be approved by the BAV. Section 8 (1), first sentence, paragraph 3 above, section 14 (1), fourth sentence, and subsection 3 above, first sentence, shall apply accordingly. If the portfolio of insurance contracts of a branch does not cover any risks located in the country, the BAV shall only give its opinion on the contract. If the BAV does not comment on the request for approval or for an opinion within a period of three months this shall be deemed a tacit approval or positive statement.

Section 111e

(1) If a request according to section 106b (5) above is to be granted the competent authorities of the EC and EEA Member States in which the undertaking has been authorised or an authorisation procedure is under way shall be required to give their approval.

(2) The BAV shall control the financial resources for all business activities in the territory of the EC and EEA Member States which approved of the request provided this has been envisaged in the request.

(3) If the BAV controls the financial resources it shall inform the competent authorities of the EC and EEA Member States concerned of the measures taken in compliance with section 81b (2) above, second sentence. It may request these authorities to take the same measures.

VIb. Notifications to the EC Commission

Section 111 f

(1) The supervisory authority shall notify the EC Commission of

1. the granting of an authorisation in accordance with section 5 (1) above to an undertaking, the subsidiary (section 7a (2) above, sixth sentence) of a parent undertaking (section 7a (2) above, seventh sentence) whose head office is not in the EC Member States and the other EEA Member States; the structure of the group of undertakings shall be stated in the notice;

2. the acquisition of a participation in an insurance undertaking by which the insurance undertaking becomes the subsidiary of a parent undertaking which does not have its head office in the EC Member States and the other EEA Member States;

3. the number and nature of the cases in which the establishment of a branch or operation of direct insurance business on a services basis in another EC Member State or the other EEA Member States could not be realised because the supervisory authority did not pass on the documents according to section 13b (1) above, second sentence, or section 13c (1) above, second and third sentences, to the supervisory authority of the other EC or EEA Member State;

4. the number and nature of the cases in which measures in accordance with section 111b (1) above, second and third sentences, were taken;

5. general difficulties which insurance undertakings face with the establishment of branches, foundation of subsidiaries or in any other way with the operation of insurance business in a State which is not an EC or EEA Member State;

6. at the request of the Commission, the application for permission of an undertaking which is the subsidiary of a parent undertaking which has its head office not in the EC Member States or the other EEA Member States;

7. at the request of the Commission, the intention disclosed in accordance with section 104 above to acquire a participation in an insurance undertaking by which the insurance company will become a subsidiary of an undertaking whose head office is not in the EC Member States or the other EEA Member States;

8. the maximum interest rates fixed pursuant to section 65 (1), first sentence, paragraph 1 above.

(2) The obligations to notify in accordance with subsection 1 (6) and (7) above shall only exist if the EC Commission finds that insurance undertakings whose head office is in one of the EC Member States or other EEA Member States are actually not permitted access to the market of the State which is not an EC or EEA Member State which is comparable to the access the EC permits undertakings of this State, or if the Commission finds that the insurance undertakings which have their head office in one of the EC Member States or other EEA Member States are not treated like domestic undertakings in this State. The obligations to notify in accordance with subsection 1 (6) and (7) above in conjunction with the first sentence shall no longer exist if an agreement has been negotiated with this State with respect to access to the market and treatment like domestic undertakings of insurance undertakings which have their head office in one of the EC Member States or other EEA Member States or if decisions on applications for permission of undertakings whose head office is in this State no longer need to be deferred in accordance with section 8 (3) above.

VII. Building societies

(repealed)

VIII. Transitional provisions

Section 122

Insurance undertakings which on 1st January, 1902, were authorised to carry on business under state (Land) law in one or more states (Länder) need no authorisation under this law if they have continued business operations within the boundaries to which they had restricted operations until 1st January, 1902, or to which in the case of their permission to do business having been based on a special authorisation their operations had been restricted under this authorisation.

Section 123

Any assets acquired until 29th December, 1974, in accordance with legal provisions and orders of the supervisory authority applicable until that time and individual approvals granted by the supervisory authority may be kept as part of the restricted assets but not as part of the Deckungsstock unless they had already been allocated to the Deckungsstock and entered into the Deckungsstock list.

Sections 124 to 127

(repealed)

Section 128

For the purpose of societies which on 1st January, 1902, had written insurances for their members on the mutuality principle and had legal capacity, the provisions of the present law with respect to mutual societies (section III) excluding the provisions concerning the members funds and loss reserve shall apply accordingly. They shall, however, establish a loss reserve by 31st December, 1983; section 53b above shall not be affected.

Sections 129 to 133e

(repealed)

Section 133f

(1) For the purpose of a public limited company with head office within the territory of application of this law which was granted authorisation to carry on life insurance before 14th March, 1989, and in which an insurance undertaking with head office in an EC Member State or another EEA Member State operating life insurance together with other classes of insurance holds a share of at least 95 per cent, a financial guarantee of the latter of up to one half of the minimum amount of the guarantee fund (section 53c (2) above) shall be considered as own funds, provided the solvency margin (section 53c (1) above) does not exceed the minimum amount of the guarantee fund, for a period ending at the end of the seventh financial year after authorisation to carry on business had been granted. In this case, not paid-up share capital shall, beyond the provision under section 53c (3), first sentence, paragraph 1 (a) above, also not be regarded as own funds to the extent that it exceeds together with the guaranteed amount half of the minimum amount of the guarantee fund. The guarantee shall be irrevocable pending its complete replacement by other own funds (subsection 3 below).

(2) Subsection 1 above shall only be applicable if the undertaking holding a share with head office in an EC Member State or EEA Member State does not have a branch within the territory of application of this law operating classes of insurance other than life insurance and if it disposes of the necessary own funds prescribed for both operation of life insurance and classes of insurance other than life insurance. For this purpose own funds in the amount of the guarantee shall not be taken into account.

(3) The public limited company shall starting with the third financial year after authorisation to carry on business gradually replace the guarantee by other own funds. For this purpose a plan to be approved by the supervisory authority shall be submitted together with the application for authorisation to carry on business.

Section 133g

Any existing outsourcing contracts (section 5 (3) (4) above) shall be deposited with the supervisory authority if this was not done previously.

IX. Provisions concerning offences and administrative fines

Section 134

A person who makes false statements to the supervisory authority for the purpose of obtaining the authorisation of an insurance undertaking to carry on business, the renewal of such authorisation or the approval of a change to the operating plan or a transfer of a portfolio of insurance contracts (sections 14, 108 above) shall be liable to imprisonment for a term not exceeding three years, or to a fine.

Sections 135 and 136

(repealed)

Section 137

(1) A person who as auditor or assistant to an auditor reports falsely on the results of the audit or does not disclose material facts in the report shall be liable to imprisonment for a term not exceeding three years, or to a fine.

(2) If the offender acts for a consideration or with the intent to enrich himself or another person or to harm another person he shall be liable to imprisonment for a term not exceeding five years, or to a fine.

Section 138

(1) A person who except for the cases under section 333 of the Handelsgesetzbuch or section 404 of the Aktiengesetz discloses any secret of the insurance undertaking without being authorised to do so, in particular any business or trade secret which has come to his knowledge in his capacity as

1. auditor or assistant to an auditor in accordance with section 341k in conjunction with section 319 of the Handelsgesetzbuch,

2. member of the board of directors or supervisory board or liquidator,

shall be liable to imprisonment for a term not exceeding one year, or to a fine.

(2) If the offender acts for a consideration or with the intent to enrich himself or another person or to harm another person he shall be punished with imprisonment for a term not exceeding two years or by imposing a fine. Subject to punishment shall also be any person who makes use of a secret of the kind described under subsection 1 above, in particular any business or trade secret which came to his knowledge as specified under subsection 1 above.

(3) The offence shall only be prosecuted at the request of the insurance undertaking. If a member of the board of directors or a liquidator has committed the offence the supervisory board shall be entitled to make the request, if a member of the supervisory board has committed the offence the board of directors or the liquidator shall be entitled to make the request.

Section 139

(1) A person who as responsible actuary submits a false actuarial certification as per section 11a (3) (2), first sentence, also in conjunction with an ordinance pursuant to subsection 5 above or with sections 11d, 11e or 110d (2) or (3) above, or under section 12 (3) (2) above, first sentence, also in conjunction with section 110d (2) or (3) above, shall be liable to imprisonment for a term not exceeding three years, or to a fine.

(2) Subject to punishment shall also be any person who as trustee appointed to control a Deckungsstock or as deputy trustee (section 70 above) submits a certificate in accordance with section 73 above, also in conjunction with section 110d (2) and (3) above, which is false.

Section 140

(1) A person who in the country

1. carries on insurance business without authorisation in accordance with section 5 (1) above, section 105 (1) above or section 110d (1) above, first sentence,

2. takes up business operations contrary to section 110a (2) above, or

3. contravenes an enforceable order in accordance with section 111b (1) above, second sentence, also in conjunction with the third sentence,

shall be liable to imprisonment for a term not exceeding one year, or to a fine.

(2) If the offender acts negligently he shall be liable to imprisonment for a term not exceeding six months, or to a fine of up to one hundred and eighty daily rates.

Section 141

(1) A person who as member of the board of directors, as authorised agent (section 106 (3) above) or as liquidator of an insurance undertaking contrary to section 88 (2) above does not give the required notice to the supervisory authority, shall be liable to imprisonment for a term not exceeding three years, or to a fine.

(2) If the offender acts negligently he shall be liable to imprisonment for a term not exceeding one year, or to a fine.

Section 142

(repealed)

Section 143

A person who as member of the board of directors or the supervisory board, authorised agent (section 106 (3) above) or liquidator of a mutual society

1. in descriptions or surveys of the financial situation of the society or in oral statements or information to the supreme representation misrepresents or conceals the actual situation of the mutual society, or

2. in explanations or statements to be made available to the auditor of a mutual society in accordance with the provisions of this law gives false information or misrepresents or conceals the actual situation of the mutual society,

shall be liable to imprisonment for a term not exceeding three years, or to a fine, however, only if in the case of (1) above no penalty has been envisaged under section 331 (1), and in the case of (2) above no penalty has been envisaged under section 331 (4) of the Handelsgesetzbuch.

Section 144

(1) An administrative offence shall be deemed to be committed by any person who as member of the board of directors or of the supervisory board, as authorised agent (section 106 (3) above) or as liquidator of an insurance undertaking

1. proposes or authorises the distribution of profits determined in violation of the requirement of the law or the approved operating plan with respect to the establishment of provisions and reserves,

2. violates a provision with respect to the investment of the assets of the Deckungsstock or the calculation, entry in the books, keeping or management of the mathematical provisions or the Deckungsstock (sections 54a to 54c, 65 to 67, 77, 79, 110d (2) and (3) above) or fails to issue, or issue correctly, a certificate in accordance with section 66 (6) above, sixth sentence, also in conjunction with section 110d (2) and (3) above,

3. violates the approved operating plan with respect to the investment of money,

4. carries on business not envisaged in the approved operating plan or permits the carrying on of such business, or

5. violates an ordinance in pursuance of section 55a (1) above, also in conjunction with section 106 (2) above, fourth sentence, to the extent that for the purpose of a certain offence reference is made to the present administrative fines provision.

(1a) An administrative offence shall be deemed to be committed by a person who

1. violates intentionally or negligently an ordinance in accordance with section 5 (6) above, section 12c above, also in conjunction with section 110a (4) (2) above or section 65 (1) above to the extent that for the purpose of a certain offence reference is made to the present administrative fines provisions,

2. intentionally or negligently fails to give notice in accordance with section 13b (1) or (4) above, first sentence, section 13c (1) also in conjunction with subsection 4 above, section 13d (1) to (6), (7) above, also in conjunction with section 110a (4) (2) or (8) above, section 58 (2) above, first sentence, or section 104 (1), first sentence, first half of the second sentence, third or fourth sentence, or subsection 3 each also in conjunction with an ordinance in accordance with subsection 6 above, fails to give it correctly, completely or in due time,

3. intentionally or negligently contrary to section 59 above, first sentence, fails to submit, or submit in due time, a copy of the auditor’s report,

4. intentionally or negligently violates an enforceable ordinance in accordance with section 81b (1), second sentence, or subsection 2, second sentence also in conjunction with subsection 4 above, or section 104 (1) above, fifth or sixth sentence, or an enforceable requirement under section 8 (2) above,

5. intentionally or negligently contrary to section 83 (1), first sentence, paragraph 1, or subsection 2 above, first sentence, each also in conjunction with section 110a (4) (3) (a) above, fails to supply information, or supply it correctly, completely, or in due time,

6. contrary to section 83 (1), first sentence, paragraph 5 above does not grant the right to speak,

7. contrary to section 83 (1), first sentence, paragraph 6 above does not call or announce meetings,

8. intentionally or negligently contrary to section 83 (1) above, second sentence, also in conjunction with section 110a (4) (3) (a) above does not tolerate a measure,

9. violates an enforceable order under section 87 (6) above, or

10. intentionally or negligently contrary to section 103a (2) above in conjunction with an ordinance pursuant to section 12c above fails to give notice, or give it correctly, completely, or in due time.

(2) An administrative offence may in the cases of subsection 1 (1) to (4) and subsection 1a above be punished with a fine not exceeding 100,000 Deutsche Mark, in the cases of subsection 1 (5) above with a fine not exceeding 50,000 Deutsche Mark.

Section 144a

(1) An administrative offence shall be deemed to be committed by a person who intentionally or negligently

1. concludes in the country an insurance contract for an undertaking which does not dispose of the authorisation required to carry on such insurance business, has taken up business contrary to section 110a (2) above or continues such business contrary to section 111b (1) above, second or third sentence, or

2. intermediates the conclusion of an insurance contract for such an undertaking on a commercial basis, or

3. violates an order issued pursuant to section 81 (2) above, third and fourth sentences, also in conjunction with section 110a (4) (3) (a) above. (2) An administrative offence may be punished with a fine not exceeding 50,000 Deutsche Mark.

Section 144b

(1) An administrative offence shall be deemed to be committed by a person who

1. contrary to section 8a (3) above, second sentence, also works for an insurance undertaking which operates other insurance business in addition to legal expenses insurance,

2. contrary to section 8a (3) above carries on an activity comparable to a loss adjustment activity for an insurance undertaking specified under paragraph 1 above,

3. contrary to section 8a (4) above, first sentence, gives instructions, or

4. contrary to section 8a (4) above, second sentence, supplies information.

(2) An administrative offence may be punished with a fine not exceeding 20,000 Deutsche Mark.

Section 145

The threat to be punished in compliance with sections 141 and 143 above and to be fined in compliance with sections 144 and 144b above shall also apply to members of the board of directors or supervisory board and liquidators of a society to be treated as a mutual society in accordance with section 128 above. The threat to be fined in compliance with section 144b (1) (3), subsection 2 above shall also be applicable to the authorised agent (section 106 (3) above).

Section 145a

The administrative authority within the meaning of section 36 (1) (1) of the Gesetz über Ordnungswidrigkeiten shall be the Bundesaufsichtsamt für das Versicherungswesen to the extent that the Bundesaufsichtsamt is authorised to supervise insurance undertakings.

Section 145b

(1) The court, the authorities for the prosecution of criminal offences or the execution of sentences shall in criminal proceedings against managers and directors of insurance undertakings or their legal deputies or personally liable partners for infringement of their professional obligations or other criminal offences while carrying on or in connection with the carrying on of a trade or another economic activity, and also in criminal proceedings for criminal offences pursuant to sections 134, 137 to 141 and 145 of the present law, in the case of a public action being brought, submit to the Bundesaufsichtsamt für das Versicherungswesen,

1. the charge or the application in place thereof,

2. the application for an order imposing punishment without previous trial, and

3. the decision taken at the end of proceedings including the reasons;if an appeal has been lodged from a decision,

the decision shall be submitted referring to the appeal lodged. As regards proceedings for negligently committed offences the submissions under nos. 1 and 2 above shall only be made if from the point of view of the body making the submission the Bundesaufsichtsamt für das Versicherungswesen is required to take decisions or other measures immediately.

(2) If during legal proceedings any facts should be disclosed suggesting that there are irregularities regarding the insurance undertaking’s business activities including its field force and if knowledge of these facts is from the point of view of the body making the submission essential for the supervisory authority to take measures, the court, the authorities for the prosecution of criminal offences or the execution of sentences shall also notify these facts, unless the body making the submission is aware of any prevailing interests of those concerned that warrant protection. In this context the reliability of the information to be submitted shall be considered.

(3) If a notification pursuant to subsections 1 or 2 above refers to an insurance undertaking which according to the present law is supervised by the competent authority of a state (Land) the Bundesaufsichtsamt shall transmit such notification to this authority immediately.

X. Final provisions

Section 146

The Federal Finance Minister shall have the power to determine by way of an ordinance not requiring approval by the Bundesrat that all the insurance business or certain kinds of insurance business carried on with the group of persons specified under article I (1) (a) to (c) of the agreement of 19th June, 1951, between the parties to the North Atlantic Treaty relating to the legal status of their troops (BGBl. 1961 II, pp. 1183, 1190) shall not be subject wholly or partly to the provisions of this law in so far as the interests of other insured and the requirement to meet obligations under the other insurance contracts as they arise are thereby not endangered within the territory of application of this law.

Sections 147 to 149

(repealed)

Section 150

All insurance undertakings subject to supervision under this law shall deposit with the BAV the statistical data about their business operations required by it. The Versicherungsbeirat shall be consulted with respect to the nature of these data.

Section 151

Insurance undertakings under public law not subject to supervision under this law shall deposit with the BAV on request the same statistical data about their business operations as insurance undertakings subject to supervision under this law..

Section 152

The BAV and the supervisory authorities of the states (Länder) shall be required to exchange information about their legal and administrative principles. This shall also apply to principles established by the authorities of the states (Länder) for the supervision of insurance undertakings under public law.

Section 153

(repealed)

Section 154

(1) The provisions of the states (Länder) with respect to the supervision by the police of fire insurance contracts after they have been concluded and of the payment of damages in the case of fire under these contracts shall not be affected.

(2) (repealed)

(3) Neither shall be affected the requirements existing on 1st January, 1901 for fire insurance undertakings to write certain insurances in a state (Land) under the law of that state (Land) or on the basis of agreements with the authorities of that state (Land), if the undertaking has continued or is continuing business operations in that state (Land) or if it has been authorised to carry on business under this law. Fulfilment of these requirements shall be supervised by the supervisory authority.

Section 155

(repealed)

Section 156

(1) Section 34 above, first sentence, and section 39 (3) above shall apply to public limited insurance companies accordingly.

(2) With respect to the management and supervisory bodies of insurance undertakings under public law section 80 of the Aktiengesetz shall apply accordingly.

Section 156a

(1) Section 5 (4) above and sections 53c and 81b (1) and (2) above shall not apply to kleinere Vereine, if

a) supplementary contributions or reductions in claims payments are permitted under their articles of association, and

b) the annual contributions do not exceed the amount fixed by ordinance in accordance with subsection 2 below,

unless they operate third party liability insurance, credit and suretyship insurances or life insurance as pension or death benefit funds. For the purpose of the undertakings mentioned in the first sentence the amount of the required financial means shall be determined in accordance with section 8 (1), first sentence, paragraph 3 above.

(2) The Federal Finance Minister shall have the power for the purpose of implementing the EC Council insurance directives to fix by way of an ordinance not requiring approval by the Bundesrat the amount of the annual contributions for the purpose of subsection 1 (1) (b) above.

(3) Section 5 (3) (2) above, second half of the sentence, shall not be applicable to pension funds having considerable economic importance if the undertakings comply with the solvency requirements under section 53c (2a) above. In this case, notwithstanding section 53 above, also sections 29, 58 and 59 above of this law and sections 341j and 341k of the Handelsgesetzbuch shall apply if kleinere Vereine are concerned; the responsible actuary shall, notwithstanding section 11a (3) (2) above, submit an actuarial certification also in the case of a kleinerer Verein. Section 11c above shall be applicable on condition that it shall also apply to insurance contracts concluded after 28th July, 1994, if they are based on an operating plan approved by the supervisory authority which includes the elements under section 5 (3) (2) above, second half of the sentence; in these cases section 11b above shall not apply. The articles of association shall stipulate that the board of directors shall be appointed by the supervisory board or the supreme body. The provisions mentioned in the first to fourth sentences shall be applied to the individual pension funds as soon as the supervisory authority determines that the pension fund meets the requirements of the first sentence. For the purpose of pension funds which were granted authorisation to carry on business before 28th July, 1994, the supervisory authority may postpone application of the requirements of the first to fourth sentences until 31st December, 1999.

(4) Subsection 3 above shall not apply to pension funds which are joint institutions established under a generally applicable collective agreement within the meaning of section 4 (2) of the Tarifvertragsgesetz (Law on Collective Agreements).

(5) For the purpose of public health care schemes of the Bundeseisenbahnvermögen, the Postbeamtenkrankenkasse and the Versorgungsanstalt des Bundes und der Länder, the Bahnversicherungsanstalt – Abteilung B and the Versorgungsanstalt der Deutschen Bundespost this law shall not be applicable.

(6) The Federal Finance Ministry shall have the power to determine by way of an ordinance when a pension fund shall be deemed to be an undertaking of considerable economic importance.

Section 157

(1) The supervisory authority may for the purpose of authorisation to carry on business and for the purpose of management of kleinere Vereine permit deviations from sections 11, 11a, 12, 55a and 66 above. The same shall apply to deviations from section 10a (1) above with respect to death benefit and pension funds where conformity with section 156a (3) above, fifth sentence, was not established. The supervisory authority may also permit deviations for pension funds other than kleinere Vereine.

(2) If the deviations relate to management they may in particular be granted on condition that business operations and the financial situation are audited by an expert at the expense of the Verein at intervals of several years and that the audit report is deposited with the supervisory authority.

Section 157a

(1) The supervisory authority may exempt from on-going supervision under this law mutual societies which need not be registered if the nature of the business operated and other circumstances are such that supervision does not appear to be necessary to safeguard the interests of the insured. These requirements may in particular be met by societies whose business operations are restricted to a limited geographical area, which have a small number of members and low premium income.

(2) The exemption under subsection 1 above may be limited to a certain period of time and subject to certain requirements; it shall be revoked if it comes to the attention of the supervisory authority that the requirements for an exemption are no longer met.

(3) If the supervisory authority has granted an exemption in accordance with subsection 1 above the provisions under sections 13, 14, 22 (4) above and sections 37 and 53c to 104 above shall not apply with the exception of the provisions under section 83 (1) (1) and (2), subsections 3, 5 and 6 above and sections 89a and 93 above if the requirements under subsection 2 above or the powers of the supervisory authority under section 83 above are to be enforced; a transformation in accordance with the Umwandlungsgesetz shall not be permitted.

Section 158

The provisions of this law with respect to mergers and transfers of assets effective from 1st January, 1983, shall not apply to transactions in preparation of which the contract relating to such merger or transfer had been authenticated or a meeting of the supreme representation or shareholders’ meeting had been called before that date.

Section 159

(1) Decisions of representatives’ meetings relating to institutions of the kind specified under section 140 (1) of the Siebtes Buch Sozialgesetzbuch (Seventh Book of the Code of Social Law) and to their articles of association and operating plans shall be approved by the supervisory authority; section 5 (1) to (3) above and section 8 above shall apply accordingly. Otherwise section 13 (1) above, sections 14, 54 (2) above, first sentence, (a) and second sentence, section 55 (1) and (2) above, section 55a above and sections 81, 81a, 82 to 84, 86, 88 and 89 above shall apply to these institutions accordingly.

(2) (repealed)

(3) If there are other provisions stipulating that provisions of this law shall be applied in the same way to undertakings no longer subject to subsection 1 above, such provisions shall not be affected.

Section 160

(1) to (4) (repealed)

(5) Undertakings which under a comprehensive contract cover risks attributable to the classes of insurance listed under nos. 1 and 19 of part A of the annex may transfer to another undertaking the accident insurance portion of such contracts. Section 14 above shall apply accordingly.

Section 161

Where the ordinance specifies for the purpose of section 53c (2) amounts in ECU, the equivalent amount in Deutsche Mark after 31st December of a year for annual accounts as per 31st December 1998 shall be the amount valid on the last day of October preceding that date, at which time the equivalent amounts in all currencies of the EU Member States will be available.

XI. Transitional provisions for the implementation of the monetary, economic and social union with the German Democratic Republic

(repealed)


Annex

A. Classification of risks according to classes of insurance

1. Accident

a) fixed pecuniary benefitst
b) benefits in the nature of indemnity
c) combinations of the two
d) injury to passengers

2. Sickness

a) Sickness
b) Sickness
c) combinations of the two

3. Land vehicles (other than railway rolling stock)

All damage to or loss of

a) land motor vehicles
b) land vehicles other than motor vehicles

4. Railway rolling stock

All damage to or loss of railway rolling stock

5. Aircraft

All damage to or loss of aircraft

6. Ships (sea, lake and river and canal vessels)

All damage to or loss of

a) river and canal vessels
b) lake vessels
c) sea vessels

7. Goods in transit

All damage to or loss of goods in transit, irrespective of the form of transport

8. Fire and natural forces

All damage to or loss of property (other than property included in classes 3 to 7) due to

a) fire
b) explosion
c) storm
d) natural forces other than storm
e) nuclear energy
f) land subsidence

9. Hail, frost and other damage to property

All damage to or loss of property (other than property included in classes 3 to 7) due to hail or frost, and any event such as theft, other than those mentioned under class 8

10. Liability arising out of the use of motor vehicles operating on the land

a) motor vehicle liability
b) liability arising out of transports by motor vehicles operating on the land
c) other

11. Aircraft liability

All liability arising out of the use of aircraft (including carrier’s liability)

12. Liability for ships (sea, lake and river and canal vessels)

All liability arising out of the use of ships, vessels or boats on the sea, lakes, rivers or canals (including carrier’s liability)

13. General liability

All liability other than those forms mentioned under classes 10 to 12

14. Credit

a) insolvency (general)
b) export credit
c) instalment credit
d) mortgages
e)agricultural credit

15. Suretyship

16. Miscellaneous financial losses

a) employment risks
b) insufficiency of income (general)
c) bad weather
d) loss of benefits
e) continuing general expenses
f) unforeseen trading expenses
g) loss of market value
h) loss of rent or revenue
i) indirect trading losses other than those mentioned above
j) other financial loss (non-trading)
k) other forms of financial loss

17. Legal expenses

18. Assistance in favour of persons in difficulties

a) on journeys or during absence from their domicile or permanent place of residence,
b) in other circumstances unless such risks are covered by other classes of insurance

19. Life

(unless listed under classes 20 and 24)

20. Marriage and birth insurance

21. Unit-linked life insurance

22. Tontines

23. Capital redemption operations

24. Operations relating to the management of pension schemes

B. Description of authorisations granted for more than one class of insurance

Where the authorisation simultaneously covers:

a) nos. 1(d), 3, 7 and 10(a), it shall be named ‘Motor Vehicle Insurance’;

b) nos. 1(d), 4, 6, 7 and 12, it shall be named ‘Marine and Transport Insurance’;

c) nos. 1(d), 5, 7 and 11, it shall be named ‘Aviation Insurance’;

d) nos. 8 and 9, it shall be named ‘Insurance against Fire and other

e) nos. 14 to 13, it shall be named ‘Liability Insurance’;

f) nos. 14 and 15, it shall be named ‘Credit and Suretyship Insurance’;

g) nos. 1, 3 to 13, and 16, it shall be named ‘Property and Accident Insurance’.

Annex C. Matching Rules

1. Where the cover provided by a contract is expressed in terms of a particular currency, the insurer’s commitments shall be considered to be payable in that currency.

2. Where the cover provided by a contract is not expressed in terms of a particular currency, the insurer’s commitments shall be considered to be payable in the currency of the country in which the risk is situated. The insurer may choose the currency in which the premium is expressed if there are justifiable grounds for exercising such a choice, in particular if, from the time the contract is entered into, it appears likely that a claim will be paid in this currency.

3. The currency which the insurer in accordance with experience acquired considers to be the one in which he must most likely provide cover or, in the absence of such experience, the currency of the country in which he is established, may, if there are no special reasons against such a choice, be taken as a basis for the following risks:

a) for contracts covering risks classified under classes 4 to 7, 11 to 13 (producers’ liability only) of part A of the annex,

b) for contracts covering the risks classified under other classes where, in accordance with the nature of the risks, the cover is to be provided in a currency other than that which would result from the application of the above rules.

4. Where a claim has been reported to an insurer and where it is payable in a currency other than the currency resulting from application of the above rules, the insurer’s commitments shall be considered to be payable in that currency, and particularly in the currency which has been determined by court judgement or by agreement between the insurer and the insured as the currency in which the compensation is to be paid by the insurer.

5. Where a claim is assessed in a currency which is known to the insurer in advance but which is different from the currency resulting from application of the above rules, the insurer may consider his commitments to be payable in that currency.

6. The restricted assets need not be matched in the currency in which the insurer’s commitments are payable if

a) it is not the currency of an EC or another EEA member State and if it is not suitable for investments in particular because of transfer restrictions,

b) the assets representing the Deckungsstock and the other restricted assets to be matched do not exceed 20 per cent of the commitments payable in a particular currency, or

c) application of the rules under (1) to (5) above would result in assets having to be held in a certain currency which amount to not more than 7 per cent of the assets of the undertaking existing in other currencies.

7. If under the above rules the other restricted assets have to be expressed in the currency of an EC member State whose currency is not the euro or another EEA member State up to 50 per cent of the assets may be in euro to the extent that this is justified in accordance with the care of a prudent businessman.

Annex D Consumer Information

Section 1

Consumer information to be supplied by insurance undertakings in accordance with section 10a (1) above before insurance contracts are concluded:

1. Consumer information required for all classes of insurance

a) Name, address, legal form and seat of the insurer and, where appropriate, any branch which concludes the contract;

b) General insurance policy conditions including the premium rate provisions and law applicable to the contract;

c) Nature and extent of the insurer benefits and when they are payable if no general insurance policy conditions or premium rate provisions are applied;

d) Term of the contract;

e) Amount of the premiums with an indication of the individual premiums if several independent insurance contracts are to be concluded and an indication of how the premiums are to be paid; information about any additional fees and expenses, and about the total sum to be paid;

f) Period during which the proposer shall be bound by his proposal;

g) Information about the cooling-off period;

h) Address of the responsible supervisory authority which the policyholder may contact in the case of complaints about the insurer.

2. Additional consumer information required for life and accident insurances with premium refunds

a) Information about the calculation bases and criteria for determining the profit and profit participation;

b) Surrender values;

c) Information about the minimum sum insured for transformation into a paid-up insurance and about the benefits under a paid-up insurance;

d) Extent to which the benefits under (b) and (c) are guaranteed;

e) For unit-linked policies, definition of the units to which the insurance is linked and indication of the nature of the underlying assets;

f) General information on the tax arrangements applicable to the type of policy.

3. Additional consumer information required for health insurances in accordance with section 12a above

a) information about the effects of increasing health care costs on future development of the premiums;

b) reference to possible limitation of premiums to be paid at old age;

c) reference to the fact that as a rule, it is impossible in old age to obtain health insurance cover in the public health insurance system.

Section 2

Consumer information to be supplied by the insurance undertaking during the term of the insurance contract in accordance with section 10a (1) above

1. Change of name, address, legal form and seat of the insurer and any branch which concludes the contract;

2. Changes in the consumer information supplied in accordance with section I (1) (c) to (e) and (2) (a) to (e) above, if such changes result from amendments of legal provisions;

3. Annual information about the situation regarding profit participation in life insurance and accident insurance with premium refunds.

4. In health insurance in accordance with section 12 (1), at each premium increase, information on the right to change tariffs, including the text of the relevant legal provision. Where insured who have attained the age of 60 are concerned, the policyholder shall be made aware of tariffs which include equal classes of benefit as do the previously agreed ones and which would result in a premium reduction in the event of a change of tariff. The information shall refer to tariffs which in sensibly assessing the interests of the insured are considered particularly appropriate; however, not more than 10 tariffs may be indicated. In respect of each tariff, the premium which would have to be paid for the insured person if they opted for this tariff shall be indicated. Moreover, the possibility to opt for the standard tariff shall be indicated. The conditions under which the tariff can be changed and the premium that would have to be paid in the standard tariff shall be indicated.


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