January 2014, section 64a (7) of the German Insurance Supervision Act
On 2 January 2014, section 64a (7) of the German Insurance Supervision Act
(Versicherungsaufsichtsgesetz or VAG) entered into force, amending existing legislation. It
defines in more detail certain requirements which senior managers of insurers and reinsurers
are required to meet in light of their general responsibility to ensure that a company has a
proper business organisation. The new Sections 64a (7) and section 142 of the
aforementioned Act introduce the possibility of imposing criminal sanctions on managing
board members if they fail to fulfil their duty to establish a proper business organisation,
including effective risk management, if this jeopardizes the stability of the undertaking.
Going forward, the authorities plan to amend the Insurance Supervision Act to accommodate
a number of international and European requirements. In particular, it will be amended to
implement the preparatory guidelines introduced by EIOPA on 25 September 2013 (these
guidelines will also be implemented through the modification of existing circulars, issuance
of new circulars, rulings or interpretive decisions) and the Solvency II Directive (although
this is dependent upon the time necessary to translate it into national law).
Other planned reforms include modifying domestic supervisory standards to implement the
FSB’s requirements as they relate to the supervision of G-SIIs, implementation of the
Directive on credit agreements relating to residential property, amending the Act on the
Supervision of Financial Conglomerates to reflect the requirements of the SSM Regulation
and facilitate cooperation between BaFin and the ECB, changing domestic guidance and
legislation to reflect the requirements of the European Regulation on Credit Rating Agencies
and finally, adapting legal provisions for long-term guarantees by life and health insurers to
protect them from the effects of the persistent low interest rate environment.